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Types of Business Insurance Plans: How to Decide Which Is Right for You

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Updated May 12, 2023

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Insurance can help you protect your business from a variety of risks. S♔ome of the most common types of business insurance plans include:

General liability insurance
Commercial property insurance
Business income insurance
Professional liability insurance
Workers’ compensation insurance
Employment practices liability insurance
Product liability insurance
Commercial auto insurance
Commercial umbrella insurance
Cybersecurity insurance

Understanding how each type of business insurance (also referred to as commercial insurance) works can help you 🌳determine which coverage options you may nee🎶d.

Key Takeaways

Business insurance is designed to protect business owners from financial losses associated with a range of covered events.
Different types include general liability, commercial property, and workers’ compensation insurance.
Like other types of insurance, business insurance can require you to pay premiums as well as deductibles.
There are several different varieties of business insurance that you could use to protect your business.
Purchasing a package policy that includes several different types of coverage is one way to save money on business insurance.

Types of Business Insurance

Coverage Type	What Risks Does It Protect Against?	What Costs Does It Cover?	What Does It Cost?
General Liability	Lawsuits from people outside of your company, including consumers or vendors	Legal fees, settlement costs, and medical expenses for injured parties	$42/month
Commercial Property	Damage to business property	Repair or replacement costs of damaged property	$63/month
Business Income	Loss of income due to a business slowdown or suspension stemming from property damage	Lost income	$85/month
Professional Liability	Lawsuits relating to claims of negligence, errors, or malpractice	Legal fees and settlements	$61/month
Workers’ Compensation	On-the-job injuries	Medical bills and lost income for injured workers	$45/month
Employment Practices Liability	Lawsuits relating to unfair employment or hiring practices	Legal fees and settlements	$182/month
Product Liability	Injuries or bodily harm caused by defective products	Legal fees and settlements	$42/month (usually included in general liability premium)
Commercial Auto	Vehicles driven for business use	Repair costs, medical bills, legal fees, and settlements	$147/month
Commercial Umbrella	Lawsuit settlements that exceed coverage limits of other business insurance	Legal fees and settlements	$75/month
Cyber Liability	Cyber-hacking and data breaches	Varies; may include costs to restore data, enhance security, or settle liability lawsuits	$140/month

The figures listed above represent the average monthly cost of various small business insurance products, according to Insureon, an online marketplace for small business insurance. The 澳洲幸运5官方开奖结果体彩网:actual cost of ins🔴uring a small business may be lower or higher, depending on your unique situation and needs.

1. General Liability Insurance

General liability insurance provides liability coverage if your business is sued. This type of coverage is fairly comprehensive and can protect you against claims stemming from a number of different circumstances.

What risks does it protect against? General liability insuraไnce protects you against lawsuits filed by people outside of your company, such as suppliers or customers.

What costs does it cover? This type of policy can cover the costs of 𒐪a lawsuit, inꦡcluding settlements paid to claimants and medical expenses related to personal injury claims.

Warning

Forgoing general liabili🅠ty insurance could leave your business open to significant losses if you’re sued.

2. Commercial Property Insurance

Commercial property insurance protects your business property against a wide variety of losses. For example, if your property is damaged as a result of a natural disaster or civil unrest, your policy could pay to repair or replace affected assets. A 澳洲幸运5官方开奖结果体彩网:civil authority provision addresses busin🍌ess closures as a result of government actions after a disaster or life-threatening event.

What risks does it protect against? Commercial property insurance covers damage resulting from fire, smoke, wind, hail, civil disobedience, 澳洲幸运5官方开奖结果体彩网:and vandalism.

3. Business Income Insurance

Business income insurance is a type of coverage designed to supplement commercial property insurance. This kind of policy protects you if your business income is interrupted due to 澳洲幸运5官方开奖结果体彩网:property damage.

What risks does it protect against? Business income insurance protects yo❀u against missing in꧙come associated with the slowdown or suspension of business resulting from damage to property.

What costs does it cover? This type of policy helps to replace lost income 💯from operation𝓡s.

