Business Insurance Basics: What Small Businesses Typically Need
Most small businesses need more than one type of insurance, because different policies protect against very different risks — property damage, lawsuits, employee injuries, and business interruption each typically require separate coverage.
Key Takeaways
General liability and commercial property are the two most common starting points. Workers’ compensation is legally required in nearly every state once you have employees. Your specific industry, whether you have a physical location, and whether you carry professional risk (advice, services, data) all shape what else you should consider.
Common Types of Business Insurance
- General liability insurance — covers third-party bodily injury, property damage, and advertising-injury claims arising from your business operations.
- Commercial property insurance — covers your building (if owned) and business property (equipment, inventory, furniture) against fire, theft, and other covered perils.
- Workers’ compensation insurance — covers medical costs and lost wages for employees injured on the job; required by law in nearly every state once you have employees, with limited exceptions.
- Professional liability insurance (errors & omissions) — covers claims that your professional advice or service caused a client financial harm; especially relevant for consultants, agencies, and licensed professionals.
- Business interruption insurance — replaces lost income and covers ongoing expenses if a covered event forces you to temporarily close.
- Commercial auto insurance — required if your business owns, leases, or regularly uses vehicles for business purposes; a personal auto policy typically excludes business use.
What’s Usually Required vs. Optional
Workers’ compensation is a legal requirement in nearly every state once you cross a minimum employee threshold (which varies by state). Commercial auto is generally required if you use vehicles for business. Most other coverage — general liability, property, professional liability — is legally optional but frequently required by landlords, clients, or lenders as a condition of doing business with you.
How Much Coverage Costs
Cost varies enormously by industry, revenue, number of employees, claims history, and location, so there’s no universal figure worth quoting here. The most reliable way to get an accurate picture is to request quotes from a licensed commercial insurance agent who can account for your specific business.
Frequently Asked Questions
Can I run a business on a homeowners or personal auto policy?
Generally no. Personal policies typically exclude business-related claims entirely, even minor ones like an at-home client visit or driving to a client meeting — a dedicated business policy closes that gap.
What’s the difference between general liability and professional liability?
See our dedicated guide on general liability vs. professional liability insurance for a full breakdown.
Educational information only, not legal, financial, or insurance advice — see our Insurance Disclaimer. Consult a licensed commercial insurance agent for guidance specific to your business.