Below, we'll walk through the most common business insurance types. For each coverage, we'll explain what it is, what it covers, who needs it and how much it costs so you can decide which policies make sense for your business.
Types of Small Business Insurance Coverage
Most businesses need general liability, workers' compensation, professional liability, commercial auto and property insurance coverage.
Find the best insurance for your small business below.

Updated: July 4, 2025
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Key Takeaways
Most businesses need multiple insurance policies, not just one. Most companies need general liability and workers' compensation (if you have employees), with additional policies based on your industry and specific risks.
Legal requirements vary widely by state and business type. Workers' compensation is required in 48 states for businesses with employees, while other coverage like general liability may be required by landlords, clients or licensing boards even when not legally mandated.
Insurance costs depend heavily on your industry risk level and business size. Low-risk office businesses will pay less than high-risk industries, and larger businesses pay more than smaller businesses. Business size, industry and claims history affect workers' comp insurance costs.
Compare Small business Insurance Rates
Ensure you're getting the best rate for your small business insurance. Compare quotes from the top insurance companies.
Most Common Types of Business Insurance
1. General Liability Insurance
General liability insurance covers third-party claims of bodily injury, property damage and personal injury, such as libel or slander. It covers the most common lawsuits businesses face, from slip-and-fall accidents to product defects.
What General Liability Covers and Doesn't Cover
Here's what general liability insurance pays for and what it won't cover.
What it covers:
- Customer injuries on your premises (slips, falls, cuts)
- Property damage you cause to others (paint spills on client's carpet)
- Product-related injuries to customers
- Advertising injury claims (copyright infringement, slander, libel)
- Legal defense costs, even for groundless lawsuits
- Medical expenses for injured third parties
What it doesn't cover:
- Employee injuries (covered by workers' compensation)
- Professional mistakes or advice (need professional liability)
- Intentional wrongdoing or criminal acts
- Cyber attacks and data breaches
- Damage to your own property
- Auto accidents (need commercial auto coverage)
Who Needs General Liability and How Much to Buy?
Nearly every business that interacts with customers, vendors or the public.
Coverage amounts:
- Minimum recommended: $1 million per occurrence / $2 million aggregate
- Higher-risk businesses: $2 million+ (restaurants, contractors, event planners)
- Service businesses: $1-2 million usually sufficient
- Consider umbrella policy: If business assets exceed $1 million
Factors increasing coverage needs:
- High foot traffic locations
- Physical products sold
- On-site customer services
- Higher annual revenue ($1 million+)
General Liability Pricing and Cost Factors
Your industry and business size are the biggest factors affecting what you'll pay for general liability.
Typical monthly costs:
- Office-based businesses: $25 to $75
- Retail stores: $50 to $150
- Restaurants: $100 to $300
- Contractors: $150 to $500+
What affects pricing:
- Industry risk level
- Annual revenue and business size
- Number of locations
- Claims history
- Geographic location (litigation risk and crime affect cost)
- Coverage limits
Read more: Best General Liability Policies and Cheapest Providers
Examples of Claim Scenarios
Here are examples of potential claims that general liability covers:
Restaurant example: Customer slips on a wet floor and breaks a wrist. Medical bills total $8,500, plus $12,000 in lost wages. General liability covers the $20,500 claim.
Contractor example: A painter accidentally damages the client's hardwood floors with paint thinner. Refinishing costs $6,200. Without coverage, the contractor pays out of pocket.
Retail example: A defective coffee maker sold by an electronics store causes a kitchen fire at a customer's home, causing property damage of $45,000. General liability covers the claim and legal defense.
2. Workers’ Compensation Insurance
Companies with employees should get workers’ compensation insurance to protect their business and employees. It provides coverage for medical expenses and lost wages for injured employees. It also covers rehabilitation costs and death benefits if an employee passes away from a work-related incident.
Unlike other types of business insurance, workers' compensation is legally required in most states. If you have at least one employee, you'll likely need workers' compensation coverage.
Depending on the state, not having workers' compensation can lead to penalties. For example, failing to provide workers' compensation in California is a criminal offense punishable by a fine of up to $10,000, up to one year in jail or both.
What Workers’ Comp Covers and Doesn't Cover
Workers' comp covers job-related injuries and illnesses but has important limitations.
