Common insurance types for small businesses

Small business owners know that not everything always goes according to plan. For better or worse: things happen. Of course, “expecting the unexpected” truly is a valuable attribute for any entrepreneur—and having the right type of insurance coverage goes a long way towards mitigating risk and building success. It’s wise (and in many cases, legally required) for small businesses to carry certain types of insurance. Here’s an overview of the 6 common types of small business insurance, and we’ve included a few other insurance types that may be valuable in certain industries.

Group health insurance 

Health insurance is one of the most common types of insurance that small business owners purchase for their employees. According to data from the Kaiser Family Foundation (KFF), around 49 percent of the United State’s total population receive employer-sponsored health insurance (also called group health insurance).

If a small business has fewer than fifty employees, offering group health insurance is optional. That said, providing health insurance to a small business workforce is recommended regardless of size—it may even give it a competitive advantage over other employers who do not provide group health insurance.

Popular types of health insurance include medical, dental, vision, and disability coverage for employees.

Workers’ compensation insurance 

Workers’ compensation insurance, also called workman’s compensation or workers’ comp is a state-mandated insurance program that helps provide medical, disability, survivor, burial, and rehabilitation benefits to employees who are injured or killed due to work-related injury or illness.

Workers’ comp insurance helps cover medical care and rehabilitation costs if any small business team members are injured in the workplace, as well as lost wages and death benefits caused by accidents at work. In return, team members give up the right to sue business owners for potential on-the-job negligence due to a workplace incident.

In nearly all states and with few exceptions, business owners are required by law to carry workers’ compensation insurance.

General liability insurance

General liability insurance helps protect small businesses from claims involving property damage and bodily injuries. Sometimes called business liability insurance and commercial general liability insurance, this type of coverage helps cover costs like attorney fees and medical expenses for incidents involving business services, products, or operations. General liability insurance can also help cover advertising and personal injury claims for issues including libel, slander, and copyright infringement.

General liability insurance is one of the most common types of insurance businesses carry. Typically, small business owners must show proof of insurance to enter into commercial leases and customer contracts. If a small business sells products, offers services, rents space, or advertises online, it will likely need general liability coverage. Whether the business serves customers on job sites, at their property, or at the business location—general liability coverage can help protect its valuable commercial and personal assets.

Business property insurance

Also called commercial property insurance, business property insurance is often bundled into what is called a business owner’s policy (BOP).

Business property insurance helps protect a business’s building and its contents. This type of insurance helps safeguard against storms, burst pipes, fire, explosions, theft, vandalism, and more. However, it doesn’t typically cover floods or earthquakes—both of those features may typically be added to the coverage for additional costs.

Commercial automobile insurance

Commercial auto insurance helps protect a small business from liability and physical damage related to the company’s automobiles. Whether the business uses work vehicles to make deliveries, haul equipment, convey clients, or run errands—it needs adequate commercial vehicle coverage. From company cars and work vans to utility vehicles and box trucks, insuring all of the business’s vehicles means better protection from unexpected incidents that could harm employees, property, or a third party.

Commercial automobile insurance helps cover bills if an employee or a third party experiences injury or death from an auto accident. It can help an employee’s family by covering lost wages and medical expenses, and it can help protect a business from accident-related lawsuits.

Cyber insurance

Cyber insurance helps protect a small business from damage, liability, and recovery costs in the event that its computer system or electronic data has been compromised. Alternatively referred to as cyber liability insurance, cyber risk insurance, or cybersecurity insurance, this type of coverage can help protect employees and customers from computer hackers and other electronic threats.

If a small business handles any sensitive information—such as employees’ drivers’ licenses and social security numbers or customers’ credit cards or bank account information—it may be a target for cybercriminals. Cybercriminal activity is only increasing over time and adequate cyber insurance coverage is one key step in guarding a business’s valuable and confidential information.

Cyber insurance is designed to protect a small business from issues like stolen or exposed computer data, employee or customer identity theft, cyber extortion, data recovery, and more. Types of coverage in cyber insurance policies vary upon a small business’s needs but may include first-party coverage and third-party coverage.

Other types of small business insurance

There are also other kinds of insurance that can be catered to specific small business needs—and these can even be bundled alongside other types of insurance into a business owner’s policy (BOP).

These can include professional liability insurance (aka errors and omissions insurance), a commercial umbrella policy, directors and officers liability insurance, employment practices liability insurance, and terrorism insurance. Also, business owners can obtain industry-specific insurance such as equipment coverage for gyms and spas, product recall coverage or spoilage insurance for food and beverage businesses, builders risk insurance for construction businesses, and more. 

Thanks for reading our educational resource! Any above reference to a specific company, method, or product is meant for educational purposes only and is not specifically endorsed by Pie.