What types of insurance does a small business need?

Small businesses face various risks – from accidents and lawsuits to property damage – so having the right insurance is vital. The exact types you need can depend on your industry and location, but here are the most common insurance types small businesses should consider:

• General Liability Insurance: This is often the first policy to get because it covers a broad range of incidents. General liability protects your business from financial loss due to claims of bodily injury, property damage, personal injury (like libel or slander), and related legal costs​. For example, if a customer slips and falls at your store or if you accidentally damage a client’s property on a job site, general liability insurance would cover medical or repair costs and legal fees if they sue. Nearly all businesses, from retail and restaurants to professional services, should have general liability coverage.
• Professional Liability Insurance (Errors & Omissions): If your business provides a professional service or advice (consultants, accountants, designers, tech services, etc.), you’ll want professional liability insurance. It covers you in case a client claims they suffered a loss due to an error or negligence in your work​. For instance, if you’re a consultant and a client alleges your advice caused them financial harm, this insurance helps cover legal defense and any settlement. Doctors and lawyers have their own specific forms (malpractice insurance), but broadly it’s often called E&O (Errors and Omissions) insurance for many professions.
• Commercial Property Insurance: This covers your business property and assets, such as your building (if owned), equipment, inventory, and furniture, against events like fire, theft, vandalism, and certain weather damage​. If a fire damages your office or a burst pipe destroys your inventory, property insurance pays for repairs or replacements. Even home-based businesses should consider it, because a homeowner’s policy usually offers little to no coverage for business assets. Note: If you rent a space, your landlord likely has building insurance, but that won’t cover your own equipment or inventory – that’s where property insurance is still needed.
• Workers’ Compensation Insurance: If you have employees, workers’ comp is often legally required (requirements vary by state/country, but most places mandate it once you have a certain number of employees, even just one in some jurisdictions)​. This insurance provides wage replacement and covers medical treatment for employees who get injured or ill due to their job. It also generally protects you from lawsuits related to those injuries. For example, if an employee injures their back lifting a heavy box at work, workers’ comp would pay for their medical bills and lost wages during recovery.
• Business Owner’s Policy (BOP): Many insurers offer a packaged policy for small businesses called a Business Owner’s Policy. A BOP typically bundles general liability and commercial property insurance into one package (often at a cost lower than buying them separately)​. It’s designed for small to mid-sized businesses and can sometimes include business interruption insurance as well (which covers lost income if your business is temporarily unable to operate due to a covered disaster). A BOP is a convenient way to get broad coverage in one go, but it’s important to understand what’s included and add any extra coverage your business might need.
• Additional Coverages: Depending on your business, you might need other specific insurance:
• Product Liability Insurance: If you manufacture or sell products, this covers you if a product defect causes injury or damage (often this is included in general liability, but companies with higher risk products might get extra coverage)​.
• Commercial Auto Insurance: If your business owns vehicles or you use personal vehicles for business purposes (deliveries, traveling between job sites), a commercial auto policy is necessary to cover accidents involving those vehicles.
• Cyber Liability Insurance: Important for businesses that handle sensitive customer data or conduct a lot of business online. It covers costs from data breaches, hacking, or other cyber incidents (like notifying customers of a breach, legal fees, and credit monitoring for affected clients).
• Umbrella Insurance: This is an extra layer of liability coverage that kicks in if a claim exceeds the limits of your general liability or auto policy. It’s a way to increase coverage relatively affordably for rare but catastrophic claims.
• Disability Insurance: Some jurisdictions require disability insurance for employees (as noted in the SBA list, along with unemployment insurance)​, which provides partial income to employees who can’t work due to non-work-related injury or illness.
• Home-Based Business Riders: If you operate out of your home, you might add a rider to your homeowner’s insurance to cover business equipment or liability for business-related visitors​. However, these are usually limited, and as your business grows, a separate policy may be necessary.

When determining what coverage you need, consider risks you couldn’t afford to pay for out-of-pocket. A good rule is to insure against events that would otherwise bankrupt or seriously impair your business​. For instance, a lawsuit or a fire could be financially devastating without insurance. Always compare quotes and coverage details from reputable insurers. It can also be helpful to speak with a business insurance agent who understands your industry’s specific risks. By securing the appropriate types of insurance, you’ll protect your business’s financial health and gain peace of mind, knowing you’re prepared for the unexpected.