Business Insurance: The Ultimate Guide for Small Businesses

Whether you’re a startup or taking your business to the next level, there are different types of business insurance you may need. The most common are general liability and commercial property insurance, which can be bundled together in a business owners policy (BOP). The costs of a BOP range from $500 to $3,500 per year.

Not sure what type of insurance your business needs? Get in touch with the experts at The Hartford. For over 30 years, The Hartford has been assisting small business owners in getting the right insurance policies for the right price. Simply fill out a free, no obligation questionnaire, and get covered in minutes.

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Most Common Types of Small Business Insurance

The types of insurance you need depends upon your situation. Most small businesses need commercial general liability insurance, commercial property insurance and business interruption insurance. These three insurance types can be combined into the most popular small business insurance policy, a business owners policy (BOP). Additional coverage can either be added on or you’ll need to purchase those policies separately.

Other Small Business Insurance Types You May Need

Here are the 13 most common types of small business insurance:

1. Commercial General Liability Insurance

Commercial general liability (CGL) insurance is important coverage for small business owners that work with the public because accidents leading to injuries or property damage are significant risks to them. Also, some businesses that do contracting work, such as construction or landscaping, will need CGL to get a contract or license. Nearly every business needs CGL insurance.

What Commercial General Liability Covers

Commercial general liability covers third-party bodily injury, property damage, and related medical and legal costs. For example, if a client was injured because they tripped and fell over furniture on your premises, CGL would cover the medical bills and legal costs, if they sue. General liability insurance costs vary by industry, but the majority of small business owners pay between $400 and $600 per year.

According to Carol Tyrrell, Vice President of Technical Underwriting, at ProSight Specialty Insurance:

“A general liability policy will protect customers from legal liability arising from bodily injury, property damage, or personal and advertising injuries incurred by third parties. Examples of potentially covered occurrences would be slip/falls, injuries caused by a defective product, or damage to another’s property arising out of the business’ operations.”

What Commercial General Liability Doesn’t Cover

Since general liability is third-party coverage, it won’t cover injury or property damage to you, your business or your employees. The most common exclusion of general liability insurance is a claim from your mistakes, negligence, errors or omissions. A CGL policy also excludes other types of liability, such as workers compensation, directors and officers liability, and liability from commercial vehicle accidents.

Commercial General Liability Costs

Here are averages for general liability premium, deductible and limits:

• Average Annual CGL Premium: $400 to $600
• Average CGL Deductible: $1,000
• Average CGL Limits: $1,000,000 per occurrence / $2,000,000 aggregate

The cost of general liability insurance depends on the size of your business, the type or industry of the business, the coverage limits and the deductible you pay.

Who Needs Commercial General Liability Insurance

Businesses that work with the public, including customers, contractors or vendors, need general liability coverage. This includes almost every small business. Whether you work out of an office, on job sites, or in your own home, general liability is important coverage.

To see if you need coverage from a CGL policy, or if you need more details, see our article on commercial general liability.

2. Commercial Property Insurance

Commercial property protects against fire, theft, vandalism or natural disaster. Since the property of your business is not covered under a general liability policy, it’s important to have commercial property insurance to cover the property owned by your business.

What Commercial Property Insurance Covers

Commercial property insurance covers the valuable assets of a business, such as an owned or leased building, tools, equipment, machinery, or inventory.

Here are some of the primary items covered in a commercial property insurance policy:

• The building, owned or leased
• Equipment
• Inventory
• Business Interruption (lost business income)
• Valuable papers and records
• Accounts receivable

For most small businesses, the most important items to cover in a commercial property insurance policy are the building and the business’ assets contained within it. Commercial property insurance rates typically average $500 to $1,000 per year.

What Commercial Property Insurance Doesn’t Cover

There are several items not commonly covered in a commercial property insurance policy. But you can increase coverage to include some specific items that are normally excluded. Speak with your insurance provider about exclusions to be sure you are properly covered.

Here are some common commercial property insurance exclusions you may not know about:

• Earthquakes, floods and volcanoes
• Weather, other than wind and hail
• Commercial vehicles
• Acts of war

When you apply for commercial property insurance coverage, you’ll need to determine if you want coverage on an “all perils” basis or a “named perils” basis. All Perils covers everything except for specifically stated exclusions. Named Perils policies list exactly what is covered.