What it covers:
- Medical expenses for work-related injuries and illnesses
- Lost wages (typically 60% to 70% of regular pay)
- Rehabilitation and physical therapy costs
- Disability benefits for permanent injuries
- Death benefits for families of workers killed on the job
- Legal defense if employee sues despite receiving benefits
What it doesn't cover:
- Injuries from intoxication or illegal drug use
- Self-inflicted injuries
- Injuries during commute (unless traveling for work)
- Non-work-related illnesses
- Independent contractors (in most cases)
- Emotional distress without physical injury
Workers' Comp Requirements
State laws determine when you must have workers' comp insurance.
- Most states: Required with one or more employees
- Georgia: Required with three or more employees
- Texas: Not required but strongly recommended
- Penalties: Fines up to $10,000+ and potential criminal charges in some states
Who Needs It and How Much to Buy?
Almost all businesses with employees need workers' comp insurance.
Who needs it:
- Any business with employees (required in most states)
- High-risk industries: construction, manufacturing, restaurants
- Even low-risk businesses benefit from protection
Workers’ Comp Pricing and Cost Factors
Here are typical costs:
- Low-risk businesses: $0.50 to $2 per $100 of payroll
- Medium-risk: $2 to $8 per $100 of payroll
- High-risk construction: $8 to $20+ per $100 of payroll
- Example: $50,000 annual payroll at $2.50 rate = $1,250 annually
What affects pricing:
- Industry classification codes
- Claims history and experience modification (EMR)
- Payroll amount
- State location (rates vary considerably)
- Safety programs and training
- Return-to-work programs
Read more: Best Workers' Comp Companies and Cheapest Policies
Workers’ Comp Claims Examples
Restaurant worker: Cook burns hand on hot grill, requiring emergency room visit and two weeks off work. Workers' comp pays $3,200 in medical bills plus $1,800 in lost wages.
Construction accident: Roofer falls from a ladder, breaking their leg and requiring surgery. Total medical costs reach $35,000, plus six months of disability payments totaling $18,000. Workers' comp covers all costs.
Office injury: Administrative assistant develops carpal tunnel syndrome from repetitive computer work. Workers' comp covers $8,500 in treatment costs and ergonomic workplace modifications.
3. Professional Liability Insurance
Professional liability insurance, or errors and omissions (E&O), protects businesses against negligence claims, mistakes or inadequate work. It's especially important for service-based industries like consulting, accounting and health care. These policies cover legal defense costs and any settlements or judgments up to the policy limits.
What Professional Liability Covers and Exclusions
Professional liability covers mistakes in your services, not physical injuries or property damage.
What it covers:
- Professional negligence claims
- Errors in services or advice provided
- Failure to deliver services as promised
- Breach of professional duty
What it doesn't cover:
- Bodily injury or property damage (general liability covers this)
- Intentional wrongdoing or criminal acts
- Employment practices violations
- Cyber attacks and data breaches
- Contractual disputes unrelated to professional services
- Known issues existing before policy starts
Requirements
Professional liability isn't legally required in most states, but can be required in these situations:
- Required for certain licensed professionals (doctors, lawyers, architects)
- Some states require it for insurance agents, financial advisors and real estate agents
- Many clients require proof of coverage before signing contracts
- Professional associations may require coverage
- Government contracts often require professional liability coverage for professional services
Who Needs It and How Much to Buy?
Who needs it:
- Consultants and advisors (business, finance, IT)
- Health care professionals
- Real estate agents and brokers
- Accountants and tax preparers
- Architects and engineers
- Technology companies
- Marketing and advertising agencies
Coverage amounts:
- Small consultancies: $1 to $2 million per claim
- Health care professionals: $1 to $6 million per claim
- Large firms: $5 to $10 million+ per claim
- Consider aggregate limits: Annual maximum payouts
Pricing and Cost Factors
Your profession and the services you provide are the main cost drivers.
Typical annual costs:
- Low-risk consultants: $500 to $2,000
- IT professionals: $1,000 to $5,000
- Health care providers: $3,000 to $15,000+
- Varies by profession and coverage limits
What affects pricing:
- Type of professional services provided
- Annual revenue and business size
- Coverage limits selected
- Claims history
- Years in business
Claims Examples
Here are real-world examples that professional liability covers:
IT professional: Software bugs in custom applications cause the client's three-day system downtime, resulting in $75,000 in lost revenue. Professional liability covers the claim.
