Business Insurance Basics for Small Companies

Starting or running a small business involves risk, from a customer slipping in your shop to a data breach or a fire at your office. Insurance transfers some of that risk to an insurer in exchange for a premium. Understanding the main types of coverage helps you protect your company without paying for protection you do not need.

General Liability

General liability insurance covers claims of bodily injury or property damage to third parties arising from your business operations, as well as certain advertising claims. Many landlords and clients require proof of coverage before signing a lease or contract.

Commercial Property

This coverage helps pay to repair or replace your building, equipment, inventory and furniture if they are damaged by events such as fire or theft. Policies differ on which events are covered, so review exclusions, such as flood or earthquake, which often require separate coverage. This is especially relevant in California.

Workers' Compensation

In California, most employers with employees are required to carry workers' compensation insurance, which provides medical care and wage replacement for employees injured on the job. Rules vary by state and situation, so confirm requirements with your state agency or a licensed professional.

Professional Liability

Also called errors and omissions insurance, this covers claims that your professional advice or services caused a client financial harm. It is especially important for consultants, designers, accountants and other service providers.

Cyber Liability

If you store customer information or accept electronic payments, cyber coverage can help pay for costs such as breach notification, forensic investigation and legal fees.

Commercial Auto and Business Interruption

If vehicles are used for business, a personal auto policy may not cover accidents. Business interruption coverage can replace lost income and help pay ongoing expenses if a covered event forces you to close temporarily.

Choosing Coverage

• List your biggest risks: customers on premises, employees, vehicles, data and contracts.
• Check contract and legal requirements.
• Compare quotes from several insurers or work with an independent agent.
• Read exclusions and understand deductibles and limits.
• Review coverage every year as your business changes.

A business owner's policy (BOP) bundles general liability and property coverage at a lower price for many small companies. This article is general information and not insurance advice, so talk with a licensed agent about your specific needs.

Review your coverage annually, and whenever you add employees, sign a new lease, take on a loan or launch a new service. Keep copies of policies and certificates of insurance in an accessible place, and make sure the people who manage your business know how to file a claim quickly if something happens.