Business Insurance: A Comprehensive Guide (2025)
Protect your company from financial risks with the right coverage. Compare policies, costs, and get quotes for LLCs, startups, and small businesses.
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Business insurance helps protect your business against the financial fallout of accidents, lawsuits, property damage, and other unforeseen events.
Even the smallest LLC or sole proprietorship faces legal and financial risks that a business insurance policy can help offset. The right coverage can safeguard your assets and keep your business running smoothly.
Here's what you need to know about business insurance, including the types of coverage available and how to buy a policy.
Table of Contents
- Quick Facts
- What is Business Insurance?
- Why Small Businesses Need Insurance
- Types of Business Insurance Policies
- What Business Insurance Doesn't Cover
- How Much Does Business Insurance Cost?
- Where to Get Business Insurance
- How to Buy Business Insurance
- How to Choose the Best Policy
- Business Insurance FAQs
Quick Facts
- Business insurance isn't one specific policy; it encompasses many types of coverage to protect against different risks.
- Some policies — like workers' compensation — may be required by law.
- You can often get coverage the same day, especially through online insurers.
What is Business Insurance?
Business insurance is an umbrella term for insurance policies that protect your company against financial losses due to unexpected events. These policies cover things like property damage, lawsuits, employee injuries, lost income, data breaches, and more. The goal is to help businesses stay afloat and recover after disruptions — whether it's a fire, a customer injury, or a cyberattack.
Businesses often purchase a mix of policies to ensure they're fully prepared for unexpected losses. Depending on the insurance company, you may have access to commercial auto insurance, general liability, commercial property, workers' compensation, business interruption insurance, and more.
The right policy for you depends on the size of your business, your industry, and risk exposure. A freelance writer, for example, may need professional liability insurance, while an Uber driver will need rideshare insurance.
Why Small Businesses Need Business Insurance
Your business's legal structure may help protect your personal assets from lawsuits or legal claims, but it won't do the same for your business assets and income.[1] Small-business insurance protects your business from unexpected financial losses that could threaten operations or even force you to close.
Business insurance may also be a requirement in some cases. For example, landlords often require businesses to purchase renters insurance when signing a lease, and most states require business owners to carry workers' compensation insurance.
Beyond practical uses, business insurance policies also provide valuable peace of mind. The policy can help limit your out-of-pocket costs and keep the business running after a covered peril.
Need Help Choosing Coverage?
Our insurance experts can help you find the right policy for your business needs and budget.
Speak With an ExpertTypes of Business Insurance Policies and What They Cover
You can typically mix and match business insurance policies to fit your needs. Common business insurance policies include:
Commercial General Liability Insurance
Protects your business against financial losses as a result of an injury, property damage, medical expenses, libel, slander, lawsuit defense, court judgments, or settlement bonds.
Professional Liability Insurance
Protects you from financial losses arising from situations such as fraud, malpractice, conflict of interest, errors, or negligence.
Business Owners Policy (BOP)
Bundles several types of coverage into one policy, which simplifies the insurance-buying process and typically helps you save money.
Commercial Property Insurance
Protects your business's physical assets — such as buildings, equipment, furniture, and inventory — if a covered peril damages those assets.
Workers' Compensation Insurance
Pays for an employee's medical costs and lost wages if they're injured at work.
Commercial Auto Insurance
Protects vehicles that you use for commercial purposes.[3] Nearly every state requires vehicle-owning businesses to carry coverage.
Cyber Liability Insurance
Protects your business against financial losses resulting from a cyberattack.
Business Interruption Insurance
Covers lost revenue and pays for extra expenses if business operations are interrupted.
Commercial Umbrella Insurance
Extends your liability limits to provide extra protection when your primary policy limits are exceeded.
Understanding the different types of insurance available is crucial for making informed decisions about your business protection.
What Business Insurance Doesn't Cover
Business insurance helps cover many risks, but it doesn't cover everything. Here are a few common exclusions to watch out for:
- Intentional acts: If a business owner or employee causes damage on purpose, insurance won't pay for it.
- Employee fraud or theft: Most standard policies exclude losses from internal theft unless you add crime coverage.
- Wear and tear: Business insurance typically doesn't cover damage from normal aging or poor maintenance.
