Small Business Insurance
Small business insurance works like the types of insurance you're already familiar with: you exchange a small payment in the present (called a premium) for the promise that you won't have to make an enormous payment in the future, if something goes wrong.
Beyond that, though, business insurance (or "commercial insurance" to industry insiders) is uncharted territory for most people. As a small business owner, you may know that you need some sort of insurance. But what kind? How much? And what will it cost? Read on for answers to some of the questions we hear most often.
What Type of Small Business Insurance Do I Need?
Your specific needs will depend on the details of your business. We have to say that for legal reasons and because no two businesses are alike. But very small businesses (those with fewer than 20 employees) can get an idea of which commercial insurance policies will cover their risks by answering the following questions.
1. Do You Own a Small Business?
We're guessing you do. If that's the case, be sure to consider these two policies:
- Commercial General Liability Insurance, the foundational policy for nearly every business, covers you for incidents that happen to third parties (i.e., anyone not employed by your business) on your business property.
- Professional Liability (Errors & Omissions) Insurance covers you for lawsuits over the work you do in your capacity as a professional.
2. Do You Have Employees?
If so, you may need two additional policies:
3. Do You Own or Rent an Office?
If so, you may need Commercial Property Insurance to protect the place where you conduct business.
Probably the most important thing we can tell you about Commercial Property Insurance, though, is that almost none of our customers buy it on its own. Why? Because many small businesses qualify for a bundled insurance package called a Business Owner's Policy (BOP) that includes Property Insurance and General Liability Insurance. Just like bundled Internet and cable packages, the BOP offers a slight discount on both policies.
4. Do You Take Credit Cards?
If you process digital payments or store customer data digitally, you're a target for hackers. Cyber Liability Insurance is a lifesaver if your business is breached: it pays for the costs of responding to a data breach so your business can regain customer trust and comply with state and federal laws. Insureon offers Cyber Liability coverage as part of a discounted Business Owner's Policy.
5. Do You or Your Employees Ever Drive for Work?
If so, take note: personal auto insurance may not cover accidents or other damages that happen during work-related trips. To fill in the gap, consider…
6. Do You Sell Alcohol?
If you do, you'll need a kind of insurance called Liquor Liability. It's an important coverage because, in all 50 states, a business can be held liable for alcohol-related damage that happens on its premises, including fight-related injuries and damage to patrons' property.
In addition, 42 states allow businesses to be held liable for damage their patrons cause after leaving the premises. The laws that allow for this liability are called "dram-shop laws" and mean that restaurant and bar owners can be found liable for drunk-driving accidents.
7. Do You Have a Lot of Cash in the Bank?
If not, an Umbrella Insurance policy may come in handy. For a relatively low investment, this policy offers an additional layer of protection that can be applied to multiple underlying policies, including General Liability and Hired and Non-Owned Auto.
Umbrella coverage may also be useful if a client requests a higher limit on your General Liability policy than what you currently carry.
8. Are You a Nonprofit?
You may benefit from Directors & Officers Insurance (D&O). This policy pays out when someone sues the members of your board for doing something wrong (e.g., mishandling money or improperly firing an employee).
How Much Does Small Business Insurance Cost?
Again, we have to say that the cost of insurance varies from one business to the next. But for very small businesses, the biggest factor that influences the cost of coverage is the limit you choose for your policy. The following are average prices from all of insureon's customers. For a more detailed breakdown by industry, check out our Business Insurance Cost Analysis portal.
- Commercial General Liability Insurance: The average cost for Insureon customers is just $48.75 / month for $1 million in coverage.
- Professional Liability (Errors & Omissions) Insurance: The average cost for insureon customers is just $86 / month for $2 million in coverage.
Other Small Business Insurance Policies
To learn more and compare the various types of insurance policies, read "Small Business Insurance Policies: How Are They Different."
To be perfectly clear, the above information is intended purely for informational purposes. The cost of a policy for your business could be very different from the average. The only way to find out for sure what coverage will cost for you is to fill out an application and get a personalized quote.