Running a small business is exciting and challenging. There are countless details to take care of—from developing products and services to managing employees and finances. One aspect that all business owners should pay attention to is insurance. 

Why do small businesses need insurance?

Carrying insurance could be a legal requirement depending on the state and industry in which a business operates. But beyond the legal necessity, small business owners still need comprehensive commercial insurance. 

Adequate coverage can protect businesses from potential financial losses due to unforeseen accidents, natural disasters, lawsuits, or other events that could disrupt operations. 

Without adequate insurance coverage, a small business could face significant financial hardship, threatening its ability to continue operating. Commercial insurance provides peace of mind and financial security, allowing business owners to focus on growing their company without worrying about unforeseen events. 

Additionally, insurance coverage can help establish credibility with customers, investors, and partners, as it demonstrates a commitment to responsible business practices.

8 policies business owners should know

1. General liability insurance

General liability insurance covers many potential risks businesses face, such as third-party bodily injury and property damage. This type of insurance is critical, as it can protect your business from expensive lawsuits and legal fees. It can also cover medical expenses from an accident or injury on the business premises.

2. Property insurance

Property insurance covers damages to the physical assets of a business, like buildings, equipment, and inventory. This type of insurance can protect your business from losses due to fire, theft, vandalism, or other disasters. It’s essential to assess your business assets’ value to determine the coverage you need.

3. Business interruption insurance

Business interruption insurance provides financial protection if your business experiences a significant disruption, such as a natural disaster or fire. It covers lost income and other expenses, allowing your business to continue operating during a difficult time.

4. Business Owners Policy (BOP)

A Business Owners Policy (BOP) can combine several types of insurance coverage, including the first three mentioned above, into one policy. Bundling policies can make it easier and more cost-effective for business owners to obtain the necessary coverage.

5. Workers’ compensation insurance

Workers’ compensation insurance is required by law in many states. It provides coverage for employees who are injured on the job. It covers medical expenses, lost wages, and rehabilitation costs. Without this coverage, a small business could be held liable for all costs associated with workplace injuries.

6. Professional liability insurance

Professional liability insurance, also known as errors and omissions insurance, is a type of insurance that protects businesses from claims of negligence or malpractice. It is crucial for companies that provide professional services, such as lawyers, doctors, and accountants. This type of insurance covers legal defense costs and settlements in case of a lawsuit.

7. Cyber liability insurance

Cyber liability insurance protects against cyber attacks, data breaches, and other cyber-related risks. It covers expenses related to data recovery, legal fees, and public relations efforts to manage the company’s reputation. This type of insurance is crucial in today’s digital age. Cyber-attacks are becoming increasingly common and can be devastating for small businesses.

8. Commercial auto insurance

Commercial auto insurance covers vehicles used for business purposes, such as delivery trucks, company cars, or catering vans. This insurance covers damages to the vehicle, liability for injuries or damages caused by the car, and other expenses related to the vehicle’s operation.

What to look for when buying small business insurance

Buying commercial insurance can be complex and time-consuming, especially for new business owners. Here are some key things to look for when purchasing a commercial insurance policy that can help make the process easier:

• Coverage: Look for a policy that covers the specific risks associated with your business. For example, suppose you operate a construction company. In that case, you’ll need coverage for property damage and liability for using heavy equipment.

• Cost: Make sure the cost of the policy fits within your budget while providing the necessary coverage. It’s also essential to compare quotes from multiple insurance providers to get the best deal.

• Deductibles: The deductible is the amount you pay out of pocket before the insurance coverage kicks in. A higher deductible means lower premiums, but you’ll need to pay more in case of a claim. Choose a deductible that you can comfortably afford.

• Limits: The insurance policy’s limit is the maximum amount the insurer will pay for a claim. Make sure the policy limit is sufficient to cover your potential losses.

• Exclusions: The policy may have exclusions that specify certain risks or events that aren’t covered. Read the policy carefully to understand any exclusions and assess if you need additional coverage for those risks.

• The reputation of the insurance company: Choose an insurance company with a good reputation for customer service and quick claims processing. Look for reviews and ratings from other business owners to understand the company’s track record.

• Professional advice: Seek the advice of a licensed insurance agent or broker who can help you understand your coverage needs. They can guide you in choosing the best policy for your business.

Remember that the right commercial insurance policy can protect your business from financial losses and give you peace of mind. Take the time to research and compare policies to find the one that best fits your business needs and budget.

About the author

Emily is the Content Marketing Manager at CoverWallet, an Aon company. CoverWallet is an insurance technology company dedicated to making commercial insurance simpler, faster, and more convenient for small businesses by leveraging data science, design, and state-of-the-art technology.

The information above is provided for educational and informational purposes only. It is not intended to be a substitute for professional advice and may not be suitable for your circumstances. Unless stated otherwise, references to third-party links, services, or products do not constitute endorsement by Yelp.