Small Business Liability Insurance
What kind of work do you do?
Business owner looking at certificate of liability
Choose from the nation's best insurance providers
Logos of Insureon's business insurance carrier partners

Business liability insurance

Business liability insurance is any type of small business insurance that protects against accusations that your business caused damages, injuries, or losses.

Why is business liability insurance important?

Business liability insurance is a type of coverage that provides crucial protection against the high cost of lawsuits. It also helps business owners secure leases and contracts.

Even if a business is not directly responsible, a customer could sue over an accident that happened at your shop or office. For example, if a customer slips on a wet floor at your business and gets injured, you could be held responsible for their medical expenses.

Legal defense costs and medical bills can devastate a business, even if you're not to blame. That’s why certain types of insurance, particularly general liability insurance coverage, are recommended across all industries – especially those that welcome visitors.

A small business owner giving a customer their order

Business liability insurance helps pay for:

  • Customer injuries at your shop or office
  • Accidental damage to customer property
  • Advertising that damages a competitor
  • Mistakes that harm a client financially
  • Incidents related to alcohol consumption if you serve drinks

When do businesses need liability insurance?

Your industry, state, and other factors determine when you need business insurance. You might need business liability insurance to:

Purple check mark

Sign a lease

Because accidents can be costly, your commercial property manager might require that you provide a certificate of liability insurance to sign a commercial lease.

Purple check mark

Fulfill the terms of a contract

Clients may request commercial general liability insurance or professional liability insurance in a contract – especially if your small business is working on a project with a large company.

Purple check mark

Get licensed

Real estate agents, dentists, and accountants may need liability insurance to fulfill licensing requirements for their profession. You may need liquor liability insurance to obtain a liquor license if you sell or serve alcohol.

Purple check mark

Comply with state laws

State laws require commercial auto insurance, which includes auto liability coverage, for business-owned vehicles.

Most states also require businesses with employees to carry workers’ compensation insurance for workplace injury liabilities.

What does business liability insurance cover?

When your business is sued, liability insurance covers the cost of legal fees, court-ordered judgments, and settlements up to your policy limits. The per-occurrence limit is the maximum amount your insurer will pay for a single incident, and the aggregate limit is the most it will pay during the policy period.

A general liability policy covers the most common liability risks, but business owners should consider other coverage as well. Here's a breakdown of the most frequently purchased liability insurance policies:

General liability insurance protects against common third-party risks, such as customer lawsuits over bodily injury or property damage. It also protects against lawsuits over product defects and advertising injuries, including copyright infringement.

Professional liability insurance is also called errors and omissions insurance (E&O) or malpractice insurance, depending on the industry. It covers your legal costs if a client sues over a professional mistake or oversight, such as a missed deadline.

Compare small business insurance quotes


Employer's liability insurance is included in almost all workers' compensation insurance policies. It provides financial protection against lawsuits brought by employees claiming your negligence caused an injury.

Commercial auto insurance helps pay for liability claims if your business vehicle gets into an accident and someone sues over an injury or property damage. All car insurance policies need to meet your state's minimum requirements for auto liability limits.

Sole proprietors who own a vehicle used for work should consider commercial auto liability insurance, or hired and non-owned auto insurance (HNOA), in additional to any personal liability policies in case they are involved in a car accident while driving their personal car for work.

Cyber insurance helps small businesses recover from costly data breaches and cyberattacks. It also protects network security businesses and IT consultants against lawsuits from clients who might hold them responsible for failing to prevent a breach.

Commercial umbrella insurance can provide additional coverage for liability claims made on general liability, employer’s liability, or a commercial auto insurance policy once policy limits have been reached.

Before you can purchase an umbrella policy, however, an insurer will require you to carry a certain amount of coverage for the underlying policy. Once the minimum coverage has been met, your business will qualify for an umbrella insurance policy.

Commercial insurance provides peace of mind that lets you focus on your business, not your risks.

Does business liability insurance protect against property damage?

Business liability insurance provides protection when a business is held responsible for another person's property damages or losses. Commercial property insurance is another type of insurance that protects your business property against theft, fire, vandalism, and other risks.

Most small business owners qualify for a business owner's policy (BOP), which combines general liability insurance with commercial property insurance at a discount. A BOP can help pay to repair or replace your inventory, equipment, and other business property after damage or loss.

How much does business liability insurance cost?

A small business owner calculating their small business insurance payments

Business insurance is a broad category that covers many different policies. Factors that affect the cost of insurance premiums include:

  • Policy type
  • Coverage limits and deductibles
  • Business operations
  • Industry risks
  • Location
  • Number of employees
View Small Business Insurance Costs

Key takeaways about business liability insurance

Here are four key takeaways about business liability insurance:

  1. Your landlord, client, or state law might require you to carry business liability insurance.
  2. Even when it's not required, you might need business insurance to make sure your business can survive a lawsuit, data breach, or other unexpected incident. Commercial insurance provides peace of mind that lets you focus on your business, not your risks.
  3. Different types of business insurance protect against different risks. If you don't know what kind your business needs, chat with a licensed insurance agent to learn more.
  4. Commercial insurance is affordable for small businesses. For example, general liability insurance costs about $42 per month.

Find answers to frequently asked questions about business liability insurance, or get an insurance quote today.

What our customers are saying
Updated: November 6, 2022
Compare free quotes for your business
Save money by comparing quotes from top-rated insurance companies.
Why your commercial lease requires liability insuranceWhat does business insurance cover?Is business insurance required by law?Find cheap business insurance in 4 easy stepsWhen is general liability insurance required?Best Small Business Insurance