Commercial Property Insurance Costs

Here are averages for commercial property insurance premium, deductible and limits:

• Average Annual Commercial Property Premium: $500 to $1,000
• Average Commercial Property Deductible: $1,000 to $2,500
• Average Commercial Property Limits: Vary based on value of property; can be dollar amount or percentage

The cost of business property insurance varies depending on several factors, including the value of your property, the location of your business, and the coverage limits and deductible you choose.

Who Needs Commercial Property Insurance

Small businesses that have assets that are needed for daily operation of the business and are expensive to repair or replace need commercial property insurance. The most important asset to protect is a building where you conduct business. If you lease a space, you may still need coverage, especially for your business assets, such as equipment, supplies and inventory.

Get more information on this important coverage by reading our article on Commercial Property Insurance.

3. Business Interruption Insurance

Business interruption insurance is usually part of a commercial property insurance policy, and is used to cover lost income due to a cease in operations caused by a covered event. It’s important to note that most policies won’t begin coverage in the first 48 to 72 hours after initial cease of operations. Also, most policies will have a time limit, such as 30 days, that business interruption coverage will be extended.

What Business Interruption Insurance Covers

Business interruption insurance covers lost income of a business that has to cease operations due to damage from a covered event under your property insurance policy. The income loss covered may be due to closing of the business facility or due to the rebuilding process after a cease in operations. Covered events typically include fire, theft, wind, water (other than flooding), falling objects and lightning.

What Business Interruption Insurance Doesn’t Cover

Business interruption insurance won’t cover every bit of lost income when your business closes down due to a covered event, nor will it begin immediately and last indefinitely. Therefore, to get the most of your business income coverage, and be prepared for what costs are your responsibility, it’s important to understand the exclusions.

Common exclusions of business interruption insurance include:

• Uncharged Utility Bills: You’re not covered for items you didn’t pay, such as utility bills not charged to you during a cease of operations.
• Undocumented Income: Lost income needs to be proven with documentation, otherwise you won’t be covered.
• Uncovered Events: Perils not covered under property insurance, such as flooding or earthquake, won’t be covered with business interruption insurance.

Business Interruption Insurance Costs

Here are average costs for business interruption insurance, plus details on deductible and limits:

• Average Annual Business Interruption Premium: $750 – $1,200
• Deductible: Included in property insurance deductible, which averages $1,000 – $2,500
• Limits: Varies based on property value and if you add extensions to duration of business interruption coverage

Keep in mind that pricing for business interruption will be included in your commercial property insurance policy. For example, the above average premium would be included as part of the total commercial property premium. Also remember that business interruption, commercial property insurance and commercial general liability are often bundled together into one business owners policy (BOP).

Who Needs Business Interruption Insurance

If your business relies on a physical location to operate and generate income, you need business interruption insurance to cover lost income while your business is temporarily closed for repair. Examples of businesses that would need business interruption insurance include restaurants, retail stores, and hair salons.

4. Errors & Omissions Insurance

Errors & omissions insurance protects professional and service-oriented business owners against liability claims arising from their mistakes or negligence. The types of professionals that most often use E&O insurance include lawyers and accountants. The cost for E&O insurance averages $400 to $1,000 per year.

What E&O Insurance Covers

Errors & omissions insurance is a form of liability insurance that covers your legal and defense costs and settlement claims, up to the policy limit, if you are sued by a client for damages and mistakes or a negligent act that was unintentional. Types of unintentional errors include incorrect advice, accidental violation of a contract, and misrepresentation.

What E&O Insurance Doesn’t Cover

The primary factor in determining what E&O insurance doesn’t cover is if the act is intentional. For example, if a financial advisor is sued by a client claiming the advisor’s poor advice resulted in a loss, the advisor’s E&O insurance would cover the legal defense costs. However, if it is discovered that the advisor’s poor advice was intentional, the advisor’s E&O insurance would not cover the claim.

Most E&O policies are written on a “claims-made” basis, which means you won’t be covered for your negligent acts that took place prior to the date you purchased your policy. You may be able to get coverage prior to inception of the policy by requesting a “retro date” that can give you coverage back to a specified date.

E&O Insurance Costs

E&O insurance costs vary, but here are some averages for reference:

• Average Annual E&O Insurance Premium: $400 to $1,000 per year (half of small businesses pay more than $1,000)
• Average E&O Insurance Deductible: $0 to $1,000
• Average E&O Insurance Limit: $1,000,000

Some of the factors that influence the cost of errors and omissions insurance include industry type, amount of revenue, and number of employees. To get a better idea of the cost you might pay for E&O insurance, discuss your situation with an insurance representative.

