What Is Small Business Insurance (+ 6 Insurance Companies to Consider) (2023)

While careful business planning can help you reduce business risk, no amount of research and preparation can protect you from every single threat out there. What happens if someone sues your company because they slipped and fell in the warehouse? Or your store gets flooded, damaging tons of merchandise? Not to mention if your website gets hacked or private data is compromised.

That’s where small business insurance comes into play. Small business insurance is more important than ever, thanks to the array of modern risks business owners face.

What is small business insurance?

Small business insurance is a paid policy you can take out to protect your business and yourself. This includes financial liability protection in the case of lawsuits, property damage, injuries, workers’ compensation claims, or any other losses that may arise while in operation.

Different small business insurance companies offer different types of insurance—and various small businesses need different policies, depending on what they do, where they’re located, how many employees they have, and a host of other factors.

W​​​​hat does small business insurance cover?

Small business insurance covers a range of things, and the specifics depend on the plan and provider. Some examples could include:

• Third-party claims of bodily injury or property damage
• Damage or loss of physical assets like buildings for warehouses or stores, etc., equipment, or inventory, often due to events like fire, theft, vandalism, or natural disasters
• Replace lost income and cover ongoing expenses if a covered event disrupts business operations
• Claims of negligence or inadequate work

10 types of small business insurance

The world of small business insurance can seem complex, stuffed with endless, complicated offers. You’ll need to shop around to know what’s best for your company, but in general, you’ll need at least general liability insurance and workers’ compensation insurance.

Here are 10 common types of small-business insurance, which—aside from the first two—may or may not apply to your business, depending on what you do:

1. General liability insurance: General liability insurance provides broad, general coverage. Most policies protect your business against injury and property claims, as well as libel and slander.
2. Workers’ compensation insurance: If one of your employees is injured on the job, you could be left on the hook for their expenses and compensation. But if you have workers’ compensation insurance, that money comes out of your insurer’s pocket instead. Workers’ comp can cover costs of medical care, lost wages, disability, and even funeral expenses. This form of insurance is mandatory in every state except Texas for businesses with non-owner employees. Four states even require that you purchase a policy from the state, not a private carrier.
3. Commercial auto insurance: Commercial auto insurance covers your business if an employee gets into an accident while driving a work vehicle, like a food truck, a construction vehicle, or a delivery van.
4. Commercial property insurance: Commercial property insurance—also called hazard insurance or business property insurance—helps your business replace the commercial property that’s lost or damaged during operations. This can include real estate (like an office building), furniture, tools, inventory, or other tangible assets your company owns.
5. Commercial umbrella insurance: Commercial umbrella insurance is like an add-on to your existing insurance coverage. It’s a good move if you anticipate that your regular insurance limits won’t cover a massive loss or liability.
6. Business income insurance: Business income insurance—sometimes called business interruption insurance—covers lost income if your business suffers property damage caused by fire, storms, or theft.
7. Employment practices liability insurance: Employment practices liability insurance—also called employers’ liability insurance—covers a business in case an employee makes discrimination, sexual harassment, or wrongful termination claims against the owner or leadership.
8. Cyber liability insurance: Data breaches and ransomware (extortion software that locks you out of your device or encrypts your data until you pay a ransom) can cause actual harm to your customers and your business—and these attacks are rising. Liability insurance helps if you have to inform customers about an attack, compensates them in case of a claim, and pays for free credit monitoring for affected customers.
9. Professional liability insurance: Professional liability insurance—also referred to as errors and omissions insurance—protects your business against claims that your advice or services caused a customer financial harm. For example, a real estate agent who fails to note mold in a basement can be liable for damages.
10. Business owner’s policy: A business owner’s policy (BOP) is a small-business insurance package deal. The specifics vary based on your company’s needs and your insurance company’s offerings, but BOPs often include general liability insurance, commercial property insurance, business income insurance, and workers’ compensation.

6 best small business insurance providers

Choosing a small business insurance provider can be overwhelming because each company offers slightly different services and pricing. You will generally want to consider your needs, finances, and risks before finding a company that best meets your needs. To help you choose, contact the providers you’re considering for pricing quotes.

Below, find six popular small business insurance providers you may consider using, listed in alphabetical order.

1. Liberty Mutual

Liberty Mutual is one of the biggest insurance providers in the world, and the sixth largest for property and casualty insurance. While it’s mainly known for property and car insurance, other coverage options include:

• General liability
• Workers’ compensation
• Commercial auto and fleet
• Environmental liability
• Equipment breakdown
• Excess and surplus
• Health care liability
• Inland marine
• Management liability
• Mergers and acquisitions
• Ocean marine
• Professional liability
• Small business owner’s policy

2. Nationwide

Nationwide has been in business for almost a hundred years—the company started in 1926 as the Farm Bureau Mutual Automobile Insurance Company. It built on those beginnings to cover much more than farmers and cars, including:

• Workers’ compensation
• Commercial auto
• Commercial property
• Commercial umbrella
• Business income
• Employment practices liability
• Cyber liability
• Errors and omissions
• Business owner’s policy
• Business liability
• Crime insurance
• Equipment breakdown
• Inland marine
• Accounts receivable
• Builder’s risk

3. Progressive Commercial

Progressive Commercial is best known for its commercial auto insurance but offers a full range of small-business insurance services. Coverage options include:

• General liability
• Workers’ compensation
• Commercial auto
• Commercial property
• Professional liability
• Cyber insurance
• Employment practices liability
• Business owner’s policy

Progressive also offers more specific insurance, including liquor liability coverage, rideshare insurance, inland marine insurance, excuse, surplus lines insurance, employee pet insurance benefits, and employee health insurance.

4. State Farm

Every State Farm agency is independently owned, so it’s not only selling small business insurance, it’s also a small-business owner itself. It offers industry-specific insurance for every growth stage of your business. Coverage options include:

• Workers’ compensation
• Commercial auto
• Business owners policy
• Contractors policy
• Liability umbrella
• Surety and fidelity bonds

5. The Hartford

The Hartford is one of the oldest small business insurers in the United States, with more than 210 years of underwriting. It started as a fire insurance company but today offers a wide range of customizable small business insurance options, including:

• General liability
• Workers’ compensation
• Commercial auto
• Commercial property
• Business income
• Professional liability
• Cyber liability
• Business owner’s policy
• Industry-specific insurance policies

6. Travelers

Travelers is known for providing commercial property insurance. In addition to the US, it also offers coverage in the UK and Canada, making Travelers a good option for international companies. Coverage options include:

• General liability
• Workers’ compensation
• Commercial auto
• Commercial property
• Commercial umbrella
• Business income and extra expense
• Cyber liability
• Business owner’s policy
• Professional liability
• Employment practices liability

How much does small business insurance cost?

The price of small business insurance depends on the coverage, policy, and provider. According to data from Insureon, small businesses pay around $42 per month for general liability insurance and $57 for BOP. All the average costs break down like this:

• General liability insurance: $42/month
• BOP: $57/month
• Professional liability insurance: $61/month
• Workers’ compensation: $45/month
• Commercial umbrella insurance: $75/month
• Cyber liability insurance: $140/month
• Commercial auto insurance: $147/month

Do you need small business insurance?

Small business insurance isn’t free but it does free up space in your mind, giving you fewer things to worry about. And though it may not be required, it’s generally a good idea to have at least some sort of protection. It’s important to get the right coverage for your business. Carefully consider your needs and shop around. Don’t be afraid to compare and even negotiate to get the best coverage at the best price.