Small business insurance, also known as commercial insurance, is designed to protect business owners and their companies from the possible risks that come with running a company. While nearly all businesses can benefit from the protection and peace of mind provided by a comprehensive policy, you may be asking yourself, what specific type(s) of small business insurance are essential for the unique needs of my organization?
The overarching term “business insurance” includes several unique types of coverage. Each type of coverage serves a specific purpose, protecting businesses against a variety of unexpected events. These events range from lawsuits to injuries to property damage to malpractice and much more.
It’s crucial to understand each type of small business insurance to avoid unexpected risks and ensure that your business thrives for years to come. To gain a better understanding of each type of small business insurance and its benefits, we invite you to explore the sections below.
Jump To:
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Workers’ Compensation Insurance
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General Liability Insurance
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Professional Liability/ Errors & Omissions (E&O) Insurance
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Commercial Auto Insurance
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Product Liability Insurance
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Cyber Insurance
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Business Owners’ Policy (BOP) Insurance
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Hazard Insurance
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Property Insurance
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Umbrella/Excess Liability Insurance
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Business Interruption Insurance
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Directors’ and Officers’ (D&O) Insurance
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Workers’ Compensation Insurance
Workers’ compensation insurance, also referred to as workers’ comp, is a type of small business insurance that’s legally required for almost all businesses in 49 states (all except for Texas). For more information about your state’s workers’ compensation laws, view our Workers’ Compensation insurance rates and coverage by state interactive map.
Workers’ compensation pays for lost wages, medical bills and rehabilitation costs if an employee suffers a workplace-related injury or illness. By covering the costs associated with these incidents, workers’ compensation provides protection to both employees and employers. Workers’ comp is especially important for businesses in high-risk industries such as construction or manufacturing where physical labor is required. Without it, businesses risk having to pay high out-of-pocket costs, or face steep fines and other legal consequences.
Want to learn more? Check out our full, in-depth Workers’ Compensation Guide.
General Liability Insurance
General Liability insurance coverage covers businesses against claims relating to bodily injury, personal injury (such as libel and slander), advertising injury (including copyright infringement) or property damage to a third-party as a result of their employees, operations, or products. It is commonly referred to as business liability or commercial general liability insurance.
General liability is usually used to cover the costs associated with lawsuits, the replacement of property or medical bills stemming from claims. For example, say a contractor working on someone’s home leaves debris on the ground and the homeowner slips on them and breaks a bone. If the contractor has a general liability policy, it would cover the cost associated with the injury. Without it, the contractor would be forced to pay the costs out-of-pocket.
Want to learn more? Check our full, in-depth General Liability Insurance Guide.
Professional Liability/ Errors & Omissions (E&O) Insurance
Professional liability insurance, also known as errors and omissions insurance, protects professionals like accountants, doctors, attorneys and consultants against client allegations of malpractice, negligence, mistakes, omissions, misrepresentations, or failure to deliver promised services. Even the most established professionals can face claims, and whether they are true or not, they can be expensive to defend.
While generally liability works by covering accidents relating to physical injury or property damage, professional liability provides specific coverage if financial losses are caused due to professional errors. More specifically, it helps to cover the costs of legal defense, settlements and judgments. Additionally, in many industries, professional liability insurance is required in order to operate and remain legally compliant.
Want to learn more? Check out our full, in-depth Professional Liability Insurance Guide.
Commercial Auto Insurance
Commercial auto insurance is a necessary type of coverage for anyone who uses vehicles for business purposes. In most states, some form of commercial auto coverage is required by law if your company uses vehicles for its operations. This type of policy covers any costs associated with injuries, fatalities, or property damage caused by a company vehicle.
Commercial auto insurance is different from rideshare insurance, which is normally necessary if you work as a delivery or rideshare driver. It’s also important to note that a standard auto insurance policy is not enough when it comes to vehicles being used for business purposes. Whether you own an entire fleet of business vehicles or just one, without commercial auto insurance you could be left financially vulnerable in the event of an accident.
Want to learn more? Check out our full, in-depth Commercial Auto Insurance Guide.
Product Liability Insurance
Product liability insurance shields businesses against claims that arise when products they manufacture, distribute, and sell cause personal injury or property damage to a third-party. This type of coverage is crucial for reducing the monetary risks associated with defective, dangerous or harmful products. Whether the problem stems from a product’s faulty design, a production error, improper labeling, or lack of warnings and/or instructions, product liability insurance is there to help cover the associated costs.
Product liability insurance exists both as a part of general liability coverage, as well as its own policy. Most commonly covering costs associated with legal defenses and settlements, the coverage enables business owners to meet industry standards while also providing peace of mind when it comes to daily operations.
Want to learn more? Check our full, in-depth Product Liability Insurance Guide.
