Small businesses face a variety of risks ranging from natural disasters to cyberattacks. Different types of insurance can help protect your business from various adverse — and often costly — circumstances. Here are a few insurance options that are available to help protect your small business.
General liability insurance
General liability insurance, also known as business liability insurance, offers protection against claims of bodily injury and property damage, as well as the medical expenses associated with these events. If a person is injured or property is damaged at your business, general liability insurance can cover their medical bills or damages if your business is found to be responsible.
General liability insurance can also protect against financial losses that result from slander or copyright infringement. This type of insurance is often required by property owners, lending agencies, and licensing boards.
Professional liability insurance
Professional liability insurance, sometimes called errors and omissions insurance, is appropriate for any business that provides professional services or offers advice to clients. This includes accountants, real estate agents, and advertising agencies. Professional liability insurance provides coverage in instances where a customer makes a claim against your business for misrepresentation, malpractice, or negligence.
This type of insurance can cover the costs of legal representation, settlements, and judgments. Without it, your small business may be financially responsible for reimbursing customers or paying expensive legal fees.
Commercial property insurance
This type of insurance provides protection for your business’s physical assets, such as its physical location, equipment, furniture, tools, business records, and electronics. Coverage generally also extends to outdoor items like signs and fences.
Commercial property insurance provides coverage for damages that may occur due to natural events, such as fires and storms. This policy may also cover damage caused by vandalism or acts of civil disobedience.
Commercial auto insurance
If your business uses vans, trucks, or cars, you will likely need commercial auto insurance. Personal auto insurance policies generally do not cover business-related vehicle use, so it is generally necessary to have commercial auto insurance for your business’s vehicles.
If you or your employees use personal vehicles for business purposes, then hired and non-owned automobile liability insurance can provide protection if you or your employees are responsible for an accident while using personal vehicles for business.
A business owner’s policy (BOP) combines multiple coverages into a single plan. It’s a good option for restaurants, retail stores, and contractors that want comprehensive coverage that’s easy to manage.
Workers’ compensation insurance
This type of insurance is required by the federal government if your business has even a single employee. Workers’ comp covers your employees in cases of work-related injuries or illnesses, including their medical expenses, disability benefits, and lost wages.
Cyber liability insurance
Data breaches and cyberattacks can be expensive for small businesses, and cyber liability insurance can help cover some of the costs associated with these events, such as notifying customers in the event of a data breach or offering free credit monitoring to impacted customers. If a customer files a claim against your business due to a breach of their personal information, this insurance may help cover those costs as well.
Business owner’s policy
A business owner’s policy (BOP) combines multiple coverages into a single plan. It’s a good option for restaurants, retail stores, and contractors that want comprehensive coverage that’s easy to manage.
A BOP typically includes general liability, commercial property, and business interruption insurance. Business interruption coverage helps cover financial losses if your business is forced to temporarily shut down. You may be able to add endorsements to your BOP to cover additional risks your business faces.
Tips for choosing business insurance
Before selecting a business insurance provider, take the following steps:
- Evaluate your business-specific risks. Carefully consider the risks your small business may face, including natural disasters, accidents, or potential lawsuits. In many cases, these risk factors depend on the nature of your small business.
- Cover your legal bases. Determine what types of insurance are legally required for your business. The federal government and individual states may have separate requirements, and business owners may have different needs based on whether they rent or own their physical workspace.
- Work with a licensed agent. When you’re considering a commercial insurance agency, read reviews and their website to see if the agency’s focus aligns with your business’ needs.
- Compare policies to find the best fit. Insurance policies often vary significantly in costs and the benefits they provide. When you’re shopping, contact several agents to compare rates and deductibles. Read policies thoroughly to understand what each option does or does not cover.
- Compare the costs. Small business insurance typically ranges from $30 to $140 per month, depending on your industry, business size, deductible, the policy limits, and your location. You can find more affordable coverage by comparing quotes from multiple insurers or working with an insurance broker.
- Regularly reassess your needs. As you expand your business operations with new equipment or increased space, your needs for insurance coverage change. Plan for annual check-ins with your insurance agent to discuss any recent changes or growth in your business and how they may impact your insurance needs.
How much does small business insurance cost?
The amount you pay for business insurance depends on your business’s size, risk profile, and location. Here’s an overview of the average costs for different types of insurance coverage.
- General liability insurance: General liability insurance costs an average of $45 per month, or $540 annually. However, your risk profile plays a big role in your insurance costs. Businesses that interact heavily with the public or operate dangerous equipment can expect to pay higher premiums.
- Professional liability insurance: Professional liability insurance costs, on average, $88 per month, or $1,056 annually. Your industry and the size of your company impact how much you’ll pay for premiums. For example, financial companies may face high premiums since their industry is heavily regulated.
- Commercial property insurance: Commercial property insurance costs an average of $108 per month, or $1,296 annually. Your costs depend heavily on your business’s location since population density, crime, and other local factors all influence your premiums. Your location also affects any weather-related risks your business faces, like flooding, earthquakes, or hurricanes.
- Commercial auto insurance: Commercial auto insurance costs an average of $140 per month, or $1,680 annually. However, the premiums can vary widely depending on the size of your fleet.
- Workers’ comp: Workers’ compensation costs approximately $54 per month, or $648 annually. The total number of employees and your industry affect how much you’ll pay. Companies in the construction industry can expect to pay more for coverage than those who employ office workers.
- Cyber liability insurance: Cyber insurance costs about $129 per month, or $1,548 annually. Your industry and the amount of sensitive customer data you handle determine your average premiums. According to Insureon, information technology companies and nonprofits pay the most for cyber insurance, while therapists and retail businesses pay the least.
- Business owner’s policy: A BOP costs an average of $83 per month, or $996 per year. It’s widely considered one of the most cost-effective options for small businesses since it bundles several types of coverage into a single plan.
Danielle Fallon O’Leary contributed to this article.
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