All businesses can benefit from some kind of insurance. It can help protect your assets in the event of an accident, natural disaster or lawsuit.
Sometimes you have to get business insurance because of a law or contract. If you have employees, your state laws might require you to have workers' compensation insurance. And a business partner might ask to see your certificate of insurance before working with you.
Here's how to figure out what kind of business insurance you need and how much.
Does my business need insurance?
Nearly every business needs some kind of insurance. You should get coverage any of the following apply to your company:
- You employ other people. Some states require workers’ compensation for businesses with salaried employees only. Others require coverage for contractors as well. Check the laws in your state here.
- Your business has a physical location.
- You have costly equipment or a backlog of inventory.
- You provide a physical product.
- Another business hired you or your business to work for them.
- You sell goods or services in a space owned by someone else.
- You provide services or products for one-time events such as weddings or conferences.
- You serve clients for a fee.
- You use a car or truck for work.
- Your business keeps sensitive customer data a hacker might value.
- You want to apply for a business loan or seek similar financial action.
It's hard to not check one or more of those boxes.
What business insurance do you need?
Risks and laws dictate a business's insurance needs.
For instance, a contractor might want to ensure you have liability coverage to work with you. States may also require workers' comp insurance if you have employees. (You might need it even if you don't employe anyone.)
The quiz below can help you assess some common needs:
All businesses should have one of the following common types of business insurance:
- General liability insurance. This coverage can pay out if someone sues your business for causing them bodily injury or damaging their possessions or reputation (like slander or libel). NerdWallet recommends all businesses carry general liability insurance since legal defense costs can add up fast.
- Commercial property insurance. This coverage protects buildings, equipment and other items that help you run your business. If you need property insurance, NerdWallet recommends a business owner's policy instead. It includes property insurance, general liability insurance and business interruption insurance.
Save up to 30% on business insurance
NerdWallet Small Business helps you get real-time quotes from 30+ insurers, and instant access to your Certificate of Insurance (COI) through our partner, Coverdash.
Additional types of coverage
Beyond standard business insurance, what kind of coverage you need depends on what your company does.
- If your business owns or operates vehicles, you need commercial auto insurance.
- Get professional liability insurance if you serve clients for a fee. For example: Architects, accountants and real estate agents should have this coverage.
- Get cyber insurance if you store sensitive customer data digitally, since small businesses are especially vulnerable to hacks.
There are at least a dozen other types of business insurance that protect against different, more specific risks. Use our guide below to find out what else you might need.
» EXPLORE MORE: All the types of business insurance
What happens if you don't have business insurance?
If you operate without business insurance, you're "self-insured." That means you will have to pay out of pocket to cover the full cost of expenses like:
- Hiring lawyers to defend your business in court.
- Paying judgements or settlements, if they're ordered.
- Rebuilding after a fire or disaster.
- Replacing stolen equipment or goods.
- Notifying customers of a data breach.
If your business is brand new, you may be comfortable self-insuring against those risks. You just don't have that much to lose. But as your business grows, you'll have more assets at risk.
Self-insuring is cheaper on a day-to-day basis since you don't pay premiums. But it could end up being a lot more expensive in the long run.
If you're legally required to have workers' comp coverage and don't, you could face fines, lawsuits and even criminal charges.
Why does another business need you to have insurance?
When businesses hire you or let you use their space, they take on risk. You having insurance protects them. It helps ensure they won't be on the hook for claims that arise from your work.
For example:
- Construction contractors often require their subcontractors to have their own general liability insurance.
- A craft fair or farmers market might require vendors to carry insurance before they can vend in the shared space.
- An apartment building might ask to see a moving company's certificate of insurance before they can use the freight elevator.
A certificate of liability insurance proves that you have coverage. Once you buy a policy, you can access your COI for free.
How do you get business insurance?
Once you’ve determined that your business does need insurance, the next step is finding the right coverage and buying a policy. Most small businesses can get coverage online in just a few minutes.
Follow these steps:
- Figure out what coverage you're required to have. Look at your state's laws around workers' comp and make a note of anything your business partners have asked for.
- Identify the other policies you need. Review your company's risks to decide whether you need professional liability insurance, cyber insurance or other policies.
- Get an agent, if you want one. An insurance agent can help explain what policies you need and exactly what they protect against. Getting coverage will take longer, though.
- Get several quotes. You can get insurance quotes from online business insurance companies. If you want several at once, use an online brokerage, like Coverdash or CoverWallet.
- Choose the best option. It's easy to compare premium costs. But make sure you also look at policy deductibles and limits. A high-deductible policy will probably have a lower premium. But if you file a claim, you'll have to pay more out of pocket.
Save up to 30% on business insurance
NerdWallet Small Business helps you get real-time quotes from 30+ insurers, and instant access to your Certificate of Insurance (COI) through our partner, Coverdash.
