Small business insurance needs: Which coverage is best for your business?

Small business insurance needs aren’t the same for every owner. While “business insurance” is often talked about as a single thing, it usually includes multiple types of small business insurance policies designed to address different risks.

Insurance needs vary based on a few key factors. A contractor, retailer, consultant and restaurant owner will all face very different risks. The right mix of policies can help protect your business and may help reduce financial losses from unexpected events.

Understanding what insurance is needed for a small business starts with knowing the risks tied to your industry, size and location. This guide breaks down 39 common types of small business insurance policies, including options that apply to specific industries and risks.

Jump ahead to learn more about:

• What insurance do I need for a small business?
• Liability insurance types for small businesses
• Property protection insurance for business owners
• Employee-related insurance
• Vehicle-related business insurance
• Financial, contractual and crime-related coverage
• Industry-specific business insurance policies
• Disaster and environmental insurance
• Small business insurance needs FAQ
• How ERGO NEXT Insurance can help protect your business

What insurance do I need for a small business?

There’s no single checklist that answers “what insurance do I need for a small business?” because coverage needs depend on how you operate. Consider these factors when figuring out which types of business insurance you need.

• Industry and daily operations. The type of work your business does influences whether liability, professional, property or industry-specific coverage could be needed.
• State and contract requirements. Are you required by state laws to have coverage? Do third parties like customers require certain coverages?
• Employees, vehicles and physical locations. Hiring employees, using vehicles for work or operating from a physical space can introduce additional risks to consider.
• Digital risks and customer data. Most businesses have some form of digital operations today, which can expose the business to cyber-related risks. Do you store customer information, process payments or rely on software to do your job?
• Growth plans and risk tolerance. As a business expands or takes on larger contracts, owners often reassess coverage based on evolving risks.

Once you’ve thought through your risks, it’s easier to understand what insurance small businesses need and how different policies are typically used.

Liability insurance types for small businesses

Liability insurance is often the foundation of a small business insurance plan. These core liability policies are part of the coverage many small businesses consider. Not every business needs every type of liability coverage, so understanding the core options can help you decide what’s right for your company.

1. General Liability insurance

General liability insurance is often one of the first coverage business owners purchase because it can help cover many of the most common accidents businesses face, including:

• Slip and fall injuries (non-employees)
• Property damage for property that doesn’t belong to you
• Legal fees
• Medical payments (non-employees)

General liability insurance is commonly considered by businesses that interact with customers or vendors — such as contractors, retail shops, cleaners, fitness professionals and food service providers. It’s also frequently required to get a professional license, or by landlords or clients as part of a contract.

2. Commercial Umbrella insurance

Commercial umbrella insurance can extend general liability policy coverage limits. Businesses may consider it as they grow, take on larger contracts or face higher risks that could exceed standard policy limits.

3. Professional Liability insurance/Errors and Omissions insurance (E&O)

If you’re a knowledge worker who makes a professional mistake that costs someone money, professional liability insurance — sometimes called errors and omissions insurance or E&O insurance in some professions — can help cover the cost of those mistakes.

This type of coverage is often considered by consultants, accountants, designers, IT professionals, marketers, real estate agents and other service providers whose advice or research influences client decisions or outcomes.

While general liability typically focuses on physical injuries or property damage, professional liability insurance is more concerned with financial losses tied to errors like missed deadlines, misrepresentation or a failure to deliver a promised service.

4. Cyber Liability insurance

Cyber liability can help protect your business from expenses related to data breaches, data theft, hacking, ransomware extortion, denial of service and more.

Any business that stores customer data, processes payments or relies on digital systems may face cyber-related exposures. Due to the specific nature of the coverage, cyber liability is usually purchased as a standalone policy, although some companies offer it as an add-on to their general liability coverage.

5. Product liability insurance

If something you sell causes someone to get injured or become ill, you may be held responsible, whether you made the product or not. Product liability insurance can help protect your business from claims that a product you sold caused an injury or property damage.