- Contract disputes: If a client claims you didn't fulfill the terms of your contract, that's a legal matter, not an insurance claim.
- Nuclear events or war: Business policies almost always exclude extreme events, such as war or radiation-related damage.
Good to Know
Policy endorsements and exclusions can vary, so it's smart to read the fine print. If you're unsure what your policy covers, talk to your agent or broker before something goes wrong.
How Much Does Business Insurance Cost?
The cost of small business insurance depends on factors like the policies you need, where the business is, your industry risk level, your chosen policy limits and deductibles, and the number of employees you have.
Most small businesses need at least a business owners policy, which has commercial liability and property coverage. These policies cost less than $100 per month, on average.
Understanding what insurance is and how it works can help you make better decisions about coverage levels and costs.
Where to Get Business Insurance
You have three main options for where to buy business insurance:
Online Marketplaces
Comparing quotes from multiple insurers in one place helps streamline the process. Once you make a decision, you'll buy the policy through the insurance company.
Direct-to-Consumer Insurers
You can also take a DIY approach and request quotes directly from insurance companies.
Independent Brokers
If you're unsure where to start or have complex needs, a broker can guide you through the process and find you more specialized coverage.
How to Buy Business Insurance
You may be able to buy a business insurance policy in about a day if you have your information ready. Here are the steps you'll take:
- Consider your risks. What kind of accidents, natural disasters, lawsuits, and other hazards could damage your business?
- Look for legal requirements. Check your state's insurance website to see which insurance policies are required.
- List your assets, payroll, and revenue. This helps determine how much coverage you need.
- Gather your business's prior claims history. Insurers often request your "loss run report" to assess risk.
- Identify key roles. List people, operations, and equipment you can't operate without.
- Get online quotes. Gather quotes from at least three insurance companies.
- Talk to a broker for specialty coverage. A broker can find policies for niche industries.
- Evaluate the policy. Look through coverage limits, deductibles, and exclusions.
- Purchase and request a certificate of insurance. You may need this for contracts or leases.
- Set renewal and audit reminders. Annual reviews ensure your coverage still fits your business.
How to Choose the Best Business Insurance Policy
The cheapest policy isn't always the best one — especially if it leaves you exposed to your biggest risks. Focus on coverage that fits your business, not just your budget.
You can consider:
- The top risks in your industry and location
- Required coverage for contracts or compliance
- Your business assets, revenue, and payroll
- Policy limits and deductibles you can afford
- Exclusions that could leave you vulnerable
- The insurer's reputation for claims handling
Choosing the right policy means balancing cost with the protection your business truly needs.
Business Insurance FAQs
If you still have more questions surrounding business insurance, the following answers may help.
In some cases, yes, business insurance is legally required. Small businesses with employees usually have state-specific coverage requirements, like workers' compensation, while businesses that use company vehicles must buy commercial auto insurance. Your needs depend on your location, your industry, and how your business operates.
It depends on your policy. Many homeowners or renters insurance policies offer limited coverage for business equipment — often capped at $2,500 or less for items used at home. If you run a business from home and have expensive gear, you may need home-based business insurance to make sure you fully protect everything.
Small businesses typically start with a business owners policy, which includes commercial general liability and property damage insurance. You may buy other types of business insurance policies or customize your BOP to fit your needs. The Small Business Administration (SBA) recommends buying business insurance for losses you wouldn't be able to pay for on your own.
LLC insurance usually refers to a business owners policy, which combines business property and liability insurance with optional add-ons, such as commercial auto insurance and workers' compensation insurance. These policies typically cost less than $100 per month before the add-ons.
Business insurance is always worth the expense if it's required by law or a business associate, such as a landlord, client, or licensing organization. Even when not required, these policies can be worthwhile because they help protect you against financial losses that could disrupt operations.
For most startups, basic business insurance like general liability costs $400 to $750 per year, while a bundled business owners policy typically runs $600 to $1,200 annually. Specialized coverage — such as professional liability or cyber insurance — can add several hundred to a few thousand dollars more, depending on your industry and risks.
If you're also considering personal protection, learn more about why you need life insurance for comprehensive financial planning.
Understanding Insurance Basics
To make the most informed decisions about your business insurance, it helps to understand fundamental insurance concepts. Learn more about what is life insurance and how different insurance products work to protect various aspects of your financial life.
