Insurance can help protect your business from a variety of risks. Some of the most common types of business insurance plans include:
- General liability insurance
- Commercial property insurance
- Business income insurance
- Professional liability insurance
- Workers’ compensation insurance
- Employment practices liability insurance
- Product liability insurance
- Commercial auto insurance
- Commercial umbrella insurance
- Cybersecurity insurance
Understanding how each type of business insurance (also known as commercial insurance) works can help you decide which coverage options you may need.
Key Takeaways
- Business insurance protects business owners from financial losses caused by a variety of covered events.
- Common types include general liability, commercial property, and workers’ compensation insurance.
- Most business insurance policies require paying premiums and possibly deductibles.
- You can protect your business using one or more types of coverage.
- Buying a bundled policy that includes several types of insurance can help save money.
Types of Business Insurance
| Coverage Type | What Risks Does It Protect Against? | What Costs Does It Cover? | Average Cost |
|---|---|---|---|
| General Liability | Lawsuits from people outside your company | Legal fees, settlements, and medical expenses | $42/month |
| Commercial Property | Damage to business property | Repair or replacement of damaged property | $63/month |
| Business Income | Loss of income from business interruption | Lost income | $85/month |
| Professional Liability | Lawsuits related to errors or negligence | Legal fees and settlements | $61/month |
| Workers’ Compensation | On-the-job injuries | Medical bills and lost wages | $45/month |
| Employment Practices Liability | Unfair employment or hiring practices | Legal fees and settlements | $182/month |
| Product Liability | Injuries caused by defective products | Legal fees and settlements | $42/month (often included with general liability) |
| Commercial Auto | Vehicles used for business | Repairs, medical bills, legal fees | $147/month |
| Commercial Umbrella | Lawsuit settlements beyond policy limits | Legal fees and settlements | $75/month |
| Cyber Liability | Data breaches and cyberattacks | Data restoration, security upgrades, legal costs | $140/month |
Actual costs vary depending on business size, industry, and risk profile.
1. General Liability Insurance
Covers lawsuits from people outside your company, such as customers or vendors.
It helps pay legal fees, settlements, and medical expenses. Forgoing this coverage could leave your business vulnerable to major losses if sued.
2. Commercial Property Insurance
Protects your business property from damage caused by fire, smoke, wind, hail, vandalism, or civil unrest.
Policies may also include a civil authority clause that covers government-mandated closures after disasters.
3. Business Income Insurance
Covers lost income if your business operations are slowed or stopped due to property damage.
This coverage supplements commercial property insurance.
4. Professional Liability Insurance
Also known as errors and omissions (E&O) insurance.
Protects against claims of negligence, malpractice, or mistakes in professional services.
Covers legal fees and settlements.
5. Workers’ Compensation Insurance
Required in most states.
Covers medical costs and lost wages for employees injured on the job.
Helps protect your business from lawsuits related to workplace injuries.
6. Employment Practices Liability Insurance
Covers claims related to employment issues such as wrongful termination, discrimination, harassment, or retaliation.
Pays legal defense costs and settlements.
7. Product Liability Insurance
Covers injuries or damage caused by defective products.
Helps pay for legal costs, settlements, and medical expenses if a product harms a customer.
8. Commercial Auto Insurance
Provides coverage for vehicles used in business operations.
Covers damages from accidents, theft, or vandalism, as well as medical and legal expenses.
Coverage requirements vary by state.
9. Commercial Umbrella Insurance
Adds extra protection by covering costs that exceed the limits of your other liability policies.
Useful for businesses facing large or unpredictable risks.
10. Cyber Liability Insurance
Covers losses related to hacking, data breaches, or cyberattacks.
Can help pay for restoring data, notifying affected customers, improving cybersecurity, and handling legal claims.
How to Choose the Right Business Insurance Plan
Choosing the right coverage helps ensure your business isn’t under-insured or overpaying. Start by asking:
- How many employees do we have?
- Do we operate from a physical location or online?
- What equipment or property needs to be insured?
- What liability risks do we face?
- Do we have company vehicles to cover?
- What would happen if a disaster halted operations?
- Will we need special coverage, such as key person insurance?
Also consider how much liability coverage you need and how much you can afford in premiums and deductibles.
Some industries or states require certain coverages, such as professional liability insurance for financial or legal professionals.
Tip: Joining a professional association may give you access to discounted insurance rates.
How to Get Business Insurance
1. Assess Your Business Risks
Identify the risks your business faces.
For example, a construction company with multiple vehicles needs commercial auto coverage, while a home-based consultant might only need professional liability insurance.
2. Understand What’s Covered
Know both what’s included and what’s excluded.
Review your policy with an agent or broker to ensure there are no coverage gaps.
3. Compare Quotes
Get multiple quotes to compare pricing and coverage options.
Provide accurate details about your business—such as revenue, number of employees, and assets—to get precise estimates.
Compare stand-alone policies versus bundled packages; bundles may offer discounts.
Common Questions
When do I need business insurance?
If your business could suffer financial losses from lawsuits, property damage, or data breaches, you need coverage. Some types may also be legally required.
Should I buy stand-alone policies or a bundle?
If you only need a few coverages, stand-alone policies might be fine. For broader protection, bundled packages can be more cost-effective.
Do I need insurance if I work from home?
Yes. Consider general liability insurance and coverage for essential business equipment used at home.
The Bottom Line
Business insurance protects your company from unexpected financial losses. By understanding the different types of coverage and comparing options, you can build a plan tailored to your business’s size, operations, and risk profile. Once you’ve identified the right coverage mix, compare quotes from multiple providers to find the best value.