Common Questions About Small Business Insurance

If you're unfamiliar with business insurance, you can find a wealth of information in our library of resources. You can use it to learn more about financial protection for your business.

Small Business Insurance Basics

There are 33.2 million small businesses in the U.S., according to the U.S. Small Business Administration. However, no two businesses are the same, so ensuring that yours has appropriate financial safeguards in place requires understanding several essential aspects of business insurance.

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    States set insurance requirements for certain businesses

    The requirements for business insurance vary from state to state. Usually, you must have worker's compensation insurance, unemployment compensation insurance and disability coverage if you have employees. Most states require commercial auto insurance for their vehicles. However, it's best to check with your state for specific requirements.

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    Several types of business insurance are available to meet different coverage needs

    Business insurance is a general term for various coverages offering business owners financial protection. Some are best suited for those in manufacturing and distribution, while others are more suited for service providers. General liability insurance is popular among business owners since it applies to most businesses.

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    Business insurance costs are based on a number of variables

    As with any insurance policy, you must pay a premium for your preferred coverage. However, your insurance costs may vary depending on several factors. These include your location, employee count and payroll expenses. Even your industry and claims history may affect your premium.

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    Many business insurance providers offer online quotes

    You don't have to go to insurance providers’ physical offices anymore. Most of them allow you to get an online quote. All you must do is provide your information to get an estimate. It makes comparing business insurance costs more convenient.

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    Business owners can often bundle coverage to lower their costs

    Business owners can often bundle coverage to lower their costs. Some business insurance providers offer several types of coverage, and bundling can be an excellent way to save money when purchasing insurance. A business owner policy (BOP) is an example — it combines commercial property and general liability insurance.

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Assess your business risks

To know what kind of business insurance you need, consider what risks your business faces. For example, professional liability insurance is worth investing in if you're a lawyer or a doctor with your own practice because it protects you against lawsuits from errors in service delivery. Commercial property insurance is handy if your business is in an area prone to natural disasters.


Understand the different types of business insurance

General liability insurance only goes so far. If you want solid financial protection, it's best to understand all the different coverages available:

  • General liability insurance: Protects against claims if someone gets hurt on your business property or if a customer's property sustains damage due to your services. It also helps with copyright infringement cases or incidents involving libel, slander or reputational harm.
  • Professional liability insurance: Protects you against lawsuits involving errors, malpractice and negligence.
  • Workers’ compensation insurance: Helps businesses cover costs associated with injuries and illnesses your employees may incur while on the job. It helps pay for medical expenses and disability benefits and may even cover funeral costs.
  • Commercial property insurance: Covers the cost of damages to your business property from vandalism, fire or theft. However, it won't cover damages from earthquakes and floods.
  • Commercial auto insurance: It's similar to a standard car insurance policy but is specifically for vehicles used to conduct your business.

Depending on your assessment of business risks and state requirements, you may need to purchase more than one kind of insurance for your business.


Determine how much coverage you need

Once you've identified the kinds of small business insurance you need, you must determine coverage limits for each. Remember, your preferred coverage level will directly impact your policy's premium. The higher your limits, the more expensive your insurance costs become.


Compare quotes from different insurers

Don't automatically go with the first provider you encounter. It's best to gather quotes from at least three insurance companies and compare their premiums and coverages. Some insurers charge more than others, even if your required coverages don't change. Comparing small business insurance quotes can help ensure you find a cost-effective policy that addresses all your business's insurance needs.