This insurance is commonly considered by retailers, e-commerce sellers, manufacturers, wholesalers and food and beverage companies.

6. Directors and Officers insurance (D&O)

Directors and officers insurance is designed to help protect individuals in business leadership roles from claims tied to business decisions and governance. D&O insurance claims might allege mismanagement, breach of fiduciary duty or improper decisions by leadership.

While D&O insurance is often associated with larger companies, it can also be relevant for small businesses, startups and nonprofits — especially those with boards or investors involved in decision making.

Property protection insurance for business owners

Property and asset protection insurance focuses on the physical things your business owns or needs to operate. These policies are designed to help businesses recover from covered losses involving buildings, equipment, inventory or interruptions to normal operations.

7. Commercial Property insurance

Commercial property insurance is designed to help protect the physical assets your business uses to operate. This can include equipment, furniture, inventory and the building itself. People sometimes assume commercial property insurance only covers the building where they do business — “property” as in real estate. But it can also help cover your business property inside.

Coverage can help with repair or replacement costs if property is damaged by covered events, such as fire, theft, vandalism or some weather events.

8. Business Owner’s Policy (BOP insurance)

A business owner’s policy or BOP isn’t a single policy. It’s a general liability policy combined with a commercial property policy. It’s commonly designed for small to midsize businesses looking for foundational coverage in a simplified package. This bundle is so widely used that it got a name of its own.

9. Business Income insurance

Business income coverage (also called business interruption insurance) is designed to help replace lost income if a business must close temporarily or scale back after a covered event. It can help with ongoing expenses, such as rent or payroll, while repairs are being made. It’s usually included in commercial property insurance.

10. Business Personal Property insurance (BPP)

Business personal property insurance focuses on the contents of your business space, such as your goods, gear and inventory. It’s often part of a commercial property policy.

11. Equipment breakdown insurance

Equipment breakdown insurance is designed to help with sudden mechanical or electrical failures of covered equipment. This can include things like HVAC systems, refrigeration units or production machinery.

Equipment breakdown insurance helps address how equipment fails — internal mechanical or electrical failure. In contrast, inland marine coverage focuses on where equipment is and how it moves.

12. Inland Marine insurance (Tool and Equipment insurance)

Inland marine insurance (also called tools and equipment insurance) can help cover tools, equipment or property that get damaged, stolen or lost. This coverage focuses on tools that move between locations or are stored off-site. It’s commonly considered by contractors, cleaners and janitors, and other businesses that regularly transport valuable items for work.

13. Builders risk insurance

Builders risk insurance is commonly used by property owners during construction or renovation projects. It may help cover building materials, fixtures and unfinished structures if they’re damaged by covered events while work is in progress.

Employee-related insurance

Having employees changes your risks. Your coverage needs often depend on where you operate and what employees do.

14. Workers’ Compensation insurance

Workers’ comp insurance, sometimes referred to as workman’s comp, may help with costs related to lawsuits and other financial losses when an employee is injured or becomes ill at work. It can help with work-related medical expenses, lost wages and rehabilitation costs.

In most states, businesses with employees are required to carry workers’ compensation coverage, though rules and exemptions can vary by location and industry.

In some cases, sole proprietors or business owners without employees might choose to carry workers’ comp coverage, especially those that perform physical or hands-on work themselves, or who need coverage to meet contract requirements.

15. Employment Practices Liability insurance (EPLI)

Employment practices liability insurance can help cover legal fees, defense costs, settlements or judgments if your business faces discrimination lawsuits from employees and job applicants. Common EPLI claims include harassment, wrongful termination, ADA violations and discrimination from employees, former employees, vendors or other business partners.

16. Key person insurance

Key person insurance is designed to help a business manage the financial impact of losing a critical employee or owner. It can help cover lost revenue, hiring costs or operational disruptions while the business adjusts or transitions leadership.

