The content of this article is provided for informational purposes only. You should always obtain independent business, tax, financial, and legal advice before making any business decision.
There are many types of business insurance for small businesses. Business insurance helps protect your company from risks and recover from issues or accidents if they do occur. Insurance can also provide many benefits, such as liability coverage and employee protections.
Now, you might be wondering, "What type of business insurance do I need? And how do I know which type of commercial insurance will keep my business protected and running smoothly?” After all, there are many commercial insurance examples, including general liability insurance and workers’ compensation insurance.
Let's explore various types of insurance for small businesses and how to choose the right coverage for your needs.
It’s important to research different types of insurance to make the best decision for your company. After all, there are many options available to protect small businesses from risks, claims, and liabilities.
To start, consider these nine types of insurance for small businesses:
What is general liability insurance? General liability insurance offers protection against third-party claims, such as customer injury, property damage, or advertising injury. Meanwhile product liability insurance offers protection against third-party claims your products caused personal injury or property damage.
Property insurance, also known as business hazard insurance, protects a business' property, such as a shop, warehouse, or hairdressing salon, and may cover damage from unexpected events such as fire, theft, or natural causes.
What is workers’ compensation insurance? Workers’ compensation insurance provides coverage for employees who suffer work-related injuries or illnesses.
Business interruption insurance can help compensate for lost income due to unexpected events such as fires, floods, or natural disasters.
What is commercial auto insurance? Commercial auto insurance protects against the costs associated with vehicle theft, accidents, or damages.
What is professional liability insurance? Professional liability insurance, also known as “errors and omissions” or “malpractice” insurance, helps small businesses that provide specific services remain protected against certain legal claims.
Cyber insurance helps protect businesses from the financial impact of cyber threats and attacks.
What is umbrella insurance? Umbrella insurance provides an extra layer of protection against unforeseen or high-cost incidents, such as large lawsuits.
Shipping insurance helps protect businesses from the costs of errors or accidents during the shipping process.
Now, you might be wondering, "What type of insurance does my business need?" With so many insurance coverage types to choose from, it can take time to find the right solution for your small business. You might consider commercial general liability insurance, for example, to protect your business against third-party claims. Or you might find you need property insurance to protect your brick-and-mortar shop from potential damage.
When weighing your options, you can take these steps to choose the right type of insurance for your small business:
First, consider which types of company insurance you might be required to have based on your state, industry, or company size. Some states, for example, have their own small business insurance requirements for companies operating within their jurisdiction.
Next, consider the risks you’d like to protect your business against, such as property and equipment damage or natural disasters. If you operate a financial services business by yourself, for instance, you probably won’t need workers’ compensation insurance. However, you might need professional liability insurance to protect your company from potential legal disputes.
Once you know which types of insurance you need, compare business insurance providers by asking for quotes and coverage options. Research reputable providers and consider a few options before making your decision.
When comparing insurance providers, it’s important to clearly understand their policy terms and conditions, including:
Small business insurance can help to provide peace of mind in the following areas:
Business insurance can help provide coverage against fraudulent activities such as employee theft, cyber fraud, and dishonest business practices. It can also help with financial services, such as covering the expenses of fighting legal claims against the business.
Ensuring a business has sufficient insurance coverage is a fundamental part of risk management. Without insurance in place, businesses could be leaving themselves open to risks such as property damage or liability.
Business insurance can help small business owners protect against the risks that could cause unnecessary downtime and impact operating expenses, such as damage to property due to a fire or flood. It may help provide continuity and stability to the business as, should the worst happen, the business would have the right cover in place for a swift recovery.
Without the correct types of cover, small businesses could be leaving themselves vulnerable to large financial costs that threaten their ability to operate. As some of the business insurance types form part of a legal requirement, they also run the risk of non-compliance penalties.
They also potentially face legal consequences, operational disruption, reputation damage, and vulnerability to cyberattacks.
Despite the clear disadvantages of not having adequate business insurance, many small businesses still do not have sufficient cover. According to a survey from NEXT7, the current landscape for small business insurance shows:
According to Simply Business, the most common and costly liability claims are:8
For many small businesses the risk of not having business insurance may often outweigh the cost of getting the right level of cover. It is important that small business owners consider assessing their risks and seek professional insurance advice to review their needs and ensure they are sufficiently covered.
Learn more about small business insurance.
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