Who Needs Errors & Omissions Insurance

The main type of business that needs E&O insurance is professional, especially those that provide a service, such as advice, for a fee. However, the majority of small business owners don’t need errors and omissions coverage. The most common professions that may need E&O insurance include lawyers, accountants, financial advisors, architects, IT businesses, and doctors.

To learn more, see our full article on Errors & Omissions Insurance.

5. Cyber Liability Insurance

Cyber liability insurance helps protect businesses before, during and after a cyberattack. Cyber insurance can provide first-party coverage for your business and third-party coverage for your clients and customers. The cost of cyber liability insurance varies widely based on many risk factors. Average premiums for most small businesses range from $1,000 to $7,500 per year.

What Cyber Liability Insurance Covers

Cyber policies most commonly cover business liability for a cyberattack in which the company’s customers’ personally identifiable information (PII), such as names, addresses, and credit card numbers, is exposed or stolen from the company’s computer network. Cyber liability can cover data loss and restoration, extortion, legal fees, credit monitoring for customers and more.

What Cyber Liability Insurance Doesn’t Cover

When reviewing insurance policies, especially specialized coverage types like cyber liability insurance, it’s important to recognize the exclusions. This way you may identify something not covered in the policy that may need to be added to coverage.

Here are some of the most common exclusions for cyber liability insurance:

• Patent, software and copyright infringement: These are covered by intellectual property insurance policy, and not by a cyber policy.
• Failure in security measures: If a data breach is due to your failure to ensure proper security, the claim can be denied.
• Loss of electronic device: Cyber liability coverage does not cover a business when an employee loses a company-issued portable electronic device.

Cyber Liability Insurance Costs

Here are average cyber liability costs for most small businesses:

• Average Annual Cyber Liability Premium: $1,000 to $7,500
• Average Cyber Liability Deductible: Varies based on number and types of client personal data stored
• Average Cyber Liability Limit: $1,000,000

There are several factors that contribute to the cost of cyber liability insurance, including the number of personal records you keep for customer information, annual revenue, and business type. Bundling cyber liability into a business owners policy (BOP) can help reduce costs.

Who Needs Cyber Liability Insurance

With cybercrimes in the news in recent years, you may think that cyber liability insurance is needed only by large retailers like Target, which experienced a massive data breach of customer information and credit card numbers. Often it is the smaller firms that are targeted by cyber criminals because they can be more vulnerable. If you allow credit card payments, you have an exposure.

Firms that store their customers’ personal data are most at risk of cybercrime. Some business types that may need cyber liability insurance include CPA/tax preparation, retail stores, IT firms, and healthcare providers.

To learn more, see our full article on Cyber Liability Insurance.

6. Inland Marine Insurance

Inland marine insurance is a type of property insurance that a business needs to protect property in transit, property in temporary care of the business, and property at a location other than the primary premises of the business. For example, businesses that move their equipment from location to location or transport cargo for a third party need inland marine insurance. The cost of inland marine insurance ranges from $500 to $2,500 for most small businesses.

What Inland Marine Insurance Covers

Inland marine insurance covers products, equipment, and materials while they are being transported over land, which is typically done by truck or train. This may include property of the business or of a third party, such as a client. Inland marine also covers your products, equipment and inventory when they are being stored in an offsite warehouse or storage facility.

What Inland Marine Insurance Doesn’t Cover

The most important exclusion to know about inland marine insurance is that it doesn’t cover the actual vehicle you use to transport your property or anything physically attached to the vehicle. For example, if your commercial vehicle was in an auto accident and the vehicle was damaged, along with the property you were transporting, inland marine would only cover the damaged property. You’d need a commercial auto insurance policy to cover the vehicle.

Who Needs Inland Marine Insurance

Business that frequently ship products or equipment should consider inland marine insurance coverage. Inland marine is especially important if you are transporting high-value products or materials.

Inland marine insurance can cover a wide range of specialty equipment and products, including:

• Computers, everything from servers to laptops
• Communications and networking equipment
• Construction and contracting equipment
• Medical and scientific equipment
• Photography equipment

Examples of businesses that may need inland marine insurance include contractors and mobile food vendors. You’ll need inland marine insurance to cover your valuable assets, such as equipment, tools, supplies and inventory, while moving from one location to another.

