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Small Business Insurance

Amy Danise

What's essential insurance for a small business? Usually small business liability insurance and business property insurance at a minimum. Add business auto insurance if you have vehicles for business use. And workers compensation may be required, depending on the state and number of employees.

There may be other insurance essentials, depending on the business type.

Liability insurance
For lawsuits against the business, including judgments, settlements and defense costs.

Business property insurance
For the building, contents (such as equipment), inventory, outdoor signs and fences. It typically covers theft and damage from fire, vandalism, storms and similar problems.

Workers compensation
For injuries employees get from work-related tasks, such as getting hurt while loading a truck or getting carpal tunnel syndrome from computer work.

Employment practices liability
For allegations of discrimination, harassment, wrongful termination and other employment issues.

Business interruption insurance (also called business income insurance)
For extra expenses if the business is forced to close temporarily or relocate due to a problem covered by the policy, such as a fire. Claims can include lost business income and expenses for relocating.

Equipment breakdown
For equipment damage because of malfunctions, operator error, power surges and problems with an electrical system. Claims can include repair costs, lost income because of the breakdown and inventory that's damaged or destroyed.

Commercial crime insurance
For crime-related losses due to employee dishonesty, forgery, theft by employees, burglary, extortion and related problems.

Cyber insurance
For costs associated with a data breach, including stolen customer data, phishing scams and even data held for ransom. Claims can include the costs of notifying customers, offering them free credit-monitoring services, recovering data and legal costs. Many insurers also offer services to help businesses reduce their chances of cyberattacks.

Errors and omissions insurance (E&O, also called professional liability)
For lawsuits claiming negligent acts or mistakes (errors and omissions) that resulted in financial loss to a client. E&O policies are usually customized for the business. For example, a plumber has different E&O risks than an accountant. Claims can include judgments or settlements and legal costs.

Inland marine
For property in transit, whether it's over water (which is how it started and got its name) or over land.

Commercial auto insurance
For vehicles used for business purposes. For a small business, this typically means a sedan, pickup or van.

How to buy small business insurance

Here are two main ways to get small business insurance:
  • Buy a commercial general liability policy and other coverage types as needed.
  • Buy a business owners policy (BOP), which packages together liability, business property and business interruption (also known as business income) coverage. You can typically tailor a BOP to also include other coverage types you want.

A commercial insurance agent can help assess your business risks and insurance needs.

How to get cheap small business insurance

  • Bundle insurance types for a potential discount. Buying a package of coverage types can help you get cheap small business insurance.
  • Compare small business insurance quotes.
  • Know your business risks and try to manage them. Avoiding insurance claims will help keep your cost low.