I started Insurance Blog by Chris™ because I have a passion for insurance. Here at the blog, our job is to educate and inform people about the best insurance for them. Since then, we have grown into national brands with a large team of researchers helping people understand all forms of insurance.

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Written by Chris Huntley
Founder of Huntley Wealth & Insurance Services Chris Huntley

Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health insu...

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Reviewed by Rachael Brennan
Licensed Insurance Agent Rachael Brennan

UPDATED: Apr 18, 2022

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Business insurance is a broad term for a type of insurance coverage that protects a business from losses due to an event occurring during the normal course of the business.

But just as every business is unique in not only its size and financials but also in how it operates and what it tries to achieve, business insurance is the same way. There is not just one type of business insurance coverage, but many different ones that may comprise a larger policy to meet the needs of the business, whatever those may be.

Business insurance is incredibly popular, and for a good reason. In fact, in 2018, over 46 percent of insurance premiums in the United States were written for commercial policies. That equates over $287 billion.

However, just because it’s popular doesn’t mean it’s not complicated. From policies that cover professional liability to property damage to employee-related risks, business insurance is a complicated and involved world that business owners need to be aware of. Only in understanding it a bit more will they be able to choose a policy that’s right for them.

And while all businesses need to be aware of the various aspects of business insurance, this is especially true for small businesses, who likely don’t have the same financial stability to cover themselves in the event of a substantial loss.

Table of Contents:

Types of Business Insurance

As stated, different businesses will need to take a look at different coverage options to find a policy that works for their business.

Here are some of the most common forms of business insurance.

Business Liability Insurance

This type of coverage protects a business and/or business owner in the event of a lawsuit or third-party claim that has been brought forward.

The coverage is designed to protect the company’s assets and typically will include any financial liability incurred, such as medical costs if someone is injured on the company’s property, as well as financial costs pertaining to any necessary legal defense.

Additionally, business liability insurance also covers claims of false or misleading advertising, including slander or copyright infringement.

There are three main types of business liability insurance:

General Liability Insurance

If a business is renting its space and the property incurs damages, such as fire or weather, then this covers costs related to those damages.

Professional Liability Insurance

Also known as Errors and Omissions, this coverage protects businesses, their employees, and other professionals that provide advice or services against negligence claims or damages.

Product Liability Insurance

If a business manufactures products to sell to a consumer, then this type of coverage is crucial, as it protects the business from claims brought forward due to damages incurred by one of those products.

Property Insurance

This coverage protects the physical items of the business, such as inventory, signage, furniture, and other things due to factors like fire, heavy storms, or theft. An important note about property insurance is that it typically does not cover events like destructive flooding or earthquakes. If a business is located in a high-risk area for those factors, then it would be worth taking out an additional policy specific to those items.

Vehicle Insurance

It’s no secret that if a vehicle is being used for a business, it’s the company’s responsibility to make sure that the vehicle is insured. Similar to other types of auto insurance policies, there is a wide range of coverage that a business could consider, such as third-party injury or comprehensive coverage, to make sure the vehicle is covered in the event of an accident. To decide what coverage is needed, the business should take into account what exactly the vehicle is being used for, and how far of a distance it regularly has to travel, among other factors.

Business Interruption Insurance

If a business experiences a disruption for some reason, which leads to a loss of income that the business would have otherwise made, this type of coverage will compensate the business. This insurance is common for businesses that have a physical location, as disruptions tend to be more related to construction, power outages, or any number of factors.

Equipment Breakdown Insurance

A business cannot operate unless it has the tools to do so, and most companies rely on some sort of equipment to operate. Whether a computer network is damaged or a tractor motor burns out and needs to be replaced, this coverage will handle those costs. It can also compensate for lost damages due to the interruption.

Home-Based Business Insurance

If a business is run from home, likely a small business, then it’s important to be aware that homeowner’s insurance coverage does not protect against business-related factors the way that commercial property insurance does. Depending on what the business is, a business owner should look into what types of additional coverages are needed, such as inventory or equipment-based policies.

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Riders for Business Insurance

While there are many avenues for a business to pursue business insurance policies, the options themselves tend to lack the ability for much customization and are typically pretty standard. This can be tricky for a business with unique needs. For this reason, business insurance riders are not only popular among policyholders but also necessary.

These riders allow the business to better customize the coverage it needs to fit its business model and the needs of its employees without having to acquire an entire additional policy.

An example of a popular rider that businesses are inclined to include would be the modification of business interruption insurance. This type of coverage goes into effect not just when its own business is interrupted, but also when a primary supplier, partner, or customer has reason to shut down as well.

Another common rider is the addition of an endorsement to workers’ compensation insurance so that benefits are extended to employees beyond what the residing state law mandates.

Business Insurance Discounts

As with most types of insurance, there are a range of discounts that can be implemented into a policy based on factors such as safety and loyalty to the insurance company. But even though a discount may seem straightforward, it might be worth looking into further.

For example, safety discounts could be applied to many aspects of the business, from having modern safety features in place, to incorporating more ergonomic features for employee ease throughout the office.

Since businesses are unique, the various discounts that could be applied vary just as much. For this reason, it’s worth a business owner to discuss the possibilities with an agent while acquiring a quote or going through the process.

Some Business Insurance is Required by Law

Many business insurance policies are optional for a business, and while they might be in the best interest of the company, they are not required by law. On the other hand, some policies must be implemented for such reasons as the safety of workers.

These requirements are reflective of the state in which the business resides, the size of the business, or a series of other factors. For example, the Small Business Association notes how a business must legally have certain policies in place to protect its employees. These requirements include workers’ compensation, unemployment, and disability coverage.

Again, it’s important for a business to look at all the regulations which may apply, as regards location, size, and other factors.

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How Do I Find Business Insurance?

Business insurance is an incredibly common type of insurance, and finding a quote can be done in many places. One good place to start would be to have a discussion with an agent.

A business owner may already have policies in place pertaining to their home or automobile, and if they are comfortable with these services, then looking within the same company would be a good way to go.

Also, many business insurance companies offer discounts if a policyholder seeks out another type of insurance in addition to their current policy, so from a financial standpoint, this might be worth looking into as well.

Additionally, most insurance providers have portals for free quotes on their websites. It doesn’t hurt for a business owner to take some time, acquire some quotes, and start comparing costs. This can be done through third-party sites as well.

However, even if a business acquires quotes from a website, speaking with an agent is the best bet due to the complexities that are involved when putting together a business insurance policy.

It’s crucial to make sure all aspects of the business are thought through, and speaking with a professional is the best way to ensure that happens.

What Business Insurance Do You Need?

Business insurance, like other types of insurance, does not come in a one-size-fits-all policy.

There is much to consider and more to learn about the world of business insurance, and making sure the policyholder is steering the business in the right direction.

What’s important is that those on the hunt for coverage are aware that they aren’t alone, and that there are services and websites out there that can help them find a quote that fits the needs of the business, and also gives them peace of mind.