7. Commercial Umbrella Insurance

Commercial umbrella insurance is used to extend coverage on other insurance types, such as general liability, in the event claims exceed the limits of the underlying policy. The cost of commercial umbrella insurance varies based on several factors, such as the limit size and type of business, but most small businesses pay $500 to $1,500 per year.

What Commercial Umbrella Insurance Covers

Commercial umbrella insurance covers claims that exceed the limits on other types of insurance, primarily general liability. For example, let’s say you have a $1,000,000 limit on your commercial liability insurance policy and a $500,000 umbrella policy. If a member of the public sues you because they were injured on your premises, and the legal expenses are $1,200,000, the umbrella policy would pay the extra $200,000.

What Commercial Umbrella Insurance Doesn’t Cover

Commercial umbrella insurance doesn’t cover claims that are not already covered by an existing policy. For example, if you don’t have commercial property insurance, your umbrella policy won’t cover property insurance claims. There are also certain types of insurance that a commercial umbrella policy won’t cover.

Here are the claims and types of insurance your umbrella policy won’t cover:

• Claims already covered by underlying policies
• Claims that you don’t have primary coverage for
• Commercial property insurance
• Errors and Omissions (E&O) / Professional liability insurance

Commercial umbrella insurance will only provide extended coverage if you have an appropriate underlying policy, such as commercial general liability.

Commercial Umbrella Insurance Costs

Here are average costs and limits for commercial umbrella insurance:

• Average Annual Commercial Umbrella Premium: $500 and $1,500 per year for most small business owners.
• Average Commercial Umbrella Deductible: Varies
• Average Commercial Umbrella Limit: $1,000,000

Also keep in mind that the premium cost for adding umbrella coverage can be less than adding to your other lines of insurance. For example, if you think you need to add $500,000 on to your general liability limit, it will likely be cheaper to add $500,000 of umbrella coverage instead.

Who Needs Commercial Umbrella Insurance

Most types of business insurance don’t require added coverage with umbrella insurance, especially for small business owners, because the limits are already high enough to cover most risk exposures. However, there are a few basic types of small business owners who may need to extend limits of liability with umbrella insurance.

You may need umbrella insurance if:

• You work with hazardous materials that can cause serious injury.
• You have employees who drive commercial vehicles.
• Your clients require higher limits than you already have now.

8. Workers Compensation

Workers compensation insurance provides benefits to your employees in the event of work-related injuries or illnesses, and is required in most states for business owners with one or more employees. The cost of workers comp averages between $1.00 to $2.00 per $100 in employee wages, but can cost up to $15 per $100 in wages for businesses where risk of injury is higher.

What Workers Compensation Covers

Workers compensation coverage includes medical bills, wages from lost work time, and more for employees who become injured or sick as a result of working for your business. Workers comp may also cover injury or illness that occurs away from your business premises, like at a remote location or while traveling to a client site, provided the employee was doing something related to their job.

What Workers Compensation Doesn’t Cover

Certain types of workers are not covered by workers compensation insurance. Some of the main types of workers that are not covered by workers comp include business owners, volunteers, independent contractors, federal employees, railroad employees, and longshoremen.

Workers Compensation Insurance Costs

The cost of workers compensation varies widely, but here are some average numbers:

• Average Workers Comp Premiums: $1.00 to $2.00 per $100 in payroll in most states; higher risk businesses, such as construction, may see workers comp rates as high as $15 per $100 in payroll
• Average Workers Comp Deductible: Zero
• Average Workers Comp Limits: Benefit amount is usually two-thirds of employee wages; maximum payout depends upon the state where your business is located

Since the cost of workers compensation varies so broadly, speaking with an insurance professional is the best way to estimate your actual costs for coverage. Read our full review of the best workers compensation insurance providers.

Who Needs Workers Compensation

Although workers compensation is not a legal requirement in every state, all businesses with employees are wise to get coverage. Since commercial general liability does not cover employee injuries, small business owners need to protect against employee claims related to the workplace with workers comp coverage.

You can learn more by reading our full article on Workers Compensation Insurance.

