Maybe a customer slips and falls, or your delivery driver backs into someone’s car, or your business partner sues you. Good small business insurance should protect you from any penalties, damages and legal fees you have to pay as a result of these events.
What is small business insurance?
It’s any policy or insurance product small business owners buy to protect themselves from legal liability. If you have a fishing business and you buy fishing boat insurance, that’s a form of small business insurance.
Which types of coverage you purchase will depend on what type of business you run. But when people in finance and law talk about “small business insurance,” they’re usually referring to one of the following:
General business liability insurance, which protects businesses from claims related to personal or bodily injury, advertising and product-related liability and property damage.
Professional liability insurance, which protects you from professional negligence claims.
Commercial property insurance, which protects the land, buildings, property and equipment owned by your business.
Workers’ compensation insurance, which protects your employees in case of injury or sickness.
Commercial auto insurance, which protects the vehicle(s) you use to carry out your business.
Further reading: Small Business Insurance (What You Need to Know)
What types of insurance coverage do I need?
Getting the right coverage can be tricky. What type of insurance you buy will depend on what your business does, what kinds of assets it owns, what the laws in your state are, and what kinds of liability you need to protect yourself against.
You probably don’t need commercial auto insurance if your business doesn’t own or use a vehicle, for example. If you collect and store a lot of customer data, you’ll want to make sure that your policy includes protection from a data breach. Even if you think your workers are safe from injury, workers’ compensation insurance is mandatory in most states.
Here’s an overview of what each kind of policy covers, whether your business might need it, and which business insurance companies you should contact for a quote.
General business liability insurance
Most general business liability insurance policies are focused on providing basic coverage for two types of liability: property damage and bodily injury claims.
If you damage someone’s property or injure someone and they sue you, a good general business liability insurance policy should cover most or all of the legal fees, damages and other expenses you pay defending yourself.
A general liability policy will also usually protect you from product and advertising injury, which refers to the problems your business can run into if a product you make or sell is defective, causes someone harm, or is advertised inappropriately.
Which insurer to go with:
The Hartford specializes in general business liability coverage for small businesses in a variety of industries. If you fall into one of 50 industry categories, they can offer you an online quote directly on their website.
Farmers Insurance specializes in providing business insurance policies for small policies tailored specifically for brick and mortar businesses (stores, hotels, restaurants).
Professional liability insurance
Of course, the range of coverage for a typical general business liability policy can vary a lot depending on what kind of business you run. If you need specific coverage for risks that are particular to your field, you’ll need professional liability insurance.
This is the kind of insurance professional services businesses will get to protect themselves from lawsuits related to negligence, which is a fancy legal term for carelessness that leads to harm (and gets you sued).
Negligence suits can be expensive, and general liability insurance won’t cover a lot of the costs you’ll need to pay if you ever find yourself caught in one. If you own a legal, medical, real estate or other professional practice, you probably need professional liability insurance.
Which insurer to go with:
Hiscox specialize in professional liability insurance for contractors, freelancers and sole proprietors—i.e. small law practices, dentists, family doctors, accountants, etc. Check them out if you’re looking for liability insurance tailored to your small professional practice.
State Farm is more suited to larger professional businesses—they’re popular with mid-size accountancies, law firms and financial services companies.
Business property insurance
If your business owns property, equipment, inventory, furniture, or really any other kind of physical asset, you’ll also probably want to get property coverage. A good business property insurance policy should protect your assets from fire, water or wind damage, theft, and other risks.
Which insurer to go with:
Allstate specializes in insurance policies for real estate investors, landlords and tenants. If you’re looking for an insurance carrier specializing in property insurance, Allstate is hard to beat.
Workers’ compensation insurance
If you have an employee that gets sick, injured, or harmed in any other way on the job, workers’ compensation insurance can save you a lot of trouble. It’s also mandatory in every state except Texas.
Depending on your policy, workers’ compensation can provide wage replacement and relief, pay for medical expenses, provide disability benefits, and compensate workers’ families for funeral and other costs in case of death.
Which insurer to go with:
Travelers is known for its strong workers’ compensation policies, its quick claim payouts, and its commitment to minimizing premiums for business owners.
Chubb is a good option for businesses that have employees who are non-U.S. citizens, or foreign employees working abroad.
Commercial auto insurance
If your business (that includes you, your employees and any subcontractors who work for you) owns and uses a vehicle, you probably won’t be able to insure it using typical auto insurance, and you’ll probably need to get commercial auto insurance. Same goes for business owners who use their personal vehicles for work. If you get into an accident while using your vehicle for business purposes, standard auto insurance might not cover you.
Which insurer to go with:
Progressive Commercial specializes in comprehensive and affordable business vehicle insurance for delivery and transportation companies.
Allstate is also known for offering all of its clients comprehensive, affordable commercial auto insurance.
How to shop for small business insurance
Which insurance provider you go with will depend on a bunch of different variables—the coverage options they provide you, your business needs, the insurance cost itself, and how risky your business is to insure.
Get a broker who knows what they’re doing
It helps a lot to have an insurance agent or broker who knows the market well, who knows your business’ needs and has insured businesses like yours before. If you don’t have a commercial broker, talk to the one you bought your personal home or business insurance from, they might be able to hook you up.
Get quotes from at least three different insurers
Quotes can vary a lot from company to company. If I build a brewery on the side of an active volcano, it’s probably going to cost more to insure than the one you built in a safe, walkable neighbourhood.
Don’t settle for the first policy you come across. Ask a few insurers for business insurance quotes and compare the rates they give you. Don’t feel compelled to buy all of your insurance from one provider, either.
Don’t skimp on costs or limits
Don’t buy a policy just because it’s the least expensive one. Chances are there’s a reason for that. Read through your policy, preferably with a lawyer, and make sure you understand what it does and doesn’t cover.
What’s the cheapest insurance I can get?
That being said, not all of us can afford the best insurance money can buy. If you’re looking for a general business insurance or a general business owner’s policy that won’t break the bank, these three insurers are a good place to start.
The Hartford offers competitively priced (starting at $400 annually) general liability insurance policies for small to medium-sized businesses in most industries.
Hiscox is a good bet if you’re a sole proprietor or independent contractor. Their basi general liability insurance package starts at $22/month.
State Farm offers comprehensive business owner’s policies starting at $500 annually.