Vehicle-related business insurance

These types of insurance help address risks tied to vehicles. Coverage needs often depend on who owns the vehicle and how it’s used.

17. Commercial Auto insurance

Commercial auto insurance is designed for vehicles owned by a business and used for work purposes, such as deliveries, service calls or transporting tools and equipment. It differs from personal auto coverage, which often excludes or limits business-related use of a vehicle. It can help pay for injuries and property damage after an accident.

18. Hired and Non-owned Auto insurance (HNOA)

Hired and non-owned auto insurance applies when employees or owners use employee-owned vehicles or rentals for business-related tasks. It may help with liability claims tied to work-related driving, even though the business doesn’t own the vehicle.

19. Garage liability insurance

Garage liability insurance is commonly used by auto service, repair and dealership businesses. It may help cover common accidents that happen in garage operations, such as a customer slipping and falling in your shop or damaging a customer’s property.

This coverage focuses on liability tied to garage operation — not the vehicles in the garage or shop. Vehicles are typically covered by garagekeepers liability insurance.

20. Garagekeepers insurance

Garagekeepers liability insurance is designed for businesses that have customers’ vehicles in their care, custody or control, such as mechanics shops, repair shops or detailing services. It may help cover damage to those vehicles caused by covered events while they’re on your premises.

Financial, contractual and crime-related insurance

This category of insurance focuses on financial risks that don’t always involve physical damage but can still disrupt cash flow and operations. If your business handles money or extends credit, you might consider these coverages.

21. Commercial crime insurance

Commercial crime insurance is designed to help with losses related to theft, fraud, forgery or other dishonest acts. This can include employee theft, social engineering scams or financial losses caused by deception.

22. Tax audit insurance

Tax audit insurance is intended to help cover certain costs associated with a tax audit, such as professional fees for accountants or tax advisors. It’s sometimes considered by businesses that want support managing the expense and time involved in an audit process.

23. Business credit/trade credit insurance

Business credit or trade credit insurance helps protect against losses from unpaid invoices when customers are unable or unwilling to pay. It’s often considered by businesses that offer payment terms or rely heavily on accounts receivable to manage cash flow.

Industry-specific business insurance policies

Some types of business insurance are designed for specific industries or operations. These specialized policies are often considered when standard coverage doesn’t fully address the risks tied to how a business operates.

24. Contractor’s E&O insurance

Contractor’s E&O insurance can help protect construction trades and contractors from errors and mistakes on a job. Contractor’s errors and omissions insurance may help cover costs if they’re accused of making workmanship errors. For example, if you are accused of installing the wrong cabinets for a client, contractors’ E&O could help cover expenses to fix the problem or defend your business against legal action and legal judgments.**

25. Bailee coverage (Customer property insurance)

Bailee insurance can apply when your business temporarily holds or stores property that belongs to someone else. It can help cover damage or loss to a customer’s property while it’s in your care, custody or control.

26. Liquor Liability insurance

Restaurants, bars and event businesses that serve or sell alcohol often consider liquor liability insurance. It can help cover alcohol-related legal fees, property damage repairs and medical costs.

27. Host Liquor Liability insurance

Unlike liquor liability coverage, host liquor liability is meant for businesses that serve alcohol occasionally, such as at company events or private functions. This policy can help with liability claims tied to alcohol service, even when selling alcohol isn’t the business’s primary activity.

28. Food spoilage insurance

Food spoilage insurance can benefit businesses that rely on refrigerated or frozen inventory, such as restaurants and grocery stores. It can help cover losses if food spoils due to certain covered equipment failures or power outages.

29. Event liability insurance

Event liability insurance is often written as a short-term policy designed for businesses or individuals hosting one-time or recurring events. It can help with liability claims related to injuries or property damage that occur during an event.

30. Event cancellation insurance

Event cancellation insurance focuses on financial losses if an event must be canceled, postponed or interrupted due to certain covered circumstances. This might include weather issues or venue-related issues.