4. Professional Liability Insurance

Professional liability insurance is liability coverage for losses resulting from perceived mistakes that you made in doing your job. You may purchase this type of insurance to supplement any events not covered by a general liability policy.

What risks does it protect against? Professional liability insurance can protect against lawsuits that may arise as a res🐎u💯lt of negligence, malpractice, or errors.

What costs does it cover? This type of policy can pay out benefits to cov💫er 𝓀lawsuit settlements and legal fees.

5. Workers’ Compensation Insurance

Workers’ compensation insurance is a type of liability coverage that protects your business if one of your employees gets injured on the job. State law can determine what types of businesses are required to have workers’ compensation coverage.

What risks does it protect against? 澳洲幸运5官方开奖结果体彩网:Workers’ compensation insurance is designed to cover on-the-job injuries.

What costs does it cover? This 💖type of policy can pay medic🍨al bills for injured employees and provide them with income replacement until they’re able to return to work.

6. Employment Practices Liability Insurance

澳洲幸ཧ运5官方开奖结果体彩网:Employment practices liability ins🍌urance is intended to protect your business from lawsuits stemming from claims relating to unlawful hiring or employment practices. If you’re sued, your policy could pay legal fees or settlements to claimants.

What risks does it protect against? Employment practices liability insurance can cover a range of situations, including lawsuits filed in connection with 澳洲幸运5官方开奖结果体彩网:wrongful termination, discrimination, sex⛦ual💞 harassment, and retaliation.

What costs does it cover? This type of policy can cover legal 🍒fees and settlements.

7. Product Liability Insurance

Product liability insurance protects businesses that manufacture or produce tangible products. Specifically, this coverage insures against claims for defective products that cause injury or bodily harm.

What risks does it protect against? Product liability insuran☂ce protects your business when someone sues yo🥂u over a defective product that has caused injury, bodily harm, or death.

What costs does it cover? This type o🧔f policy can cover l๊egal fees and settlements.

8. Commercial Auto Insurance

Commercial auto insurance works similarly to personal car insurance, but it’s designed to protect business vehicles. The type of coverage you need and the coverage limits required can vary from state to state.

What risks does it protect against? Commercial auto insurance protects you against damage related to accidents, vandalism, or theft of 🐠compan🍬y vehicles.

What costs does it cover? This type of policy can cover repair costs, me🍰dical bills, legal fees, and settlements.

9. Commercial Umbrella Insurance

Commercial umbrella insurance is designed to cover risks not covered by other types of business insurance. For example, if you’re sued and you’ve maxed out the coverage limits of your general liability policy, an umbrella policy could help to fill the gaps.

What risks does it protect against? Commercial umbrella insurance can help you to minimize financial losses stemming from law🦂suit settlements that exceed other business insurance coverage limits.

What costs does it cover? This🔯😼 type of policy covers legal fees and settlements.

10. Cyber Liability Insurance

Cyber liability insurance, also known as cybersecurity insurance, is designed to cover liability and property losses relating to the electronic transfer or sharing of data. This type of insurance is becoming increasingly important as more businesses are targeted by hackers and identity thieves online.

What risks does it protect against? Cybersecurity insurance can protect your business if any electronic ꦐor digital data is sꦆtolen or otherwise compromised.

What costs does it cover? This type of policy can provide liability protection rel🌳ated to lawsuits or cover the cost of upgrading or restoring cybersecurity systems.

How to Choose the Right Business Insurance Plan

Cho🤪osing the right business insurance is important because you don’t want to leave certain aspects of your business unprotected or overpay for coverage. Asking the righ♐t questions can help you better evaluate your needs.

Some of the most important questions t𒁏o answer include:

How many employees does the business have?
Does the business have a physical location, or does it operate online only?
Is there any business equipment that will need to be insured?
What types of liability risks does the business face?
Are there any vehicles that will need to be covered?
What would happen if the business is interrupted by a natural disaster or another situation that’s beyond my control?
Will I need insurance to cover special situations? For example, will it be necessary to buy 澳洲幸运5官方开奖结果体彩网:key person insurance if I plan to sell or transfer the business to my heirs?

