General liability insurance, also known as business liability insurance, is essential coverage for a variety of claims, like bodily injury, property damage, personal or advertising injury, medical payments, products completed operations and damages to premises rented to you. Virtually every type of small business owner or contractor should have some form of general liability insurance. When comparing policies, keep in mind that your rates will depend on the specific features of your business.
Business Owners Policy (BOP)
If you are seeking both general liability insurance and property coverage, you can package them together in a business owner insurance policy, also known as BOP insurance. This provides liability coverage for customer injury, property damage and product-related claims, in addition to commercial building and movable property coverage. This is ideal coverage for small and midsize businesses like restaurants, retail stores and wholesalers. Keep in mind that BOP insurance doesn't cover your employees.
Employment Practices Liability Insurance (EPLI)
Small businesses with employees often benefit from employment practices liability insurance. This type of insurance protects you if an employee files a claim against you for wrongful discipline or termination, sexual harassment, discrimination, negligent evaluation, breach of employment contract, mismanagement of employee benefits or wrongful infliction of emotional distress. Some insurers offer EPLI as stand-alone coverage, whereas others offer it as an endorsement to their BOP. The terms and conditions of your policy will depend on what type you sign up for. Your business type, number of employees and various risk factors all play a part in the cost of EPLI.
Professional Liability Insurance
Professional liability insurance, also known as errors and omissions (E&O) insurance, protects businesses that offer professional services. This is often used by B2B businesses for protection against claims stating their services caused financial distress to clients. This type of insurance is essential for professional service providers like consultants and financial advisors.
Contractors Professional Liability Insurance
If your business is in the design-build or construction management industry, you are required to purchase some form of contractors professional liability insurance. This coverage protects professionals against construction errors or losses incurred when designing, engineering and constructing a building. It can also protect you from errors made by third-party vendors associated with a project.
Directors and Officers (D&O) Liability Insurance
If your business has a corporate board of directors or advisory committee, you will want D&O insurance. This insurance protects the personal assets of your directors and officers if they are personally sued for wrongful acts in company management (e.g., failure to comply with workplace laws, fraud, theft of intellectual property, misrepresentation of company assets, misuse of company funds).
Management Liability Insurance
This is a combination of insurance coverages that are used to protect private, public and nonprofit companies for a variety of board-level exposures. It protects against the risks of managing a business and is purchased by organizations that have a board of directors. A typical management liability insurance package includes coverage for employment practices liability, fiduciary liability and D&O liability.
Product Liability Insurance
This type of insurance provides more protection and security than a simple product warranty or product guarantee. For example, it protects your business in the event that your product causes damage or injury to a third party, or if your business faces a product-related lawsuit. This is important for companies that repair damaged products.
If you have a home-based business or store business property in your house, check the business coverage under your homeowners insurance. Homeowners insurance often only provides limited coverage (e.g., $2,500) for business property or equipment stored in your home, and some policies don't cover business property at all. Those with a home-based business should seek fuller business coverage through a homeowners policy endorsement or an in-home business policy. Much like commercial property insurance, a homeowners policy will be required by your lender until the mortgage is paid.
Business Renters Insurance
Business renters insurance is important for businesses operating in one or more rented spaces. It will cover incidents within the space, like fire, floods, accidents, and building or property damage due to natural disasters. This type of insurance covers many of the same things other policies do, but for rented spaces specifically.
Personal Auto Insurance
If you are self-employed and drive your personal vehicle for business purposes, you may be covered under your personal automobile insurance. If you personally own your car, truck or van and only use it occasionally for work, you may be able to skate by with standard personal auto insurance. However, if you operate a company-owned vehicle, your vehicle is specifically designated for work or you need higher coverage, you may need a commercial automobile insurance policy.
Commercial Auto Insurance
This type of insurance coverage is similar to personal automobile insurance, as it protects your cars, trucks or vans in the event of damage, injury or liability claims. However, commercial auto insurance provides more coverage, like property and liability trailer exposure, loading and unloading exposure, hired-vehicle coverage, non-owned vehicle coverage, and higher coverage limits. You will likely need this form of auto insurance if you have vehicles used for business purposes, dump trucks, tow trucks, snow plows, semi or commercial trailers, vehicles exceeding 10,000 pounds, or vehicles with installed business equipment (e.g., toolboxes or ladders).