9. Commercial Auto Insurance

Commercial auto insurance protects against claims arising from accidents involving vehicles you use for your business. Coverage includes third-party liability, physical damage, and more. Most policies will also include first-party coverage types, such as medical payments and collision. Premiums vary widely, but the average cost of commercial auto insurance ranges between $750 and $1,200 per vehicle.

What Commercial Auto Insurance Covers

Commercial auto insurance covers bodily injury and property damage in the event a vehicle you use for business is involved in an auto accident or is hit by an object. You may choose which coverage types to include in your policy. Small business owners should, at a minimum, include third-party bodily injury and property damage for protection when you or an employee are at fault in an auto accident.

Here are the basic types of coverage for commercial auto insurance:

• Bodily Injury: Third-party medical expenses, legal fees and more when you or your insured driver are at fault.
• Property Damage: Repair of vehicles or other property when you or your insured driver are at fault.
• Medical Payments: Medical expenses for you, your insured driver and passengers, no matter who is at fault.
• Uninsured/Underinsured Motorist: Medical expenses and property damage for you when the owner of the other vehicle is uninsured or underinsured.
• Collision: Damage to your business’ insured vehicle.
• Comprehensive: Damage to your vehicle caused by events other than a collision, such as a falling object.

There are other types of coverage you can add to a commercial auto policy, such as roadside assistance and hired auto physical damage. Be sure to go over the risks associated with your commercial vehicle and discuss them with your insurance provider.

What Commercial Auto Insurance Doesn’t Cover

Small business owners may make the mistake of assuming that any incident or event involving their vehicle is covered under their commercial auto insurance policy, but there are a few important exclusions to know before implementing the policy.

Here are key exclusions of a typical commercial auto insurance policy:

• Workers Compensation: Commercial vehicle insurance will not cover claims that are already covered under your workers compensation insurance. For example, if your employee is injured on the job while operating your commercial vehicle, workers comp will cover the medical costs and lost wages, if applicable, not commercial auto insurance.
• Care, Custody and Control: This is a common exclusion that denies coverage for a third party’s property that is in your care, custody and control. For example, if you are in possession of someone else’s vehicle and it’s damaged, your commercial auto insurance wouldn’t cover this.
• Fellow Employee Injuries: Claims made by one of your employees against another employee are excluded from the commercial auto insurance policy.

There may be other exclusions in your policy, which should be discussed thoroughly with your insurance provider before coverage begins.

Commercial Auto Insurance Costs

Here are some average costs and information on limits for commercial auto insurance:

• Average Annual Commercial Auto Insurance Premium: $750 to $1,200 per year per vehicle and $2,000 or more for semitrucks
• Average Commercial Auto Insurance Deductible: $0 to $500 on each coverage type
• Average Commercial Auto Insurance Limits: Combined limit between $100,000 and $1,000,000

Most small business owners insure just one car, which is why the average premium cost is typically less than $1,200 per year. Truck drivers may pay $2,000 and up to $12,000 or more if they are owner/operators. Another example is food truck insurance, which ranges between $1,300 up to $7,000 or more per year.

Who Needs Commercial Auto Insurance

Any small business owner who uses a vehicle for business purposes other than commuting to and from work needs commercial auto insurance coverage. Small business owners who use their own vehicles should be aware that business-related accidents are typically excluded from a personal auto insurance policy.

Don’t assume your personal auto coverage will extend to your commercial vehicle, according to Michelle Christian, Mid-Atlantic Regional Administrator, U.S. Small Business Administration:

“If you use your personal vehicle for business (not counting commuting), your personal policy likely will not cover you if you get into an accident, and you’ll have to pay out-of-pocket for damages and injuries. If you use the vehicle primarily for business (driving customers and employees to worksites; hauling tools and equipment; making deliveries; driving by uninsured drivers), it’s best to get a commercial policy—even though they may be more expensive.”

You can learn more by reading our full article on Commercial Auto Insurance.

10. Directors and Officers Insurance

Directors and officers insurance is a type of liability insurance that pays defense costs in the event a member of the board of directors, a company officer, or the business is sued for alleged or wrongful acts. The average cost of D&O insurance for most small to mid-sized businesses ranges from $5,000 to $10,000 per $1 million of coverage per year.

What D&O Insurance Covers

D&O insurance covers defense costs and payment of claims if directors or officers of the company are sued for alleged wrongful acts. A D&O policy can also cover the business itself for claims not covered in a general liability policy. D&O insurance has three different types of coverage that are called “Sides.” Each Side offers unique coverage.

