small business insurance policy, often referred to as a Business Owners Policy (BOP), is a comprehensive insurance package designed to provide coverage for various risks commonly faced by small businesses. This type of policy typically combines several essential coverages into a single, cost-effective package, making it suitable for small businesses with relatively straightforward insurance needs. Small business insurance policies are customizable, allowing businesses to tailor coverage to their specific requirements.

What is small business insurance?

Small business insurance is a paid policy you can take out to protect your business and yourself. This includes financial liability protection in the case of lawsuits, property damage, injuries, workers’ compensation claims, or any other losses that may arise while in operation.

Different small business insurance companies offer different types of insurance—and various small businesses need different policies, depending on what they do, where they’re located, how many employees they have, and a host of other factors.

W​​​​hat does small business insurance cover?

Small business insurance covers a range of things, and the specifics depend on the plan and provider. Some examples could include:

  • Third-party claims of bodily injury or property damage
  • Damage or loss of physical assets like buildings for warehouses or stores, etc., equipment, or inventory, often due to events like fire, theft, vandalism, or natural disasters
  • Replace lost income and cover ongoing expenses if a covered event disrupts business operations
  • Claims of negligence or inadequate work

10 types of small business insurance

The world of small business insurance can seem complex, stuffed with endless, complicated offers. You’ll need to shop around to know what’s best for your company, but in general, you’ll need at least general liability insurance and workers’ compensation insurance.

Here are 10 common types of small-business insurance, which—aside from the first two—may or may not apply to your business, depending on what you do:

  • General liability insurance: General liability insurance provides broad, general coverage. Most policies protect your business against injury and property claims, as well as libel and slander.
  • Workers’ compensation insurance: If one of your employees is injured on the job, you could be left on the hook for their expenses and compensation. But if you have workers’ compensation insurance, that money comes out of your insurer’s pocket instead. Workers’ comp can cover costs of medical care, lost wages, disability, and even funeral expenses. This form of insurance is mandatory in every state except Texas for businesses with non-owner employees. Four states even require that you purchase a policy from the state, not a private carrier.
  • Commercial auto insurance: Commercial auto insurance covers your business if an employee gets into an accident while driving a work vehicle, like a food truck, a construction vehicle, or a delivery van.
  • Commercial property insurance: Commercial property insurance—also called hazard insurance or business property insurance—helps your business replace the commercial property that’s lost or damaged during operations. This can include real estate (like an office building), furniture, tools, inventory, or other tangible assets your company owns.
  • Commercial umbrella insurance: Commercial umbrella insurance is like an add-on to your existing insurance coverage. It’s a good move if you anticipate that your regular insurance limits won’t cover a massive loss or liability.
  • Business income insurance: Business income insurance—sometimes called business interruption insurance—covers lost income if your business suffers property damage caused by fire, storms, or theft.
  • Employment practices liability insurance: Employment practices liability insurance—also called employers’ liability insurance—covers a business in case an employee makes discrimination, sexual harassment, or wrongful termination claims against the owner or leadership.
  • Cyber liability insurance: Data breaches and ransomware (extortion software that locks you out of your device or encrypts your data until you pay a ransom) can cause actual harm to your customers and your business—and these attacks are rising. Liability insurance helps if you have to inform customers about an attack, compensates them in case of a claim, and pays for free credit monitoring for affected customers.
  • Professional liability insurance: Professional liability insurance—also referred to as errors and omissions insurance—protects your business against claims that your advice or services caused a customer financial harm. For example, a real estate agent who fails to note mold in a basement can be liable for damages.
  • Business owner’s policy: A business owner’s policy (BOP) is a small-business insurance package deal. The specifics vary based on your company’s needs and your insurance company’s offerings, but BOPs often include general liability insurance, commercial property insurance, business income insurance, and workers’ compensation.

Small business owners should work with insurance professionals to ensure they have the appropriate coverage tailored to their specific risks and needs. Regular reviews and adjustments based on changes in business operations contribute to sustained risk management.

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