California law requires two coverages for most businesses: workers' compensation once you have employees and commercial auto for business-owned vehicles. General liability isn't required by the state, but contracts routinely make it mandatory in practice. Here's how each one applies in California:

Workers' comp, commercial auto and general liability cover what the state and your contracts demand, but they leave significant gaps in protection. The coverage that you add depends on your actual operations and the assets you own. Most businesses in California build from these core coverages:

• Commercial Property: Pays to repair or replace the things your business owns, including your building, equipment, furniture and inventory, after a fire, theft or storm. Any business with a storefront, a stocked office or inventory on shelves should carry it, since covering those losses out of pocket can sink a small company. The catch in California is that standard property policies exclude earthquake and flood, so you add those separately if you want them.
• Business Owner's Policy (BOP): Bundles general liability and commercial property together, almost always with business interruption coverage that replaces lost income if you have to close after a covered loss. It usually costs less than buying those policies separately, which is why most small businesses with a physical location and some equipment start here. It is designed for smaller, lower-risk operations, so eligibility generally caps around 100 employees and a few million dollars in revenue. A BOP leaves out workers' comp and professional liability, so you add those on top when your business needs them.
• Professional Liability: Pays for claims that your work or advice cost a client money or caused them harm, such as a missed deadline, a flawed deliverable or a professional mistake. It goes by different names depending on the field: errors and omissions (E&O) for consultants, agencies and tech firms, and malpractice for doctors, therapists, lawyers and accountants. Anyone who sells expertise needs it, and clients or licensing bodies in those fields usually require it. General liability won't respond to this kind of claim, since that policy only covers physical injury and property damage. If a client could sue over the quality of your work rather than a physical accident, this coverage is worth the added cost.
• Cyber Insurance: Covers the fallout from a data breach or cyberattack, including notifying affected customers, legal and regulatory costs, and restoring your systems and data. Any business that stores customer records or takes card payments is exposed, which now covers most retailers, ecommerce sellers, healthcare practices, tech companies and professional firms. Standard general liability and BOP policies specifically exclude these losses, so a dedicated cyber policy or endorsement is the only way to cover them. Given how routine breaches have become, it's worth pricing even if you assume your business is too small to be a target.

Depending on what you do, your business may need protection from specific risks.

The average California business pays about $160 per month ($1,921 per year) for business insurance, based on my analysis of premium estimates across the state. California is the second-most-expensive state in the country to insure a business, behind only New York. What you actually pay swings widely around that average, depending on which coverages you buy and how much risk your business carries. Here's the average cost of business insurance in California for various coverage types:

I prepared a checklist that you can use when you're putting your coverage together. Each item is a decision to make or a detail to confirm before you sign, so you end up with coverage that fits your business and meets every requirement on it.

The simplest way to size up the coverage you need is to ask yourself these questions:

• Who could get hurt or have their property damaged because of what you do?
• What do you own that you couldn't afford to replace out of pocket?
• Does anyone, whether a client, a landlord or the state, require you to carry a specific coverage?
• What kind of event would stop your business from operating at all?

Each answer points to a coverage, and together they show you where your real exposure sits. I recommend that you start with the coverage you're legally or contractually required to carry, then add protection for the risks that would actually set you back. Choose the limits your situation calls for instead of the cheapest available option, and look at the whole picture again whenever the business changes in a way that matters.

For most California businesses, the right move is to compare the top-rated insurers before anything else. In a state this expensive for business insurance, a carrier that prices fairly and actually pays claims is worth more than the lowest quote, so a vetted shortlist keeps you from shopping blind. If you're not ready to compare carriers yet, find your situation below.