Business Overhead Expense (BOE) Insurance
Business overhead expense disability insurance, commonly known as business expense insurance, goes hand in hand with your disability insurance. BOE insurance covers the cost of running your business (based on actual expenses like utility bills and employee salaries) in the event that you become disabled and can no longer operate your business on your own, but it does not pay your own salary (as an employer) while you are out of work. This type of insurance is a common purchase for small law firms, medical practices, and architecture and accounting firms.
Workers' compensation insurance, also known as workers' comp or workman's comp, covers medical costs and a portion of lost wages to an employee who has suffered a work-related illness or injury. If an employee accepts the benefits of workers' comp, they relinquish their ability to sue your company for the illness or injury. This insurance is often required by law.
Disability Income Insurance
Disability insurance is similar to workers' comp in that it temporarily covers an employee's lost wages if they are unable to work because of a disability. However, disability insurance will cover injuries or illnesses that occurred on or off the job, whereas workers' comp only covers work-related ones. This type of insurance is sometimes required by law.
Key Person Insurance
Key person insurance, also known as key man insurance or key woman insurance, helps replace lost revenue due to the death of a key executive of your business. Your business pays the premium while the key person is alive, and then collects a death benefit after their passing. These benefits can be essential to continuing the operation of your business and/or finding someone to fill their role.
You, and any member of your business, can acquire a life insurance policy. This is similar to key person insurance, providing a beneficiary with financial assistance in the event of your death. This can give you peace of mind that your family or business partners will not be financially burdened by your death.
Business Interruption Insurance
Business interruption insurance, also known as business income insurance, is one of the most common types of coverage most small businesses need. If a disaster strikes (such as a fire, flood, theft, building collapse or civil authority incident) and your business is required to shut down for a period of time, business interruption insurance will help to cover lost income or operating expenses like mortgage or rent, loan payments, taxes, and payroll. Business interruption insurance can be bundled into your BOP.
Comprehensive Crime Insurance
Crime insurance can protect your business from financial loss due to criminal activity, including computer and funds transfer fraud, employee dishonesty, forgery and alteration, loss of money and securities, and theft of your clients' property. If you have employees or work with sensitive information, you will want some form of crime insurance. Before purchasing a policy, make sure the provider covers your industry.
Small businesses with loans or credit cards can purchase credit insurance, also known as payment protection insurance, to ensure that their payments will still be made in the event of financial shock that prevents them from paying (such as a death, disability or unemployment). Unlike disability insurance, credit insurance does not pay the employer; it simply pays your lenders what you owe.
In the digital era, protecting your company's technology is imperative. Small businesses should seek cyber insurance to protect against loss from cyberattacks like ransomware, viruses and data breaches. Cyber insurance can include data breach insurance (which is good for helping small businesses recover) and cyber liability insurance (which is geared toward larger businesses that need more coverage).
Product Recall Insurance
If your business sends out a defective product and needs to recall it from the market, product recall insurance can financially help you do just that. This insurance is typically necessary for manufacturers to cover recall costs related to customer notification, shipping and disposal.
Inland Marine Insurance
Small businesses that have movable business property can purchase inland marine insurance to protect their equipment, products, or materials while they're in transit via truck or train. Although "marine" implies water, this insurance only covers transportation over land, as well as property being temporarily warehoused by a third party.
Commercial Umbrella Insurance
For an extra layer of protection, business owners can seek out umbrella insurance. Commercial umbrella insurance (similar to personal umbrella insurance, but with higher policy limits) covers the cost of additional liability that exceeds the limits of an underlying policy, such as your general liability or commercial auto insurance. Though often referred to interchangeably with excess liability insurance, commercial umbrella insurance can also sometimes cover claims that the underlying policy wouldn't otherwise cover.