Is Small Business Insurance Required?
Although most types of business insurance coverage is optional, some states do require certain policies. For example, no matter how many employees you have, workers’ compensation insurance is usually required. This coverage provides important benefits to your employees if they suffer work-related injuries or illnesses. To learn more about small business insurance
requirements in your area, get a quote
What Type of Insurance Is Required for a Small Business?
Many business owners wonder what coverage they need. We can help if you’ve been trying to figure out this common question: “What insurance do I need for a small business?
” While the answers vary depending on where you live and what you do, most states require certain coverage, like:
- General liability insurance
- Workers’ compensation insurance
- Commercial auto insurance
- Professional liability insurance
To make sure your business is covered, you’ll want to see what your state requires. Learn more by getting a quote
Workers' Compensation Insurance
- Medical care
- Lost wages if they take time off to recover
- Disability benefits
- Funeral costs
Keep in mind that the number of employees at your company and the risks they face on-the-job impact how much coverage you’ll need.
Commercial Auto Insurance
Commercial auto insurance
can help cover the costs of an auto accident if you or your employee is at fault for a collision. You should consider this coverage if your business owns, leases or rents vehicles. Some factors that can influence how much coverage you need depend on your:
- Number of employees
- Type of vehicle used on the job
- State laws
Professional Liability Insurance
Professional liability insurance
, also known as errors and omissions insurance, can help cover mistakes in your products or professional services. It can help cover claims of:
- Inaccurate advice
Some clients may require you to carry this coverage before they’ll work with you. It’s important to have if you offer advice directly to your customers. Without this policy, you’ll have to pay your legal defense costs out of pocket. Some factors that can impact how much coverage you’ll need include your type of business and the size of your operation. For instance, law firms may need more professional liability insurance than clothing stores because of the legal advice they provide.
Optional Small Business Insurance Coverage
While there are many types of coverage that are required, there are also some optional policies that may be a part of a lease, client contract or just necessary for full protection. These can include:
- Cyber liability insurance for coverage against data breaches.
- Business Owners’ Policy (BOPs), which bundle business liability and property coverage into one policy. This can help you save money.
- Commercial flood insurance if your business is in an area with frequent hurricanes, rain or snow melt.
Commercial Property Insurance
Commercial property insurance
can help cover your business property. It can help pay to repair or replace damages in your business from fire, theft or other covered losses. This coverage can help protect your:
- Personal property
Some factors that could impact how much coverage you need include your business’ location and industry. The assets inside your building can also impact how much coverage you need. For instance, if you have expensive equipment, it may increase the amount of coverage that’s right for your business.
General Liability Insurance
General liability insurance
helps protect your business from claims of property damage and bodily injury. So, if your customer trips and needs medical treatment, this coverage can help pay for their medical bills. Some factors that can influence how much coverage you’ll need include your:
- Type of business
- Business’ size
- Type of customers
- Number of employees
Data Breach Insurance
- Notify impacted customers, patients or employees
- Hire a public relations firm
- Offer credit monitoring services to data breach victims
Some factors that can influence how much coverage you need include your industry and the number of employees you have that can access your systems. It will also depend on how much personal identifiable information (PPI) you store. For instance, accountants may need more coverage than a retail business.
Business Income Insurance
If your business is damaged from losses such as fire, theft or wind, business income insurance
can help replace your lost income. This coverage acts like business interruption insurance and is especially important if you rely on your physical location, equipment or property to make a profit. This policy can help cover your:
- Lost profits
- Mortgages or rent
The amount of coverage you need will depend on different factors, like how much revenue you typically make. To get a general idea, you can calculate your revenue and subtract your expenses. The idea is to calculate your previous income for the last 12 months so you can estimate what it will be in the future 12-month period.
Additional Small Business Insurance Coverage
What Happens If You Don't Have Small Business Insurance?
If you don’t have the right business insurance for your company, you’ll have to pay for claims filed against you out of pocket. For instance, if a customer slips in your clothing shop and needs medical attention, you’ll have to pay for this out of pocket if you don’t have general liability insurance. You may also face penalties if you don’t have the right insurance for your state.
Meet the Small Business Insurance Requirements and Get a Quote Today
Buying the right business insurance is a key part to your success as a small business owner. Learn more about the coverages you need by getting a small business insurance quote
today. We’re an insurance company that small business owners like you have trusted for over 200 years.