Small business insurance: 12 types + how to choose yours

Small businesses need to consider insurance in the unfortunate event of a natural disaster, burglary, or lawsuit. Without small business insurance, having to cover the costs of such events can be costly. 

Small business insurance helps protect your business from a variety of risks, including damage and loss related to natural disasters, theft, and more. Use this guide to learn more about the most common types of business insurance, where to get a great policy and ways you could save money on your insurance premiums.

1. General liability insurance

General liability insurance, or business liability insurance, is a policy that all businesses need to have in place when they open their doors. This liability policy helps to cover a number of legal disputes with third parties, including:

• Accidents that cause bodily injury
• Property damage
• Defamation
• Damage suffered due to a defective product
• Copyright infringement
• Libel and slander

General liability insurance also covers medical expenses and lost wages if someone other than you or an employee is injured. If someone slips and falls at your location, or trips on your tools or equipment, general liability can cover you.

2. Commercial property insurance

Commercial property insurance protects your business’s physical assets, including real estate, equipment, inventory, and machinery, in the event of financial loss due to theft, vandalism, or a natural disaster. This type of insurance helps pay for fixing or buying new damaged property so you can keep running your business.

Every business should have a commercial property insurance policy, whether you own your building, rent a space, or work from home. While it’s not always a legal requirement, the policy will protect you if your property gets damaged.

3. Business owners policy

Your insurance company may bundle general liability insurance with commercial property insurance at a discounted rate. This is called a “business owners policy” or BOP. A BOP is beneficial for any business that has equipment or inventory or operates a brick-and-mortar location outside of your home.

4. Professional liability insurance

Professional liability insurance, also called errors and omissions insurance, protects you against claims made against the professional services you provide. You might be accused of doing something you shouldn’t have (an error) or not doing something you should have (an omission), and a client or vendor could seek damages. These policies are a great option for business owners who provide any type of service to clients, including but not limited to:

• Accountants
• Real estate agents
• Healthcare providers
• Marketing consultants
• Interior designers

A professional liability insurance policy can cover defense costs, as well as any settlement or judgment.

5. Product liability insurance

Businesses that manufacture, distribute, or sell products may be held liable for the safety of the customers who use the products. Product liability insurance covers risks related to production or design flaws, as well as improper labels, warnings, and instructions. Some product liability coverage is included in a general liability insurance policy, but manufacturing, distributing, and other product-related businesses may need additional coverage.

6. Cyber liability insurance

Cyber liability insurance is a must if you have a website, accept credit cards, or store customer information. It protects your business against the costs related to a data breach or ransomware attack. If you need to file a claim, your cyber liability insurance policy may cover lost income, computer system repair, and public relations work to restore your reputation after a severe breach.

7. Workers’ compensation insurance

Workers’ compensation insurance is required in nearly every state if you have employees. Workers comp pays for medical costs and wages for work-related illnesses or injuries that your employees may suffer. This coverage should be part of your payroll insurance. The policy protects business owners from liability and protects employees from potentially high out-of-pocket medical costs for work-related injuries. 

With software like QuickBooks Payroll, you can link your workers’ compensation policy to your QuickBoks account to make staying current on your coverage easy.

8. Commercial auto insurance

Commercial auto insurance protects you if you or an employee has an accident in a company vehicle. If you make deliveries to customers or work at client job sites, you may need this coverage. This policy is separate from your personal auto insurance coverage and protects physical damage, liability, medical payments, and more.

9. Home-based business insurance

If you run a business out of your home, investing in home-based business insurance could be a good idea. This coverage enhances your homeowner's insurance policy to cover general and professional liability risks, as well as the potential for loss of business income if the home office is damaged. Depending on your homeowners’ insurance provider, you may be able to add home-based business insurance to your existing policy as an add-on endorsement. Speak with your insurance agent to learn more.

10. Business interruption insurance

Business interruption insurance covers financial losses incurred while your facilities are closed, including rent or mortgage payments, payroll expenses, taxes, and more. This policy can also pay for a temporary business location so you can continue operating. This coverage may be beneficial for most business owners since an interruption in their ability to run their business can result in a loss of income. 

11. Commercial umbrella insurance

Umbrella insurance is extra insurance that covers losses not covered by your regular business liability policies. Think of it as a supplemental policy that kicks in if your business liability policy’s coverage limits are too low to cover what you owe an injured party. 

12. Commercial flood insurance

Commercial flood insurance protects your business from damage related to floods and flash floods. This may include structural damage, roof damage, damage to electrical systems, plumbing, and HVAC units, and other similar problems. Not every business will need commercial flood insurance—only those located near waterways or in known flood-risk zones need to invest in these policies.