Accountant: Tax preparation error costs the client $25,000 in penalties and interest. E&O insurance pays the claim plus legal fees for defending against a malpractice lawsuit.
Marketing agency: A campaign inadvertently used a copyrighted image, resulting in a $30,000 lawsuit. Professional liability covers legal costs and settlement.
4. Commercial Auto Insurance
Commercial auto insurance covers vehicles used for business purposes, protecting against accidents, theft and damage. It provides higher liability limits than personal auto insurance and covers business-specific vehicle uses.
What Commercial Auto Covers and Excludes
Commercial auto insurance provides higher liability limits than personal policies but excludes personal use.
What it covers:
- Injuries you cause to other people
- Damage to your vehicle from accidents or theft
- Medical bills for anyone hurt in your vehicle
- Protection when hit by drivers without insurance
What it doesn't cover:
- Using company vehicles for personal errands
- Participating in races or competitions
- Damage you cause on purpose
- Regular upkeep like oil changes
Requirements and Who Needs to Buy
You need commercial auto insurance if your business owns vehicles or if you regularly use your personal car for work. Most states require it by law.
Who needs it:
- Delivery and service companies
- Sales teams with company cars
- Any business owning vehicles
Coverage amounts:
- Follow state minimum liability requirements
- Consider 100/300/100 or more
Commercial Auto Pricing and Cost Factors
Vehicle type, business use and driver records affect your commercial auto rates.
Typical annual costs:
- Light commercial vehicles: $1,200 to $3,000
- Delivery trucks: $2,500 to $5,000
- Fleet pricing varies by size
Cost factors:
- Vehicle type and value
- Business use type
- Driver records
- Location and mileage
5. Commercial Property Insurance
This coverage protects your business's physical assets from damage or theft. Commercial property insurance covers your building, equipment and inventory.
What Commercial Property Covers and Doesn't
Commercial property insurance covers most disasters but excludes floods and earthquakes.
Covers: Buildings, equipment, inventory and debris cleanup
Excludes: Floods, earthquakes, normal wear and pest damage
Requirements
Lenders typically require this coverage if you have a business loan or mortgage. Most lenders and landlords require it, not state law.
Commercial Property Pricing and Cost Factors
Your property value, location and building type determine your premium.
Typical costs:
- Office space: $1 to $3 per $100 of property value
- Retail: $2 to $4 per $100 of property value
- Restaurants: $3 to $6 per $100 of property value
Cost factors:
- Property value and age
- Location and weather risks
- Security systems
- Claims history
Less Common Business Insurance Types
These are business insurance types that some businesses will need but are less often purchased.
6. Business Income Insurance
Business interruption insurance covers lost income when disasters force you to close temporarily. It pays for ongoing expenses like rent, payroll and utilities while you recover from covered property damage.
This coverage helps businesses that can't operate after fires, storms or other disasters damage their location. For example, if fire damages your leased building, business interruption insurance covers the cost of a temporary location plus your lost income during the closure.
The coverage only applies when physical property damage forces you to close. It won't cover closures from pandemics, utility outages or other events without property damage.
7. Product Liability Insurance
Product liability insurance covers lawsuits when your products injure customers or damage their property. It protects manufacturers, retailers and distributors from claims involving defective products.
If a product you sell injures someone due to a defect, this coverage pays for legal defense, medical expenses and settlements. For example, if your electronics cause a house fire or your food product makes customers sick, product liability insurance handles the resulting lawsuits.
Premiums vary based on your products' risk level and sales volume. Higher-risk items like medical devices, food products or children's toys cost more to insure than low-risk products like office supplies.
8. Commercial Umbrella Insurance
Commercial umbrella insurance adds extra liability coverage above your primary policy limits. It kicks in when claims exceed your general liability, commercial auto or other underlying coverage limits.
This coverage protects businesses from catastrophic lawsuits that surpass standard policy limits. If a customer suffers a severe injury at your business and medical costs exceed your $1 million general liability limit, umbrella insurance covers the excess amount.
Umbrella policies are cost-effective ways to get higher liability protection. They're especially valuable for businesses with substantial assets or high lawsuit risk.
9. Data Breach and Cyber Insurance
Cyber liability insurance covers costs from data breaches, ransomware attacks and other cyber threats. It pays for legal fees, customer notification, credit monitoring and system recovery after hackers compromise your data.