The three Sides for D&O insurance coverage include:

• Side A: Covers directors and officers.
• Side B: Covers the company if they choose to indemnify (reimburse legal costs) for their directors and officers.
• Side C: Covers the business in the event that they’re being sued for something not covered by their general liability policy.

Most for-profit businesses buy a standalone Side A policy, whereas over half of non-profit organizations buy all three sides. Deciding which is best for your business is best determined with your insurance providers.

What D&O Insurance Doesn’t Cover

Most of the items D&O insurance doesn’t cover are intentional, illegal acts. For example, some of the primary exclusions of a D&O insurance policy include fraud, personal profiting, pending and prior litigation. Other exclusions include claims that would fall under a general liability policy, such as third-party bodily injury and property damage.

It’s also important to note that Side C coverage typically covers a company’s own liabilities when it is named along with its directors and officers in shareholder litigation. This would apply primarily to publicly traded companies. If your business needs broader protection, you would need to add endorsements with your insurance provider.

D&O Insurance Costs

D&O insurance costs will vary based on several factors, including the size of the business, industry type, deductible amount, and the policy limit. For most small- to mid-sized businesses, the cost of D&O insurance may range from about $5,000 to $10,000 per year in premium for every $1 million of coverage you need.

Here are average ranges for D&O insurance rates, deductible and limit:

• Average D&O Insurance Premium: $5,000 to $10,000 per $1 million of coverage
• Average D&O Insurance Deductible: Can be waived or a business may choose deductible to decrease premium
• Average D&O Policy Limit: $2,000,000 to $3,000,000

If you want to get accurate estimates on D&O insurance cost for your business, it’s wise to get quotes directly from an insurance provider. When shopping for rates and coverage, be sure to speak to at least three different providers.

Who Needs D&O Insurance

D&O insurance is needed by any business that is led by a board of directors or by businesses with a large amount of liabilities or creditors. D&O insurance is often needed to attract quality board members and executives, who may expect this coverage before considering joining your company. D&O insurance is used by both for-profit businesses and nonprofit organizations.

For more information, see our full article on D&O Insurance.

11. Employment Practices Liability Insurance (EPLI)

Employment practices liability insurance protects business owners from employment-related claims, such as sexual harassment, discrimination, and wrongful termination. EPLI insurance is most needed by businesses that have multiple employees. The cost of EPLI insurance varies based on several factors, but most small businesses pay less than $1,200 per year in premium.

What EPLI Insurance Covers

EPLI insurance protects employers from employee claims alleging:

• Wrongful Termination: Occurs when termination is alleged to have breached terms of a contract.
• Discrimination: Unfavorable treatment based on sex, race, age, or disability, for example.
• Sexual Misconduct or Harassment: Unwanted sexual advances or obscene remarks to an employee.
• Defamation of Character: For example, a false statement intended to harm the reputation of an employee.
• Invasion of Privacy: An employee alleges that an employer unreasonably searches their private space.

EPLI typically will also cover, within the limits of the policy, legal defense costs arising from lawsuits related to the above claims. Business owners should also note that coverage extends only to financial damage and not to other liability claims, such as bodily injury.

What EPLI Insurance Doesn’t Cover

Typical exclusions in an employment practices liability policy will be covered under other policies, such as general liability. Also, EPLI exclusions vary by state and by industry type.

Here are some of the typical items excluded from an EPLI policy:

• Bodily Injury: This is covered by general liability insurance.
• Contractual Liability and Breach of Employment Contract Claims: This covered by E&O insurance
• Criminal and Fraudulent Acts: Usually covered by E&O insurance if acts are unintentional.
• Violation of Employment Laws and Other Regulations: May be covered by E&O insurance if unintentional.

As with all other insurance types, it’s important to discuss what’s covered and what’s not covered by your EPLI insurance policy with an insurance agent or broker before buying coverage. By doing this, you’ll ensure that you’re covering your greatest risk exposures.

EPLI Insurance Costs

The average cost of employment practices liability insurance ranges broadly:

• Average Annual EPLI Premium: $1,200 (ranges between $800 and $3,000)
• Average EPLI Deductible: $25,000 to $50,000
• Average EPLI Limit:

Factors influencing your actual EPLI insurance costs will include the number of employees you have, the size of your business, claims history, and policies and procedures followed for hiring and firing employees.