Cyber Liability Insurance
Cyber liability insurance helps protect business against threats such as data breaches, hacking and ransomware. Not only can cyber attacks result in major financial losses and legal issues, but they can also cause lasting reputational damage. For companies that deal with sensitive data, use online payment processing or just rely on technology to operate efficiently, cyber liability insurance is crucial.
In the event of an attack or breach, cyber insurance works by covering costs associated with legal fees, fines, data recovery, and the notification of affected customers. In today’s world, physical damage isn’t all we need to worry about, as technological attacks can be just as, or even more financially damaging. As technology continues to grow and evolve, there’s never been a more important time to invest in cyber liability insurance.
Want to learn more? Check out our full, in-depth Cyber Liability Insurance Guide.
Business Owners’ Policy (BOP) Insurance
A Business Owner’s Policy (BOP) is an insurance package that combines two (or more) essential types of insurance, commercial property and general liability. A business owner’s policy is a great choice for small business owners as purchasing these two types of policies separately typically costs more than purchasing them as a bundled package. Beyond the financial security that a BOP provides, it also provides more important clients with peace of mind, since they’ll know that a lawsuit won’t force you out of business.
In addition to providing commercial property and general liability coverage, BOPs oftentimes offer add-on coverage in the form of endorsements. These include protections like business interruption insurance, cyber insurance, product liability insurance, tools and equipment insurance and more. Business owner’s policies are a great investment especially for small businesses looking for comprehensive protection without the high costs that come with purchasing multiple separate policies.
Want to learn more? Check out our full, in-depth Business Owner’s Policy Guide.
Hazard Insurance
Hazard insurance is a type of property insurance that protects against damages caused by certain natural or man-made risks including fires, storms, hail, or vandalism. The kind of insurance is critical for small businesses especially, because it protects the physical structure of a property against unforeseen disasters that could result in substantial financial damage.
While hazard insurance protects the building itself, it does not often cover personal belongings or offer liability protection. As a result, many property owners choose comprehensive property insurance policies that incorporate hazard coverage in addition to other protections, guaranteeing that both the structure and its contents are protected from a wide range of potential threats.
Want to learn more? Check out our full, in-depth Hazard Insurance Guide.
Commercial Property Insurance
Commercial property insurance protects business owners and their companies from financial losses if their property and/or assets are damaged or lost. Common assets that are generally covered by commercial property insurance include buildings, furniture, fixtures, equipment, and more. No matter how big or small a business is, commercial property is a vital piece of protection, ensuring that companies recuperate quickly in the event of an incident.
Want to learn more? Check out our full, in-depth Commercial Property Insurance Guide.
Umbrella/Excess Liability Insurance
Umbrella liability and excess liability insurance both work by extending the coverage of an existing insurance policy, to provide coverage beyond the policies normal limits. Both umbrella and excess liability insurance typically work in tandem with primary policies such as general liability, commercial auto, homeowners and more.
While similar, umbrella liability and excess liability operate slightly differently. One one hand, umbrella broadens an established coverage to cover claims not included in the primary policy. On the other hand, excess liability works by extending the limits of an already established policy. By obtaining umbrella liability and/or excess liability insurance for your business, you can rest assured knowing there are no holes in your protection plan.
Want to learn more? Check out our full, in-depth Umbrella Liability/Excess Liability Insurance Guide.
Business Interruption Insurance
Business interruption insurance (also called business income insurance) safeguards companies from financial losses due to unexpected events that cause businesses to halt their operations. Natural disasters, fires and theft are all events that can leave organizations in shambles without the proper protection plan in places.
Business interruption insurance works to mitigate these financial risks by replacing lost income while shut down. Additionally, this type of policy covers operating expenses such as rent, power bills, employee wages, bank loans and taxes.
Want to learn more? Check out our full, in-depth Business Interruption Insurance Guide.
Directors’ and Officers’ (D&O) Insurance
Directors and Officers (D&O) insurance protects executives along with board members and officers, who make major decisions in a company. This specialized liability policy safeguards leaders against claims when others accuse them of mistakes or poor judgment in their roles.
Accusations stemming from mismanagement or negligence leads to high costs, potentially having major negative impacts on businesses. This is especially true for small businesses, nonprofits, and start-ups. Directors and Officers insurance combats these expensive claims by covering the cost of legal defense, settlements plus any damages.
Want to learn more? Check out our full, in-depth Directors’ and Officers’ Insurance guide.
Tools and Equipment Insurance
Tools and equipment insurance, also known as contractor’s equipment insurance, protects company tools and machinery from damage or loss. This policy extends to a variety of tools such as portable tools, heavy machinery, power equipment, as well as leased or borrowed tools, depending on the specifics of your policy. If your equipment is lost, stolen, damaged or destroyed as a result of an unforeseen event, tools and equipment insurance can assist you in repairing or replacing them, keeping your projects on track.
Want to learn more? Check out our full, in-depth Tools and Equipment Insurance Guide.
Get Small Business Insurance with EZ.Insure
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