Any business storing customer information needs this protection. If criminals steal your customers' personal data, cyber insurance covers the response costs, which can easily reach $100,000 or more for notification, legal defense and system restoration.
The coverage also includes business interruption payments when cyber attacks shut down your operations. E-commerce businesses, health care providers and professional services face the highest risk and should prioritize this coverage.
MONEYGEEK EXPERT TIP
Some errors and omissions (E&O) or professional liability policies include data breach coverage, as they often complement each other. Review your policy to see if you’re protected, or ask your provider for more details.
10. Key Person Insurance
Key person insurance pays your business if a critical employee dies or becomes disabled. It covers lost income and the costs of finding and training a replacement while your business recovers from losing someone essential.
This coverage works best for small businesses that depend heavily on one or two people. If your restaurant's head chef dies or your company's top salesperson becomes disabled, key person insurance provides cash to keep operations running during the transition.
Coverage amounts should reflect the person's contribution to your business income. Most policies pay between $100,000 and $1 million, depending on the employee's role and your company's revenue.
Business Owner's Policy Combines Three Policies
General liability: Covers bodily injury and property damage claims against the business
Commercial property: Protects the business location and inventory
Business income: Replaces lost income from an unexpected event
How to Choose the Right Type of Business Insurance
Before you get business insurance, determine what type to purchase based on the risks and liabilities associated with your business and industry.
- Assess your risks: Identify potential risks specific to your business and industry. Consider factors like business size, location and operational activities to help you determine the types and levels of coverage needed.
- Prioritize legally required insurance: Workers' compensation and commercial auto insurance are legally required in most states, but the limits can vary. Find out how much liability insurance you legally need for your business, then evaluate if you need more based on your industry and business.
- Consult with an insurance agent: Seek advice from a professional to understand the best coverage options for your business needs. An agent can help tailor a policy to fit your budget and risk profile, ensuring you don't overpay for your premium.
- Compare quotes: Obtain multiple quotes to compare coverage options and prices. Look for policies that offer the best value rather than the cheapest price.
- Review policy exclusions: Carefully read the exclusions in each policy to ensure you understand what's not covered. This will help avoid surprises during the claims process.
- Don't choose the cheapest coverage: Minimal coverage might seem affordable, but it can leave you paying out of pocket for large claims. It's better to ensure your business has adequate protection.
Use these tips as a starting point to determine what coverage you need and how much to buy to protect your business's future.
Business Insurance Types: FAQ
To provide you with financial insights, we answered some questions that frequently come up when learning about the most common types of business insurance.
What is the most important type of business insurance?
General liability insurance is the most essential coverage for most businesses because it protects against the most common lawsuits. If you have employees, workers' compensation is also legally required in most states. Professional liability is important for service-based businesses.
Can you bundle different types of business insurance?
Many insurers offer business owner's policies (BOPs) that combine general liability and commercial property insurance at a discount. You can also bundle other coverages like commercial auto and cyber liability with the same carrier for potential savings.
What factors affect business insurance premiums?
Business type, size, location, claims history and industry-specific risks determine your premiums. Contact multiple insurers for quotes to find the best rates for your business.
Do I need business insurance if I work from home?
Yes, your homeowner's or renter's insurance won't cover business activities or equipment. You'll need at least general liability insurance, and possibly professional liability if you provide services to clients.
When do I need workers' compensation insurance?
Most states require workers' compensation as soon as you hire your first employee, though some states have different thresholds. Even if not required, it protects you from employee injury lawsuits and covers their medical expenses.
What happens if I don't have business insurance?
You'll pay all costs out of pocket if someone sues your business or disasters damage your property. This can bankrupt small businesses, particularly since legal defense alone can cost tens of thousands of dollars, even for frivolous lawsuits.
About Mark Fitzpatrick

Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. With over five years of experience analyzing the insurance market, he conducts original research and creates tailored content for all types of buyers. His insights have been featured in publications like CNBC, NBC News and Mashable.
Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!
Passionate about economics and insurance, he aims to promote transparency in financial topics and empower others to make confident money decisions.
sources
- State of California Department of Industrial Relations. "Answers to Frequently Asked Questions About Workers' Compensation for Employers." Accessed July 4, 2025.