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What Is Business Insurance? A Complete Guide

Owning a business comes with a lot of expected challenges, like finding customers, picking the right POS system, or managing supply chains. But when something unexpected happens that impairs or even closes down your business for a period of time, business insurance can help.

Business insurance protects your company against things like legal claims, property damage, or other business interruptions. While it’s not a silver bullet for everything that could possibly happen, business insurance can be a good investment for your peace of mind.

Let’s take a closer look at what business insurance is, what it covers, and whether you need it.

What is Business Insurance

What Is Business Insurance?

Business insurance refers to a range of insurance policies designed for businesses of all sizes. This type of insurance is designed to compensate businesses in the event of a covered financial loss.

In many ways, business insurance works like any other type of insurance policy. You pay a monthly premium in exchange for coverage. If your business loses money from a covered loss – for example, a lawsuit against your company or damage to your building from a fire – then your insurance provider will reimburse you for the total amount of the loss or the maximum value of your policy, whichever is lower. Most business insurance policies have a deductible, which is the amount your business is responsible for covering before the policy starts to pay out.

Business Insurance

Types Of Business Insurance

There are many different types of insurance policies available. Let’s take a look at the options below.

Insurance for business

General Liability Insurance

General liability insurance is a blanket policy designed to protect your business from a variety of legal claims. If someone slips and falls in your office and sues your business, general liability insurance would cover that. This type of insurance can also cover injury or property damage that occurs in the course of your normal business operations. 

Property Insurance

Business property insurance covers damage to your business property, including equipment and office furnishings, due to a natural disaster, fire, accident, or theft. It can also cover the buildings your business operates in if they are owned by your business.

Business Income Insurance

Business income insurance reimburses your business for ongoing expenses like rent or mortgage payments, payroll, and business taxes. The conditions under which an income insurance policy kicks in can differ, but this insurance typically helps if your business suddenly loses revenue due to property damage. Many new business income insurance policies specifically exclude revenue loss due to disease, which means these policies wouldn’t pay out during an event like the COVID-19 pandemic.

Workers’ Compensation Insurance

Workers’ compensation insurance is required for most businesses with employees in most states. This type of insurance covers your employees’ health expenses if they become sick or injured while working.

Commercial Vehicle Insurance

Commercial vehicle insurance works just like personal auto insurance, except that it’s for business vehicles. Most personal vehicle coverage does not extend to vehicles owned by your business.

Business Owner’s Policy

You may need more than one type of policy depending on what assets your business has and how it operates. Many insurance providers offer a Business Owner’s Policy, which bundles general liability, property, and business income insurance into a single policy.

How Much Does Business Insurance Cost?

The cost for business insurance will depend on a number of factors, including the type of policy you need, the nature of your business, and how many employees you have. That said, you can look at the average cost that insurance providers report to get a sense of how much a policy might cost you.

In 2019, Progressive reported that worker’s compensation insurance cost an average of $85 per month (for several employees), while a Business Owner’s Policy cost $80 per month on average. Together, those add up to around $1,980 per year. 

Still, small businesses may be able to get insurance for much less. In a survey of 28,000 small business from Insureon, more than half reported paying less than $600 per year for a basic Business Owner’s Policy.

cost of Insurance for business

Do You Need Business Insurance?

While business insurance can be extremely helpful for a wide variety of businesses, it’s not right for every business. Whether or not you need business insurance depends on the type of business you own, the nature of your day-to-day operations, whether you have employees, and more.

To start, if your business has employees, you very likely need workers’ compensation insurance at a minimum. Most states require this even if you only have one or two employees.

If your business owns the buildings you work in, you likely also need property insurance. Most commercial mortgage lenders require that you have insurance on the building that they’ve given you a loan for.

Even if you rent, property insurance can be a good idea if your business has a lot of equipment. Your landlord might be on the hook for repairing your building if damage happens, but they likely won’t cover damage to your office equipment or other expensive items you need to run your business. 

Some owner-run small businesses with no employees, no commercial vehicles, and little or no capital equipment might be able to get away without business insurance. However, if customers visit your office, you still might want to invest in general liability insurance. If a customer were to be injured during a visit to your office, for example, you could be on the hook for any legal and medical fees that result.

How To Get Business Insurance

The best way to get business insurance is to find a licensed insurance agent who can help you get the best policy for your business. Licensed agents may be able to spot risks that you wouldn’t normally think about for your business. Most major insurance companies in the US have commercial branches that offer access to agents and a variety of business insurance policies.

Keep in mind that you should reassess your policy every year. Your business’s needs will likely change over time, and you may be able to find a better deal with another insurance provider once your business has been around for a longer time. 

How to get business insurance

Conclusion: Business Insurance

Business insurance can help protect your business against the unexpected, like damage to your building or equipment or injury to an employee or customer. There are many different types of business insurance policies, so it’s important to think about what risks your business faces and pick one or more policies that are customized for your company. Getting in touch with a licensed insurance agent can help you find the insurance policy that’s right for your business. 

Kevin

Kevin is an ambitious entrepreneur that is obsessed with all things related to finance. From a young age, Kevin has always been involved with side hustles ranging from online selling to freelance work. Over the years, Kevin graduated from side hustles and started launching multiple online and offline businesses. Kevin is a serial entrepreneur who loves starting new businesses and exploring all things related to business and finance. He is constantly looking for new ways to save money, invest money, and create income streams.

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