Who Needs Employment Practices Liability Insurance?

Generally, any business that has multiple employees should consider buying employment practices liability insurance coverage. While EPLI is more commonly purchased by large corporations, small businesses tend to be more vulnerable to EPLI claims because they typically don’t have a legal department or an employee handbook guiding their employment practices.

According to Jay Starkman, Engage PEO:

“The rise in visibility of employment-related claims, such as sexual harassment and discrimination, should cause all small businesses to consider an EPLI insurance policy as well as obtaining professional help in the HR arena.”

12. Key Man Insurance

Key man insurance is life and disability insurance for employees important to the business’ financial success. Examples of key employees include business owners and founders. If the covered key person dies or becomes disabled while the policy is in force, the business receives the payout. Key man insurance costs vary, but average $100 to $2,000 per year.

What Key Man Insurance Covers

Key man insurance covers financial damage to a business when a key person dies or becomes disabled. The key man policy is usually backed by a term life insurance policy, which is purchased by the business. The term of the policy, which is typically 10 to 20 years, should be long enough to remain in force during the years the key person is employed with the business.

What Key Man Insurance Doesn’t Cover

A key man policy may have several exclusions, the most common of which are fraud, misrepresentation and suicide. For example, a claim can be denied if it is found that there was intentional dishonesty. Also, it’s common for key man insurance to exclude death by suicide in the first two years of the policy, which is called the contestability period.

Key Man Insurance Costs

Key man insurance costs vary widely, but here are some premium ranges for various death benefits:

• $100,000 Key Man Policy Premium: $99 to $130
• $500,000 Key Man Policy Premium: $255 to $410
• $1,000,000 Key Man Policy Premium: $390 to $705

The above key man premium ranges are for term life policies with terms of 10 to 20 years for a 40-year-old, non-smoking male. Females are generally priced lower than males. Higher age generally pushes prices higher. If you use whole life insurance for the policy, premium costs are typically five to 10 times higher than term life.

Who Needs Key Man Insurance

Business that rely on just one or a few key people, such as an owner or top executive, for the financial success of the business should consider getting key man insurance coverage. Key man insurance is not just for large businesses. Small businesses are often more dependent on one or two key people for its success.

To learn more, see our full article on Key Man Insurance.

13. Surety Bonds

A surety bond is a contract between three parties known as the principal, surety, and obligee. The bond insures that the purchaser of the bond (you, the business and principal) will live up to the financial obligations of the contract to the obligee, which is often a state government. The “surety” is an insurance company that provides the financial guarantee.

What Surety Bonds Cover

It’s important to keep in mind that surety bonds are not a type of insurance but rather a guarantee that an individual or business will fulfill contracts in accordance with all applicable regulations and laws. Therefore, although the business, or the principal, is the purchaser of the surety bond, the protection is for the public, employers and project owners.

What Surety Bonds Don’t Cover

Surety bonds are insurance vehicles but they aren’t insurance policies, which means that they don’t cover things like third-party bodily injury and property damage. These claims would be covered under a general liability insurance policy.

Surety Bond Costs

Surety bond costs vary depending on the financial status of the applicant, the type of bond and the coverage amount. For example, a contractor with a poor credit rating will likely pay more for a surety bond than one with a good credit rating. Bond rates typically range between 1 to 3 percent of the total amount. Surety bonds for most small business contractors cost $100 to $300 per year for up to $100,000 in coverage.

Who Needs Surety Bonds

Businesses that do contracting work may be required to be bonded in order to obtain a license with the state where they do business. In addition to meeting state requirements, being bonded can help attract larger contracts. Examples of businesses that may need a surety bond include builders and landscape contractors.

To learn more, please see our full article on Surety Bonds.

What’s Included in a Business Owners Policy (BOP)

A business owners policy isn’t an insurance type but instead is a package of multiple insurance types bundled together for one, cost-efficient insurance plan. Common types of insurance included in a BOP are general liability insurance, commercial property insurance, and business interruption insurance. The cost of a BOP ranges between $500 and $3,500 for most small business owners.

According to Mick Noland, Senior Vice President, MetLife Auto & Home:

“A Business Owners Policy (BOP) provides business owners with the opportunity to purchase several insurance coverages within a single policy. In addition to simplifying the purchasing process, an integrated BOP policy provides one deductible, simplified billing and streamlined service. Also, a BOP can be modified to meet the needs of each business owner, including special coverages such as food spoilage for a business in the food services industry.”

