What types of business insurance do I need?

You know you need insurance to protect your business, but getting the right coverage can be tricky.

Buy too much coverage and you’re paying for things you’ll never need. If you buy too little, you can expose yourself and your business to costly lawsuits and payouts.

There are many different types of business insurance. Understanding them is the first step to putting together a package that will keep you covered.

One way to approach it is to consider two types of business insurance plans when shopping for insurance:

Core business insurance coverage plans can protect you from some of the most common risks small businesses face and are sometimes required by law.

Additional business insurance coverage plans can support the core types of business insurance. Oftentimes they are more relevant for specific types of businesses, such as restaurants, retail or construction.

Core business insurance coverage:

• Workers’ compensation insurance to protect your employees and your business.
• General liability insurance for financial protection against common business accidents.
• Commercial property insurance to protect your gear, goods and buildings.
• Business owner’s policy (BOP) is general liability plus commercial property insurance in one package.
• Professional liability insurance for business mistakes and accusations of negligence.

Additional business insurance coverage:

• Hired and non-owned auto insurance can cover rented or employee-owned vehicles for work.
• Commercial auto insurance helps protect your business if you or an employee have an accident.
• Tools & equipment insurance is essential for your gear.
• Liquor liability insurance helps protect you from the risks of serving alcohol.
• Product liability insurance offers protection for retail and e-commerce businesses.
• Employment practices liability insurance (EPLI) is coverage for lawsuits involving discrimination, harassment and wrongful termination.
• Cyber liability insurance can offer protection from data breaches, wire fraud and cyber attacks.

Workers’ compensation insurance

Workers’ compensation insurance can protect your business from lawsuits and other financial losses when an employee is injured or gets sick at work.

Most states require it by law when you have employees, but rules are different depending on where you do business.

General liability insurance

General liability insurance is often the first coverage business owners purchase because it can 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)

You might need general liability insurance to get a professional license or secure a lease.

Commercial property insurance

People often mistakenly think commercial property insurance only covers the building where they do business — “property” as in real estate.

Commercial property can also cover the gear and goods, inventory and equipment you need to run your business.

Commercial property can cover losses in income if you have to close due to damage for a covered event, such as a fire or water damage.

Business owner’s policy (BOP)

Save money by combining two policies into one. A business owner’s policy combines two types of business insurance — general liability and commercial property.

It can help pay for medical expenses if your business is held responsible for an injury to someone who is not an employee, as well as legal costs if someone sues your business. It can also help cover the costs if you or an employee accidentally damage someone’s property.

In addition, a BOP can help pay for business goods, gear and inventory, as well as damage to structures. It could also provide business income after a covered event.

Professional liability insurance

If you make an error while doing your job that costs someone money, professional liability insurance (also called errors & omissions insurance [E&O]) can help cover the cost of those mistakes.

Accountants, consultants and real estate professionals commonly carry professional liability insurance, but it can also benefit construction professionals. Mistakes happen, but these policies can make them less costly.

Commercial auto insurance

Almost every state requires commercial auto insurance if you drive for business purposes. It can help pay for injuries and property damage after an accident.

Tools & equipment insurance

Tools get damaged. Sometimes they get stolen. And on rare occasions, they’re just lost.

With tools & equipment coverage added to your general liability insurance, construction and cleaning professionals can get financial help without having to pay for everything out-of-pocket.

Liquor liability insurance

General liability insurance alone usually won’t cover alcohol-related incidents. If you run a business that sells alcohol, you’ll need to add liquor liability to your general liability policy if you want added protection.

Product liability insurance

If something you sell causes someone to get injured or become ill, you can be held responsible, whether you made the product or not.

Product liability insurance can protect your business from claims that a product you sold caused an injury or property damage.

Employment practices liability insurance (EPLI)

Employment practices liability insurance (EPLI) can protect small businesses from financial losses if an employee sues for harassment, wrongful termination or discrimination. It can also help cover expenses related to Americans with Disabilities Act (ADA) compliance complaints.

Cyber liability insurance

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

Due to the specific nature of the coverage, cyber liability is usually purchased as a stand-alone policy, although some companies offer it as an add-on to their general liability coverage.

How to choose a business insurance package

Now that you know the different types of business insurance, it’s time to put together a package that matches the needs of your business.

What insurance are you required to carry?

Your state might require certain types of insurance (workers’ comp, for example), but that’s not where the requirements end.

Your local government may have business insurance requirements.You might be asked to provide proof of insurance for your landlord, lenders or clients you hope to work with.

Be sure you have the coverage your business needs both legally and professionally — and make sure you have easy access to your certificates of insurance once you buy coverage.

Know your business risks

A construction company with a large crew is probably going to need to make sure that everyone is covered if an accident happens on the job. This isn’t a concern for an accountant, but they’ll have to be sure they’re protected from professional mistakes.

Understand the specific risks your industry faces and get the insurance you need to protect against them.

Understand the costs

You may find what seems like a great deal on your insurance, with low premiums every month, but if that plan comes with a sky-high deductible, it might not be worth it in practice.

Additionally, if your per claim or aggregate limit is too low, you could find yourself paying out-of-pocket sooner than you think.

Make sure you understand the true cost and limits of your policy before making a purchase.

How NEXT can help you get the business insurance you need

At NEXT, we know every business has unique needs. That’s why we make bundling coverage options online tailored, fast and affordable for your business.

You can complete our online application, see policy options, buy coverage and get your certificate of insurance in less than 10 minutes.

Get your free instant quote today.