Small businesses need different insurance types based on their operations, risks, and legal requirements. The six most common coverages protect against lawsuits, property damage, employee injuries, and cyber threats.
This guide, types of small business insurance, explains each policy type, what it covers, who needs it, typical costs, and real examples. Use it to build the right protection for your business.
1. General Liability Insurance
What it covers: Bodily injury, property damage, and advertising injury claims from your business operations.
Examples:
- Customer slips in your store
- Your work damages client property
- Copyright infringement claims
Who needs it: Almost every business with customers, clients, or public interaction.
Cost: $30–$80/month ($1M coverage)
Limits: $1M–$5M per occurrence
Related guide: General Liability Insurance for Small Businesses
2. Professional Liability Insurance (E&O)
What it covers: Claims from professional mistakes, negligence, or failure to deliver promised services.
Examples:
- Bad advice costs client money
- Missed deadline causes financial loss
- Errors in your work product
Who needs it: Consultants, freelancers, accountants, lawyers, designers, IT services.
Cost: $50–$150/month ($1M coverage)
Key feature: Claims-made policy (covers incidents during active policy period)
Related guide: Professional Liability Insurance Explained
3. Product Liability Insurance
What it covers: Claims that your product caused injury or damage.
Examples:
- Defective product injures customer
- Allergic reaction to your cosmetics
- Faulty equipment damages property
Who needs it: Manufacturers, wholesalers, retailers, restaurants, any physical product seller.
Cost: $40–$120/month (added to general liability)
4. Commercial Property Insurance
What it covers: Damage to business property from fire, theft, vandalism, weather events.
Examples:
- Office fire destroys equipment
- Break-in steals inventory
- Storm damages building roof
Who needs it: Businesses with physical locations or valuable equipment.
Cost: $40–$100/month ($500K coverage)
Replacement cost vs actual cash value: Choose replacement cost for full value recovery.
5. Workers’ Compensation Insurance
What it covers: Employee injuries/illnesses from work (medical bills, lost wages, rehab).
Examples:
- Employee falls from ladder
- Repetitive strain injury
- Work-related illness
Who needs it: Legally required in most states if you have any employees (even part-time).
Cost: $50–$200+/month (based on payroll/risk)
State variations: CA/TX/NY have different minimum requirements.
6. Cyber Liability Insurance
What it covers: Data breaches, hacking, ransomware, privacy violations.
Examples:
- Customer data stolen
- Ransomware encrypts files
- HIPAA violation fine
Who needs it: Any business handling customer data (e-commerce, healthcare, financial services).
Cost: $25–$100/month ($1M coverage)
First-party vs third-party: Covers your cleanup costs + customer claims.
Coverage Comparison Table
| Coverage | Lawsuits | Property | Employees | Products | Cyber | Cost/Month |
|---|---|---|---|---|---|---|
| General Liability | ✅ | ✅ | ❌ | ❌ | ❌ | $30–$80 |
| Professional Liability | ✅ (professional) | ❌ | ❌ | ❌ | ❌ | $50–$150 |
| Product Liability | ✅ (products) | ❌ | ❌ | ✅ | ❌ | $40–$120 |
| Commercial Property | ❌ | ✅ | ❌ | ❌ | ❌ | $40–$100 |
| Workers’ Comp | ❌ | ❌ | ✅ | ❌ | ❌ | $50–$200 |
| Cyber Liability | ✅ (cyber) | ❌ | ❌ | ❌ | ✅ | $25–$100 |
Business Owner’s Policy (BOP)
What it is: Bundles general liability + commercial property at 15–30% discount.
Eligibility: Businesses with < $5M revenue, <100 employees, low-risk industries.
Cost: $50–$120/month (covers both policies)
Add-ons available: Business interruption, equipment breakdown.
Which Coverages Do You Need?
Solo/Freelancer
- General liability
- Professional liability
Total: $50–$100/month
Service Business (consulting, agencies)
- General liability
- Professional liability
- Cyber (if handling data)
Total: $80–$200/month
Retail/E-commerce
- BOP
- Product liability
- Cyber liability
Total: $100–$250/month
Contractors/Trades
- General liability ($2M+)
- Workers’ comp
- Commercial auto
Total: $200–$500+/month
Common Exclusions Across Policies
Never covered:
- Intentional illegal acts
- Wear and tear
- Contractual penalties
- Employee dishonesty (needs fidelity bond)
Policy-specific exclusions:
- Professional errors (in general liability)
- Cyber attacks (in standard policies)
How to Choose Coverage Limits
Minimum recommended:
| Coverage | Minimum Limit |
|---|---|
| General Liability | $1 million |
| Professional Liability | $1 million |
| Property | Building replacement value |
| Cyber | $1 million |
Consider umbrella policy for extra $1M+ coverage ($20–$50/month).
Frequently Asked Questions
What is the most important small business insurance?
General liability – protects against the most common lawsuits (injuries, property damage).
Do I need insurance as a freelancer?
Yes, especially professional liability. Many clients require proof before hiring.
Is workers’ comp required for independent contractors?
No, but verify their status. Misclassification can lead to fines.
What does a BOP cover?
General liability + commercial property. Often includes business interruption.
Can one policy cover everything?
No single policy covers all risks. Most businesses need 2–4 policies.
How often should I review coverage?
Annually, or whenever: hiring employees, moving locations, revenue changes >20%.
Next steps: Assess your risks using our Small Business Insurance Cost guide, then get quotes from 3+ providers.
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