When You Need a BOP

Business owners policies are generally best for small business owners who need more than one type of insurance. Almost every business owner needs a general liability policy. If they need more than that, such as commercial property insurance, a BOP will reduce the total cost of insurance compared to buying the policies separately.

Types of Insurance That Can Be Included in a BOP

The standard types of insurance that are included in a business owners policy are commercial general liability, commercial property insurance, and business interruption insurance. In addition to these three standard types, there are other types of insurance that may be added to a BOP.

Here are the insurance types that typically come with a standard BOP:

• Commercial General Liability
• Commercial Property Insurance
• Business Interruption Insurance

Here are additional insurance types that can be added to a standard BOP:

• Errors & Omissions (E&O) Insurance
• Cyber Liability Insurance
• Directors & Officers (D&O) Insurance
• Inland Marine Insurance

Not all insurance companies offer these additional types of small business insurance. To customize a BOP to meet your needs, speak with your insurance agent or broker to see what is available for you. To learn more about a BOP, see our full article on Business Owners Policies.

What a Certificate of Liability Insurance Is

A certificate of liability insurance (COI) is a document that provides proof that a business is covered by liability insurance. The COI is not insurance coverage in itself, but rather a document that shows evidence of liability insurance. This standardized, one-page certificate will include your insurance coverage, limits of coverage, the certificate holder, the insured, additional insureds, and more.

When You Need a COI

A COI is most commonly needed when you’re about to enter into a contract and the contractor or prospective client requests to see your proof of insurance. However, any business owner who works with the public and with other businesses should have a certificate of insurance (COI). Presenting the COI, even if it’s not requested, can help you win contracts and bids on projects.

Here are some examples when you need a certificate:

• A food truck business plans to serve food at a county fair and the county requires food vendors to have at least $1 million in general liability. The COI is required to show proof of liability insurance.
• A yoga instructor is about to start teaching at a new studio and the studio owner needs to see her certificate of liability insurance.
• A semitruck driver wants to be an owner-operator working under their own authority and needs a certificate proving at least $2 million in coverage.

How to Get a Certificate of Liability Insurance

Insurance companies typically offer quick access to your COI at no charge. You should be able to get free copies within 24 hours of request. Online access to a COI is also a common offering at small business insurance companies.

To learn more about COI, see our full article on Certificates of Liability Insurance.

Best Small Business Insurance Providers

These are five of the best small business insurance providers:

1. The Hartford

The Hartford has been specializing in small business insurance for 30 years. In addition to offering specialized business insurance by industry and profession, The Hartford has become known for their industry-leading customer care and highly-rated claims service. Businesses that need more than basic coverage can choose a pre-set specialized package or create a custom plan to suit their unique needs.

2. Next Insurance

Next Insurance is a leader in online service to small business owners and offers basic insurance packages at highly competitive pricing. Their goal for their small business clients is to make insurance simple, tailored and affordable. They also offer quick access to a certificate of liability insurance (COI), which is a valuable benefit for business owners needing to show proof of coverage to get licenses and to enter into certain contracts.

3. AP Intego

AP Intego partners with multiple highly-rated carriers, such as Travelers and AmTrust. Their team of nationally licensed agents will work with your business to identify your coverage needs. They will shop and compare rates so you can find the best policy at the best price.

4. State Farm

State Farm is a large insurance company with a presence in almost every city and town in the nation. State Farm has 70,000 employees and 19,000 agents in the U.S. Large insurance companies like State Farm have sound financial backing and broad product offerings. If you’re a small business owner who prefers working with a local agent, you should consider State Farm as your insurance provider.

5. Nationwide

Nationwide is another large insurance provider with local agents all over the U.S. Where they stand out is specialization in property and casualty insurance. Commercial property insurance, along with general liability, is a common insurance type needed by small business owners. Nationwide also receives high marks for customer service.

Bottom Line

Every small business owner needs at least some form of insurance coverage, such as commercial general liability, which covers claims arising from third-party bodily injury, property damage and more. Expensive claims can do severe financial damage or even bankrupt a small business. Protect what you’ve earned and ensure the future success of your business with the right kind of small business insurance.

The folks at The Hartford make protecting your business a breeze. Their team of agents will work with you to make sure your business is properly covered. Get started today by filling out a short online questionnaire.

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