Business insurance protects your company from financial loss due to accidents, lawsuits, property damage, employee issues, cyberattacks, and more. Whether you’re a new small business owner, a freelancer, or running an established company, understanding your coverage options is essential. This FAQ breaks down the key concepts in simple terms so you can make smart decisions and safeguard your business.
What Is Business Insurance?
Business insurance is a collection of policies designed to protect your company from unexpected losses. It covers events like:
- Property damage
- Customer injuries
- Employee injuries
- Legal claims
- Theft or vandalism
- Cyber incidents
- Business interruption
Different businesses require different policies, depending on industry, size, location, and risk exposure.
Why Do Businesses Need Insurance?
Insurance protects your business’s finances and reputation. Without proper coverage, a single lawsuit or disaster could force a company to close.
Business insurance helps with:
- Covering legal fees and settlements
- Repairing or replacing damaged property
- Protecting business income after disruptions
- Meeting landlord, client, or contract requirements
- Complying with state regulations
- Gaining trust and credibility with customers
What Types of Business Insurance Are Most Common?
Here are the core policies most businesses need:
General Liability Insurance
Covers customer injuries, property damage you cause, and legal defense fees. This is the most essential policy for nearly every business.
Commercial Property Insurance
Protects your building, equipment, inventory, and furniture from damage caused by fire, theft, storms, and other covered events.
Business Owner’s Policy (BOP)
A package that combines general liability, commercial property, and often business interruption insurance at a lower cost. Ideal for small to midsize businesses.
Professional Liability Insurance (Errors & Omissions)
Protects service-based businesses from claims of negligence, mistakes, or inadequate work.
Workers’ Compensation
Required in most states if you have employees. Covers medical bills and lost wages after an employee injury.
Commercial Auto Insurance
Covers vehicles used for business—delivery vans, company cars, contractor trucks, etc.
Cyber Liability Insurance
Protects against data breaches, cyberattacks, ransomware, and privacy violations.
Business Interruption Insurance
Covers lost income and operating expenses if your business must temporarily shut down due to a covered event.
Product Liability Insurance
Covers claims related to defective or harmful products you manufacture, sell, or distribute.
What Does Business Insurance Not Cover?
Exclusions vary, but policies typically do not cover:
- Intentional wrongdoing
- Fraudulent behavior
- Wear and tear
- Employee theft (unless you add fidelity bonds)
- Flood or earthquake damage (separate policies required)
- Cyber incidents (if not part of your policy)
Always review your declarations page to understand your limits and exclusions.
How Much Business Insurance Do You Need?
Your coverage depends on:
- Your industry
- Number of employees
- Physical assets (equipment, property, inventory)
- Client contract requirements
- Risk exposure
- Annual revenue
For example:
- Contractors often need higher liability limits
- Retail shops require property coverage for inventory
- Consultants and agencies rely heavily on professional liability insurance
A licensed agent can help determine the right amount for your business structure.
How Much Does Business Insurance Cost?
Costs vary widely, but the biggest factors include:
- Business size and revenue
- Claims history
- Industry risk level
- Location
- Number of employees
- Coverage limits and deductibles
Small businesses typically pay:
- $400–$1,200 per year for general liability
- $750–$2,500 per year for a BOP
- $800–$3,000 per year for workers’ comp
- $1,000–$7,500+ per year for cyber coverage (depending on risk)
Low-risk businesses like online freelancers often pay less.
What Is a Certificate of Insurance (COI)?
A COI is a document verifying your business insurance coverage. Clients, landlords, and vendors often request it before working with you. It shows:
- Policy types
- Coverage limits
- Effective dates
- Insurer information
It acts as proof of protection and professionalism.
What Is a Business Interruption Claim?
If a covered event—such as a fire or storm—forces you to close temporarily, business interruption insurance may pay for:
- Lost income
- Employee wages
- Loan payments
- Rent or mortgage
- Relocation costs
- Temporary operating expenses
This coverage can be critical for recovery and survival after a major disruption.
Do Self-Employed People Need Business Insurance?
Yes. Freelancers and independent contractors face many of the same risks as larger companies. Clients may require proof of:
- General liability
- Professional liability
- Cyber coverage (for data handling roles)
Even home-based businesses should consider protection.
What Is Professional Liability (E&O) and Who Needs It?
Professional liability (errors and omissions) is essential for service-based industries, including:
- Consultants
- Accountants
- Real estate agents
- Marketing agencies
- Financial advisors
- IT professionals
- Therapists and coaches
If your service, advice, or work could cause financial loss to a client, you need E&O coverage.
Does Business Insurance Cover Remote Work?
Usually yes—if properly structured.
Commercial property insurance may cover:
- Laptops
- Equipment
- Office furniture
Professional liability still applies if remote employees provide services. If employees work from home full-time, you may need extra endorsements to extend coverage to their location.
How Do You File a Business Insurance Claim?
- Document the incident with photos, receipts, and notes.
- Notify your insurer promptly.
- Provide required records (invoices, financial statements, etc.).
- Meet with an adjuster if needed.
- Review the settlement offer and ask questions.
- Receive payment or repairs depending on the claim type.
The more organized your documentation, the faster your claim is processed.
How Can You Lower Your Business Insurance Premiums?
Try:
- Bundling policies into a BOP
- Improving workplace safety
- Installing security systems
- Reducing risk with employee training
- Increasing your deductible
- Maintaining clean claims history
- Asking about industry-specific discounts
Shopping rates annually also helps keep premiums competitive.
Final Thoughts
Business insurance is a core part of protecting your company’s future. Whether you run a small shop, manage a team, work remotely, or operate a high-risk business, the right coverage protects your income, reputation, and financial stability. Use this FAQ as your guide to understand your options and build a policy that supports long-term success.