31. Malpractice insurance

Malpractice insurance is a form of professional liability coverage used by medical, legal and similar professions. It’s designed to help address claims alleging professional negligence, errors or omissions related to specialized services.

32. Technology E&O insurance

Technology E&O or cyber tech liability insurance is designed for software, SaaS and IT service providers. It may help with claims tied to technology failures, data breaches or errors in digital products or services.

33. Media liability insurance

Media liability insurance applies to businesses involved in advertising, marketing, publishing or content creation. It can help cover claims related to copyright infringement, defamation or misuse of content.

34. Home-based business insurance

Businesses operating out of a residence might consider home business insurance. It may help fill coverage gaps where homeowners insurance doesn’t extend to business-related activities or property.

35. Farm and ranch coverage

Farm and ranch insurance is tailored to agricultural operations, combining elements of property, liability and equipment coverage. It’s designed to address risks unique to livestock and rural property.

Disaster and environmental insurance

Some types of insurance are designed to address large-scale or environmental risks that are often excluded from standard commercial property policies. Business owners often consider these coverages based on location and exposure to certain natural or environmental hazards.

36. Commercial flood insurance

Commercial flood insurance is usually purchased as a separate policy, since most commercial property insurance doesn’t cover flood damage. In the U.S., flood coverage is commonly managed through FEMA’s National Flood Insurance Program (NFIP). Businesses in flood-prone areas or those required to carry it by lenders or local regulations consider this coverage.

37. Earthquake insurance

Earthquake insurance can help protect against damage caused by seismic activity. It’s often purchased by businesses in regions with higher earthquake risk, where standard property coverage may not apply.

38. Wildfire coverage enhancement

Wildfire coverage can help address losses related to wildfire damage, especially in high-risk areas. Availability and coverage terms often depend on location, structure and local regulations.

39. Environmental or pollution liability insurance

Environmental or pollution liability insurance is designed to help with claims involving hazardous materials or environmental damage. It’s commonly considered by businesses that handle chemicals, fuel, waste or other potentially harmful substances.

Small business insurance types FAQ

This list of frequently asked questions can answer many common queries about small business insurance needs.

How many types of insurance does a small business usually need?

What insurance does a small business need? There’s no single answer that applies to everyone. Coverage often depends on factors like industry, location, employees, vehicles and how the business operates day to day.

Is business insurance required by law?

Some types of business insurance are required by law, such as workers’ compensation in many states. Other coverage requirements may come from landlords, clients, lenders or professional licensing rules.

Can small businesses bundle insurance coverage?

Yes, some small businesses choose to bundle certain types of coverage into a single policy, such as a Business Owner’s Policy (BOP insurance). At ERGO NEXT, business owners who bundle two or more of some policies can save up to 10%.*

How often should businesses review their coverage needs?

Many business owners review their insurance at least once a year or when major changes occur, such as hiring employees, adding services or moving locations. Regular reviews can help ensure coverage still aligns with how the business operates.

What’s the difference between insurance and bonds?

Insurance is designed to help protect a business from certain losses, while bonds are typically used to guarantee performance or compliance with a contract. Bonds are used to protect the customer or client, not the business itself.

How ERGO NEXT Insurance can help protect your business

Small business insurance isn’t one-size-fits-all. The types of coverage a business needs depends on how it operates, where it’s located and its risks. And insurance needs can change over time, especially as operations, locations or staffing evolve.

ERGO NEXT can help you build a customized insurance package to address your business needs. We’ll ask a few questions about your business and provide a quote. You can select your coverage options and buy your policy in about 10 minutes — 100% online. Your certificate of insurance will be available to share at no extra cost, and you can access your policy 24/7 via web or mobile app.

If you have questions, our licensed, U.S.-based insurance professionals are available to help.

Start a free quote with ERGO NEXT.