It’s also a good idea to weigh💯 other factors when choosing insurance options. For example, you’ll likely need to think about how much liability coverage is appropriate or🅠 what type of premiums your business can afford to pay.

Also, consider what types of coverage may be required based on state law or the industry in which you operate. For example, individuals who work in financial services may be required to have prof🐭essi🍎onal liability insurance.

Fast Fact

Joining a professional association in yo🧜ur field may 🐼allow you to unlock business insurance discounts.

How to Get Business Insurance

If you’re ready to purchase business insurance, it helps to know what to expect. The process isn’t that different from buying other types of insurance.♐ Here’s how to buy business insurance, step by step.

1. Assess Your Business Risk

The types of risk factors that affect your business can determine which types of busine🗹ss insurance you might need.

For example, say that you ruꦚn an HVAC repair business. You have 10 employees, eight of whom drive work vans to customers’ homes or businesses. In that case, it would make sense to have a commercial automobile policy in place to insure those vehicles.

What if you have no employees and run your business solo? You may not need an auto policy if you drive your own vehicle for work and are covered🌜 by personal car insurance. And workers’ compensation c൲overage may not be necessary, either.

Looking at your busiꦺness through the lens of risk can help you narrow the types of insurance coverage that may be appropriate and what you can do without.

2. Understand What’s Covered

By now, you should be familiar with the different types of business insurance. When putting together a policy, it’s helpful to know two thin🦂gs:ꩲ

What’s covered
What’s excluded

You don’t want to be taken by surprise if you need to file a claim, only to find out that there’s a gap in your coverage. Reviewing the details of a business insurance policy with the help of an agent or broker can help you pinpoint any poten♔tial holes in your plan that could leave your business vulnerable.

3. Compare Quotes for Business Insurance

Many companies offer business insurance, and all of them price their policies differently. The main pricing considerations for business insurance include what you’ll pay in premiums and what you’ll shell out for a 澳洲幸运5官方开奖结果体彩网:deductible, should you need to file a claim.

Tip

Providing as much information as ♎possible a✃bout your business, including the number of employees, annual revenue, and value of business property, can help you get the most accurate insurance quotes.

Getting one quote is a good start, bu⛄t it’s helpful to have other quotes to compare it with. At a minimum, it may be a good idea to get at least three quotes for business insurance𒆙 so you have a better idea of the price range you’re working with.

If you’re buying multiple policies to cover different things, get quotes for each. You may want to take quotes for individual policies and compare them with pricing for bundled business insurance to see if bun💙dling might save you any money.

When do I need business insurance?

Generally, you need to have business insurance if you’re concerned about the 澳洲幸运5官方开奖结果体彩网:possibility of financial losses stemming from liability claims or other events. If you don’t have the proper insurance in place, you could take a sizable financial hit if you’re sued for damages. Business insurance may also be necessary ♈if it’s mandated by law in the state where you operate.

Should I buy stand-alone policies or a bundled business insurance package?

If you only need one or two types of business insurance, then it could ♉make sense to choose standℱ-alone policies. On the other hand, if you’re looking for more comprehensive coverage, then you may benefit more from purchasing a business insurance package or bundle. Buying bundled insurance potentially could be more cost-effective if you’re able to get multiple policies at discounted rates.

What types of business insurance would I need if I work from home?

Working f🥀rom home doesn’t negate the need to have business insurance. At a minimum, it may be advisable to have general liability insurance in place. You also may want to purchase ins🔜urance to cover any business property that you use while working from home if it’s essential to your business operations.

The Bottom Line

Business insurance can be invaluable if you find yourself in a worst-case scenario and need to file a claim. Taking time to compare the different types of business insurance can help you determine which policy or policies are best suited to your needs. Once you know what coverage you need, you can take the next step and compare quotes f🧸rom the best small business insurance companies.

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North Carolina Department of Insurance. “.”
U.S. Small Business Administration. “.”
IRMI (Int𝕴ernational Risk Manage༒ment Institute). “.”
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IRMI (International Risk Management I൲nstitute). “.”
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North Carolina Department of Insurance. “,” select “What might a Cyber Liability Insurance Pol💃icy cover for a busine🔥ss?”

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