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By Mark Lauer Updated on October 15, 2021

Top 9 Types of Business Insurance

Starting your own business can be exciting, but also a little nerve-wracking. It can be tough to know all the ins and outs of every aspect of business, regardless of your prior experience. One area that can be especially tricky is learning what is the best insurance for your small business.

Don’t panic; there are many business resources available if you’re looking for the best insurance for small business owners.

Understand Your Business’s Insurance Needs

One of the first questions on a business insurance coverage questionnaire will be about the type of business you want to insure. Needs will vary greatly depending upon what your business does, offers or serves. Will your business include automobiles? Do you have customers coming in through a brick-and-mortar storefront? Are you storing hazardous materials? Do you run your business operation out of your home? Consider the answers to these questions before selecting the types of business insurance you’ll need.

In addition to basic facts about your business, the types of insurance you might want or be legally required to obtain will vary by your business’s industry. For example, the owner of a retail store will have far different needs than someone working as a business consultant from a home-based office.

Before shopping for your insurance, have a clear picture about your precise business. Aspects of your business that could impact the types of policies you’ll need, as well as their costs; this includes the following:

  • Location
  • Number of employees
  • Your business’s industry
  • Product inventory
  • Business style

Once you’ve gathered your answers, navigating the wide world of insurance policies is much easier.

Types of Small Business Insurance

After determining your needs, there are many types of insurance products that can fill the required coverage. Here’s a breakdown of several types of insurance for your small business. In general, one size does not fit all, so examine your unique needs to select what best covers your business.

General Liability

This is a popular product nearly all businesses will want to research. This coverage, according to Consumer Advocate, offers assistance for a wide variety of needs such as:

  • Third-party physical injury
  • Property damage
  • Reputational injury
  • Advertising injury
  • Other types of liabilities

As the name likely indicates, most businesses need and should have general liability coverage. These policies offer the basics of insurance for any industry, in any location, and for any size business. Prices will vary depending on what and how much you want covered.

Workers’ Compensation

If your business has employees, it is legally required in the United States for you to carry workers’ compensation insurance. This insurance covers an employee’s medical expenses if they suffered a work-related injury or illness and also covers lost wages of an employee who’s injured on the job.

Premium rates vary depending on your business’s industry, the number of employees and required amounts of coverage. The laws are mandated by state, so check with yours to find out required coverage. The Department of Labor will typically handle such concerns.

QuickBooks has a free-to-use online guide to learn what your state requires regarding workers’ compensation.

Commercial Auto

You should have a commercial auto policy if your business owns vehicles that employees or owners use for work purposes.  These vehicles can include company cars, work vans or various trucks.

“Commercial auto insurance helps cover the costs of an auto accident if you or an employee is at fault,” explained The Hartford, a company offering multiple types of small business insurance. “This coverage can help pay for damaged property and medical expenses — even in the event of a fatal accident.”

Price will vary by location. Larger cities and other population-dense spaces usually have higher prices. Just like personal auto insurance, it will also vary by the type and number of vehicles your company uses, and the amount of coverage your business needs.

Small Business Insurance

While there are many types of insurance for your small business, some companies carry a generally termed “Small Business Insurance” policy that can cover your basic needs.

“At its most basic level, small business insurance should help protect your company’s property, income and safeguard you against liability claims,” explained The Hartford’s website.

The Hartford, just one such company that offers similar products, explained on its site that a policy offered by its organization combines 3 types of insurance into one policy.

  • Business property insurance
  • Business income insurance
  • General liability insurance

Nearly all small businesses can benefit from having this policy. As with most types of coverage, the number of assets you need to insure will determine the total cost. If you have elaborate grounds and need millions of dollars of income protection, that will inevitably cost more than a home-based office with a single worker.

Business Owner’s Policy

Depending on your coverage and income, you might also want to add a Business Owner’s Policy (BOP) insurance to your portfolio.

“A BOP combines business property and business liability insurance into one policy,” explained The Hartford. These policies, sometimes also called umbrella insurance, help cover the costs of liability claims, which — according to The Hartford — can average $15,000.

This insurance can be used in any industry, but is most recommended for businesses that have frequent customer or client traffic in and out of your location (for example, a store-front retail business). Location does not often cause price changes as much as the size of business or amount of coverage you require.

A store employee stocks the shelves. Purchasing products liability insurance can help your business if it carries physical goods.

Product Liability

Product liability is the best insurance for your small business if it focuses on inventory. If your company “manufactures, sells, handles, or distributes” products, states Consumer Advocate, you might want to add this type of coverage. This policy would “insure the business against claims for losses and damages resulting from their products,” said the site.

Businesses that do not directly work with physical products would not need this coverage. Prices vary depending on the amount of product or cost you want the policy to include.

Professional Liability

This type of insurance is usually purchased by professionals such as an architect, doctor, lawyer or accountant.

Professional liability insurance protects these business owners “against claims of financial loss and personal injury.” The Hartford added it can also be used “to help cover lawsuits that claim you made errors or omissions in the services your business provides.”

“Your professional liability coverage also helps cover clerical mistakes, including those made by your employees,” said The Hartford website.

Commercial Flood

Depending on your business’s location, you might want to purchase flood insurance. Many basic small business policies do not include flood insurance, making the add-on something valuable if your business is in a flood-prone area.

Business Interruption

As with most types of insurance, policies are designed to help you when the unexpected occurs. If your business is damaged by a fire, flood or any kind of accident or vandalism, or if you are sidelined with a serious illness or injury, you could be forced to temporarily close your business. In these instances, business interruption insurance will bridge the income gap and make sure your basic life and professional needs are covered.

Consult Your Insurance Provider

No matter the type of policy or company providing it to your small business, owners need to be aware and informed. If you aren’t sure about a product, ask your insurance provider. If you aren’t sure if you need a policy, seek the advice of others. Resources can include other business owners, non-biased websites, advisers, chambers of commerce.

Mark Lauer has been a Business Advisor at Fast Capital 360 since the very beginning. He’s helped thousands of businesses reach their potential, grow and thrive, forging strong relationships along the way.
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