Running a small business comes with risk, even when you do everything right. From customer injuries and property damage to lawsuits or cyberattacks, everyday situations can quickly become costly. Small business insurance, sometimes called commercial insurance, helps protect your company from these common risks so one incident doesn’t jeopardize your operations, income or future. With the right coverage in place, you can focus on growing your business, knowing you’re better prepared for unexpected challenges.
Do Small Businesses Need Insurance?
Unexpected claims happen more often than many owners think. In 2024, private industry employers reported 2.5 million nonfatal workplace injuries and illnesses, highlighting why coverages like workers’ compensation matters for businesses. And other emerging risks like cybercrime and data breaches continue to rise too. The FBI’s 2024 IC3 report, there were 859,532 complaints documented of suspected internet crime and reported losses exceeding a staggering $16 billion. Because every business faces different risks, having insurance that’s tailored to your specific needs will help you protect what matters most.
The right small business insurance will help cover expensive damage and potential lawsuits from:
- Accidents
- Natural disasters
- Professional errors and omissions
- Workers’ compensation claims
An insurance specialist or agent can help you identify the best business insurance based on your industry, business type and size. They’ll ask the right questions to help you get the best small business insurance for all of your needs.
What Is the Best Business Insurance for a Small Business?
The necessary types of coverage depend on many factors. A landscaping company with a corporate office will have different insurance needs than an architect who works from their home office. Just as every business is different, its small business insurance needs vary too. But there are some insurance options that serve most small businesses. Business liability insurance is an example of a “good for all” insurance. It refers to either general liability or professional liability insurance. And it’s a wise coverage option for all small business owners. Determining the best business insurance for your small business is worth the time and effort. It helps you get coverage for every type of scenario that applies to you, without paying for insurance options that don’t.
Types of Small Business Insurance Plans
There is a wide variety of small business insurance plans. So it’s often helpful to speak with an insurance professional. Even if you feel confident with your types of business insurance coverage and the amount of coverage, it’s a good idea to schedule an occasional insurance checkup. This helps ensure that you and your business are in a good place coverage-wise. Think of it as a wellness visit with your doctor, but for your business.
General Liability Insurance
Most small businesses choose to get general liability insurance coverage. It helps cover the costs associated with bodily injury or property damage claims made against a business. For example, if one of your employees damages a customer’s deck while pressure washing, then they could ask you to pay for repairs. General liability insurance would cover that and similar situations. Liability coverages can also include the costs of claims made against a business for:
- False advertising
- Libel
- Slander
Keep in mind, however, that business liability does not cover liabilities that arise from your professional services. For example, if you give inaccurate advice to a customer who then files a lawsuit, this would not be covered under general liability insurance. For that, you would need professional liability insurance. And if your business manufactures products, then you may want to include product liability coverage. While similar to general liability insurance, product liability insurance can cover legal fees related to any claims of:
- Property damage
- Bodily injury
- Financial loss
- Damages due to a faulty product
Commercial Property Insurance
Theft, customer injury and fire damage claims are all covered under commercial property insurance. Also known as business property insurance, this small business insurance protects your business property whether you own it or rent it. This coverage can include:
- Tools
- Equipment
- Inventory
- Computers
- Furniture
- Important documents
- Outdoor landscaping
When you have adequate property coverage, it can help cover the costs to repair or replace any business property that gets stolen, damaged or destroyed. And this doesn’t only cover businesses with physical locations. It also covers remote or on-site businesses that have property necessary to their work, such as technology, gear and documentation. For example, a photographer who works at home would want to insure her camera equipment, lenses and lighting with business property insurance.
Professional Liability Insurance
Mistakes happen, even if you’re an expert in your field and have been in business for decades. Professional liability insurance is also known as errors and omissions insurance. It helps cover you and your company if you make a mistake (or if a customer accuses you of making a mistake) while providing your professional services. This type of insurance helps cover claims of inaccurate advice, negligence, and misrepresentation — all gray areas that can require costly legal defense. Without professional liability insurance, defending your business against such a claim would come out of your pocket. So, if you provide a professional service or give advice to clients — whether it’s legal, marketing or consulting in your area of expertise — professional liability insurance might make sense for you. In fact, many clients will require it to complete a contract.
Workers’ Compensation Insurance
Accidents happen. Your employee could trip over a cord or your salesperson could get into a fender bender after leaving a client meeting. This is why workers’ compensation insurance is not only a good idea for small business owners, but also required by most states. If your business is in a high-risk field, like construction or agriculture, then this type of coverage is imperative. Also known as workers’ comp, these small business insurance plans provide benefits to your employees if they get a work-related injury or illness. This coverage helps them:
- Cover their medical care
- Replace lost wages
- Provide disability benefits
As the small business owner, it can also help you if the injured employee or their family decides to sue. You might be wondering if workers’ comp is needed for 1099 contractors. Oftentimes, the answer is yes. Most independent contractors are not required to carry their own workers’ compensation insurance. So, if they are injured while working for your business, they can claim damages and file suit. Worker’s compensation insurance is one of the best and most common small business insurance plans for small business owners.
