Every business needs basic business insurance, like for general liability and workers’ compensation. State laws and contracts require it. But you might want other types of coverage to protect your business against financial risks, from lawsuits to natural disasters.
Here are the most common types of business insurance, what they cover and how to figure out which your business needs.
What does business insurance cover?
Business insurance helps cover the costs of unexpected big expenses. Issues like litigations, break-ins and car crashes can drain a company's finances. Insurance can protect that from happening.
Business insurance can pay out to cover things like:
- Legal fees, whether or not your business is at fault.
- Judgements or settlements, if a court finds you liable.
- Replacements for damaged or stolen property.
- Building repairs after a fire or bad weather.
- Medical bills for someone injured at your business.
- Customer notification after a data breach.
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What are the most common types of business insurance?
Many companies need the following business insurance coverage.
| Type of insurance | What it covers | Who needs it |
|---|---|---|
| Lawsuits filed by customers or other people outside your business. For example: “slip-and-fall” lawsuits or accusations that you ruined someone else’s reputation. | All businesses should have this coverage. Landlords and businesses hiring you often require it. | |
| Repairing or replacing equipment, inventory or your building in case of theft, fire or most natural disasters. | Any business that owns or rents space or has physical assets. | |
| Medical payments and lost wages if you or an employee is injured on the job. | States regulate workers’ comp and each state has slightly different requirements. Check yours here. | |
| Repairing or replacing a vehicle that gets damaged while on the job. Also, any lawsuits that result from car crashes. | All businesses that own or rent vehicles. | |
| Lawsuits filed by your clients. For example: accusations that you made an error or did a bad job and that cost your client money. | Any business that serves clients for a fee. | |
| Notifying customers or clients that you had a data breach, recovering lost data, paying regulatory fines and settling related lawsuits. | All businesses that keep personal customer data on file or that want to protect sensitive business data. |
How to get common types of business insurance
Shopping online is the best way to get common types of business insurance. These policies are quite standardized, and nearly all insurance companies sell them.
It should only take a few minutes to get an online business insurance quote for these policies:
- General liability insurance.
- Professional liability insurance.
- Business owner’s policies, which include general liability insurance along with property insurance.
- Commercial auto insurance.
- Workers’ comp in most states.
- Cyber insurance, unless your business is very complex.
Always get several business insurance quotes. If you use a comparison site like Coverdash or Simply Business, you can see a few quotes at the same time. Or you can visit individual insurer websites and compare prices and coverage that way.
» MORE: How to get business insurance
Should you get a business owner’s policy?
If your business needs general liability insurance and property coverage, get a business owner’s policy. This package provides both types of insurance.
Most also include business interruption insurance, which can help make up for lost revenue while you recover from property damage. You typically can’t buy business interruption insurance on its own.
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.
What other types of business insurance are there?
Lots of businesses face risks that standard policies don’t cover. Specialized business insurance is generally more important for larger companies. But small ones operating in certain fields, like construction, might need them too.
| Type of insurance | What it covers | Who needs it |
|---|---|---|
| Replacing a key employee and making up for lost income while you search. | Businesses with a founder or employee whose knowledge is essential to the business. | |
| Lawsuits filed by your employees. For example: allegations of discrimination or wrongful termination. | Businesses with employees. | |
| Lawsuits that say a product you sell caused harm. | Businesses that sell physical products. | |
| Lawsuits related to things intoxicated people did at your business. | Businesses that serve alcohol on site, especially bars and restaurants. | |
| Lawsuits against individual people associated with your business, like your Board of Directors. | Businesses seeking professional investment or forming a board. Many potential directors will insist that you have coverage. | |
| Legal fees or settlement costs when they exceed the limits on your other liability insurance policies. | Medium to large businesses that want an extra layer of protection against lawsuits. | |
| Repairing or replacing construction materials if they’re damaged during the project. | Construction companies while a project is underway. | |
| Repairing or replacing tools, equipment or inventory that are lost or damaged in transit or while stored offsite, like in a warehouse. | Businesses that ship lots of things or have storage in other locations. | |
| Equipment breakdown insurance | Repair costs when a piece of equipment breaks. (Property insurance usually excludes equipment breakage unless it's the result of a fire or disaster.) | Businesses with highly specialized or expensive equipment. |
| These bonds pay out if you fail to complete a contract. | Companies with certain public contracts, especially in construction. |
How to get specialized business insurance coverage
We’d recommend working with an independent insurance agent if your business needs specialized coverage. They can help you shop for the following:
- Directors and officers insurance.
- Key person insurance.
- Employment practices liability insurance.
- Builders’ risk insurance.
- Inland marine insurance.
- Umbrella insurance.
Not all insurance companies sell such policies. An agent will know which ones do, and they should be able to get multiple quotes.
They can also help you understand any differences between the policies and choose the best fit. For instance, you can get some of these coverage types as “endorsements” on other policies, like BOPs and general liability insurance. Endorsements provide some coverage, but not as much as you’d get from buying a full policy.
An endorsement might be enough for certain businesses. For a diner that serves brunch cocktails on holidays, a liquor liability endorsement on a BOP might be sufficient. But a sports bar where most patrons order alcohol should buy a dedicated liquor liability insurance policy.
