Common kinds of business insurance
The SBA’s get business insurance (opens in a new tab) guide describes the main types. In general terms:
| Coverage | What it generally covers |
|---|---|
| General liability | Claims that your business caused bodily injury or property damage to someone else |
| Professional liability (errors and omissions) | Claims that your services or advice caused a client a loss |
| Commercial property | Your buildings, equipment, inventory and furniture against covered events such as fire or theft |
| Business owner’s policy (BOP) | A bundle of general liability and commercial property, often with business interruption |
| Workers’ compensation | Medical costs and lost wages for employees injured on the job |
| Commercial auto | Vehicles used for business |
| Cyber liability | Costs from data breaches and cyberattacks |
| Business interruption | Lost income and ongoing expenses while a covered event keeps you closed |
Every policy has its own definitions, exclusions and limits. Reading what is excluded matters as much as what is covered.
What may be required
- Workers’ compensation: most states require it once you have employees. Rules differ by state, so check with your state.
- Unemployment insurance: employers generally pay state unemployment taxes; see our first employee guide.
- Commercial auto: states require liability coverage on vehicles, and business vehicles generally need a commercial policy.
- Contracts: landlords, clients and government agencies often require certain coverage before you start.
- Licenses: some trades and professions must carry specific coverage or bonds.
What lenders often require
When a loan or lease is secured by equipment, vehicles or property, lenders commonly require property or hazard insurance on that collateral and ask to be listed as loss payee, so they are paid if it is destroyed. Some also ask for liability coverage. If you are looking at equipment financing, ask about insurance requirements early. Our loan-ready guide covers other documents lenders often request.
Surety bonds for contractors
A surety bond is not insurance for you; it is a promise to the project owner that a contractor will finish the work and pay subcontractors and suppliers. Public projects and many private contracts require them. The SBA runs a surety bond program (opens in a new tab) that backs bonds for eligible small businesses through participating surety companies.
An LLC is not insurance
Forming an LLC or corporation can separate business debts from your personal assets, but it does not pay for a lawsuit, a fire or an injury. The business itself can still lose everything it owns. Structure and insurance do different jobs; see our business formation guide.
Buying coverage
- List your risks: customers on site, advice you give, equipment, vehicles, employees, customer data.
- Get quotes from more than one licensed agent or insurer, comparing the same limits and deductibles.
- Ask what is excluded and whether you need additional coverage for those gaps.
- Review coverage each year and whenever you hire, add a location or buy equipment.
Check the license
Insurance agents and companies are licensed by your state’s insurance department. You can confirm a license with the department before you buy; the National Association of Insurance Commissioners keeps a directory of state departments.
Free counseling on managing risk is available through SBA resource partners (opens in a new tab).
Red flags
- Relying on personal auto or homeowners policies for business activity; many exclude it.
- Sellers you cannot find in your state insurance department’s license lookup.
- Quotes that look cheap because the limits or coverage are much narrower.
Frequently asked questions
What insurance does a small business need?
It depends on your industry, location, employees and assets. Many businesses start by looking at general liability and property coverage, and some coverage, such as workers’ compensation, may be required by law.
Is workers’ comp required?
Most states require workers’ compensation insurance once a business has employees, with rules that vary by state. Your state’s workers’ compensation agency can explain the requirement.
What is a BOP?
A business owner’s policy bundles general liability and commercial property coverage, often with business interruption coverage. Insurers typically offer them to smaller businesses.
If I have an LLC, do I still need insurance?
An LLC can help separate business debts from personal assets, but it does not pay for claims or losses. The business itself can still be sued or lose its property, which is what insurance is for.