Types of Insurance Small Business Owners Need to Have

Beyond providing coverage like health insurance for themselves and their employees, small business owners should also carry insurance to protect their business. One lawsuit or catastrophic event could be enough to wipe out their business, erase all their hard work, and possibly drain their personal bank accounts.

There are many types of business-specific insurance policies—after all, there are many types of businesses offering myriad services and products! Below is a list of the most common and comprehensive policies to get you started to find which ones are right for your small business.

1. General Liability Insurance
     
   Even if you run a home-based business, it’s smart to carry a general liability insurance. A policy provides defense and pays for damages if you, your employees, and your products or services cause, or are alleged to have caused, bodily damage or property damage to a third party—whether that’s a customer or a vendor you work with.
     
2. Property Insurance
     
   If you own the building your business is in or if you lease a space that houses property used for your business (office equipment, furniture, computers, inventory, tools, etc.), this policy pays for damages caused by a fire, vandalism, theft, smoke damage, storm, etc. However, floods and earthquakes are generally not covered. You can also purchase business interruption, or loss of earning, insurance as part of this policy. This would pay out lost revenue and fixed expenses if your business is unable to operate for a period of time.
     
3. Business Owner’s Policy (BOP)
     
   This is sometimes called small business insurance and includes many of the individual policies on our list. Often, BOP will include business interruption insurance, property insurance, vehicle coverage, liability insurance, and crime insurance. You can change what’s included in a BOP policy based on your company’s needs. Bundling services this way can save you some serious cash.
     
4. Commercial Auto Insurance
     
   Commercial auto insurance protects company vehicles that carry employees, products, and equipment and insures against third-party injuries. A lawncare service business would be a good example of a business that would need this type of insurance. Even if employees use their own cars to drive for company business, a business owner should look into non-owned auto liability to protect the company in case an employee lacks or has inadequate coverage. This can usually be added to a BOP.
     
5. Worker’s Compensation
     
   Anyone with W2 employees needs to carry worker’s compensation insurance. It will provide wage replacement, medical benefits and treatment, disability, and death benefits to employees injured on the job. In accepting this insurance coverage, employees give up their right to sue you. Penalties are stiff if you fail to carry this type of insurance.
     
6. Professional Liability Insurance
     
   Also called errors and omissions insurance, this policy projects against failure to or improperly rendering professional services. A general liability policy does not cover these scenarios. Owners with any type of professional firm, including lawyers, accountants, consultants, notaries, real estate agents, insurance agents, hair stylists, technology providers, and others would want to carry a professional liability policy.
     
7. Product Liability
     
   If you manufacture products for sale, this works to protect your business with tailored coverage to a specific type of product you make and sell.
     
8. Data Breach
     
   If your business is responsible for protecting sensitive, non-public client information, this policy is a must-have. It will protect against loss or theft of employees and client information held on computers, servers, or in paper files.