Commercial Auto Insurance
Auto accidents can result in injuries that require medical treatment, damaged property and even death. Commercial auto insurance is one of the best business insurance policies to help cover related costs if you or an employee is at fault. If your business owns, leases or rents vehicles, or if your employees operate leased, rented or owned-company vehicles, then you should consider getting a commercial auto insurance policy. And if your employees drive their own vehicles to conduct business, such as a salesperson who travels to client visits in their personal car or truck, then you will also need auto insurance coverage. However, if your employees only use their personal vehicle to commute to and from work, then you do not need commercial auto insurance.
Cyber Insurance
Unlike physical damage that’s easy to see, cyber risks are often complex and can disrupt your business in unexpected ways. Cyber insurance helps protect businesses from events like data breaches, ransomware attacks, phishing scams and other cyber threats. It can also help cover costs related to incident response, forensic investigations, legal defense and regulatory inquiries following a cyber event.
Cyber insurance can be especially important for businesses that store personally identifiable information (PII) or personal health information (PHI), accept digital payments or rely on computer systems to operate day to day. Industries with strict data management or privacy requirements may face more risk, but any business that uses email, websites or digital tools can be vulnerable.
This type of insurance is generally available at different levels of coverage. Some policies focus primarily on costs related to data breaches, such as notifying affected individuals and providing credit monitoring services. Broader cyber insurance policies may offer more extensive protection to help businesses prepare for, respond to and recover from a wide range of cyber incidents, including business interruption and cyber extortion.
Business Income Insurance
If you have a brick-and-mortar storefront or your business depends on a physical location to serve your customers, then you might want to look into business income insurance from a reputable small business insurance company. Think of business income insurance as business interruption coverage or income protection in the event that your business cannot be open due to theft or damage from a natural disaster. In those events, these small business insurance plans will replace some of your lost income.
Business Hazard Insurance and Homeowners Insurance
If you run your business out of your home, you may be wondering if there’s a difference between business hazard insurance vs. homeowners insurance. When it comes to homeowners coverage, hazard insurance applies to the home and other structures, like a shed or detached garage. Even if you had homeowners insurance for a home-based business, you’ll likely need business hazard insurance to help protect your company’s assets.
Do I Need LLC Business Insurance?
Registering your business as a limited liability company (LLC) separates your business assets from your personal assets. But keep in mind that your business is not automatically protected from various risks. Depending on your industry, LLC business insurance may be necessary to do that. LLC insurance helps protect LLCs from several types of liability claims. These include bodily injury or property damage caused by your business, employees or even products.
For example, take an LLC that provides human resources services. Let’s say the owner or an employee makes a mistake that costs one of their clients significant time and money to correct. Professional liability LLC business insurance could help cover any legal costs related to the client’s claim. It will also lessen the risk to the owner’s personal assets. Similarly, a general liability insurance policy helps protect you from claims alleging that your LLC caused bodily injury or property damage. An example would be if a heavy mirror on display at your store falls and injures a customer. Without general liability insurance protecting your LLC, you or your business would have to pay the medical bills.
How Do I Get the Best Small Business Insurance for Me?
Most small business owners find it helpful to work with an insurance professional. This person will guide you in ensuring that your business has the correct coverage. Many times, insurance companies offer packaged or bundled policies, often called a Business Owner’s Policy (BOP). This policy combines business property and business liability insurance into one business insurance policy. These bundles can be further tailored by adding optional types of coverage to meet unique business needs.
Compare Small Business Insurance Companies
There are a few things to consider when looking for the best small business insurance company to meet your needs. For example, some insurance companies specialize in certain types of coverage or serve specific industries. No matter what type of small business insurance plan you’re shopping for, ask if there are any company offers or money-saving insurance bundles available.
Many times it pays to keep your small business insurance plans with one insurance company. Finally, consider an insurance company’s customer service track record. You can refer to the Better Business Bureau and ask other business owners about their experience with the company. Weigh what’s covered in the small business insurance plans you’re considering.
The Hartford shall not be liable for any damages in connection with the use of any information provided on this page. Please consult with your insurance agent/broker or insurance company to determine specific coverage needs as this information is intended to be educational in nature.
The information contained on this page should not be construed as specific legal, HR, financial, or insurance advice and is not a guarantee of coverage. In the event of a loss or claim, coverage determinations will be subject to the policy language, and any potential claim payment will be determined following a claim investigation.
Certain coverages vary by state and may not be available to all businesses. All Hartford coverages and services described on this page may be offered by one or more of the property and casualty insurance company subsidiaries of The Hartford Financial Services Group, Inc. In AZ, CA, NH, TX and WA by Sentinel Insurance Company, Ltd., Hartford Casualty Insurance Company, Hartford Lloyd’s Insurance Company, Property and Casualty Insurance Company of Hartford, Hartford Underwriters Insurance Company, Trumbull Insurance Company, Twin City Fire Insurance Company, Hartford Accident and Indemnity Company and Hartford Fire Insurance Company. and its property and casualty insurance company affiliates, One Hartford Plaza, Hartford, CT 06155. (CA license # 8701) and its property and casualty insurance company affiliates, 690 Asylum Avenue, Hartford, CT 06155.
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