How to choose small business insurance

The right small business insurance policy can help you keep your company running smoothly. Your coverage can reduce the risk of high out-of-pocket costs if you’re liable for damages or injuries or your business suffers damage from a qualifying event. 

But finding the right policy can be tricky if you’re not sure where to start. Here’s how to find coverage that works for your business and protects you from risks you may face:

• Assess your business risks: Every business has unique risk factors it needs to protect against. Think about the types of lawsuits and accidents your business could experience during a typical year. Also, consider the types of natural disasters common to your area.
• Pinpoint essential coverage: Once you understand the risks that could threaten your business, think about the types of coverage you need to protect against the most severe. For most businesses, this will involve property insurance, business liability coverage, business interruption insurance, and other similar policies.
• Consider additional coverages: After identifying your essential coverage needs, think about the types of additional coverage you may want to invest in. This could involve buying an umbrella policy, investing in cyber liability protection, or purchasing professional liability insurance.
• Review policy details: Before you agree to pay for coverage, take the time to review the policy details for each type of insurance you’re considering. Read the terms, the qualifying events each policy recognizes, and the coverage limits each policy has. You may need to make changes based on your business’s unique needs.
• Work with an insurance broker: While you can purchase insurance on your own, it’s a good idea to work with an insurance broker. They can help you find coverage that meets your needs and may recommend additional coverage based on your business’s unique risk factors.
• Consult other small businesses: You can also speak with other small business owners to see what types of small business insurance they’ve purchased and which providers they work with. 

These steps can act as a small business insurance guide to help you find the right coverage for your company. As always, it’s a good idea to speak with an insurance broker to ensure that you get the coverage you truly need and coverage limits that will protect your bottom line.

Tips for reducing insurance premiums

Quality insurance for small businesses can be expensive. But there are things you can do to reduce the cost of your insurance premiums without compromising on the types of coverage you purchase. 

Here are a few tips to keep in mind:

• Compare quotes from multiple providers: Shop around and get quotes for insurance for small businesses from several insurance companies before you choose a policy. Compare the coverage types, limits, and details with each provider and choose the policy that meets the insurance needs for small businesses like yours at a price you can afford.

• Ask about bundling policies: You may be able to reduce your premium costs by purchasing multiple policies from the same insurance provider. Ask your insurance broker about any discounts they may offer for bundling policies. 

• Review coverage regularly: You may end up buying more insurance than you really need. Review your coverage at least once a year and consider decreasing your coverage limits if you feel that your policies could be more balanced. Reducing your coverage limits may save you money on monthly premium rates.

• Consider payment options: Insurance providers may offer discounts for paying for coverage upfront rather than in monthly installments. Ask your broker if your provider offers lower premium rates if you make payments upfront.

When you determine what insurance is needed for a small business like yours, know that you will have to pay for coverage. But these tips should help you lower your business insurance costs and help you save on premiums throughout the year.

How to handle small business insurance claims

The claims process will be different depending on the insurance provider you’re working with. But there are some steps you’ll want to follow to file your claim regardless of who you’re working with:

• Report the claim: Notify your insurance agent or contact your insurance provider’s claims division to report the damage and initiate the process.
• Document everything: Take pictures of the damage and write down as much information as you can about the incident.
• Review your policy details: Review your policy and coverage limits to make sure the claim is valid. Don’t be afraid to appeal the decision if your insurance provider denies your claim.
• Communicate with the insurance adjuster: Stay in contact with the insurance adjuster and point out any damage they don’t readily notice during the walkthrough.
• Accept or appeal the settlement: If the insurance settlement is fair and meets your needs, you can accept it and get paid quickly. If it’s too low, you may be able to appeal the decision.

These are just the most common steps you’ll want to take. Ask your insurance agent for advice as soon as you file a claim, and let them guide you through the process.

Run your business with confidence

Small business insurance exists to help you keep your business safe from common hazards and risks. While coverage costs can vary, they should always be part of your company’s operating budget and included in your accounting practices so you never have to worry about missing a premium payment.

But if you’re just starting out, navigating the recordkeeping, budgeting, and bookkeeping process can be difficult. Accounting software that supports built-in payroll and insurance features like worker compensation can help you streamline your efforts so you can focus on doing what you do best: running your business.



QuickBooks Online Payroll & Contractor Payments: Money movement services are provided by Intuit Payments Inc., licensed as a Money Transmitter by the New York State Department of Financial Services, subject to eligibility criteria, credit, and application approval. For more information about Intuit Payments Inc.’s money transmission licenses, please visit https://www.intuit.com/legal/licenses/payment-licenses/