Last updated: November 29th, 2022
Reviewed by
Rebecca Thrift
Licensed Insurance Agent
Many kinds of insurance are available, and the ones a specific business needs depends on a variety of factors.
Table of Contents
There is no one-size-fits-all set of insurance policies that works for all businesses. The kind of business largely determines insurance requirements. The table below summarizes the basic types of insurance.
What insurance you need to start a business varies. However, most startups with a physical location will benefit from business liability and commercial property insurance. Business interruption insurance may also be helpful, as startups may not be able to survive even a short closure.
A business owner’s policy or BOP is often a good choice for startups. This type of insurance combines general liability, commercial property, and business continuation and generally costs less than purchasing the policies individually.
Entrepreneurs should check federal, state, and local laws and regulations governing their industry to determine if any other types of insurance are mandatory. A state’s Office of the Secretary of State is a good source of advice regarding insurance requirements.
It’s a good idea for all small businesses to have insurance. Under federal laws, all businesses with at least one employee must have worker’s compensation, disability, and unemployment insurance coverage.
Other types of business insurance can greatly reduce the risk of your business facing financial hardship or bankruptcy. Although business insurance is an ongoing expense, the cost is generally much lower than what you would pay in the event of a natural disaster or a lawsuit.
A business’s industry determines what types of insurance it needs. In some industries, a particular type of insurance may be necessary to legally operate. For example, states generally require that medical and mental health professionals have professional liability insurance to obtain and maintain a license.
The types of risks a business faces also vary by industry. For example, a bakery is likely to need general liability insurance and commercial property insurance. An accounting firm where employees all work remotely may require professional liability, errors and omissions, and cyber liability insurance. A landscaping company may require general liability, commercial property insurance, and commercial auto insurance.
To choose the right insurance for your small business, consider what your business owns and what it would cost to replace these items. Then, consider what risks your business faces, such as:
Once you’ve assessed your needs, contact multiple insurance companies. Listen to recommendations and obtain quotes. Then, compare the offers. When comparing offers, consider:
Because business needs can change over time, reevaluate your insurance needs and shop for better rates at least once per year.
Brian is the founder and CEO of Insurist and carries Life, Health, and Property & Casualty licenses in all 50 U.S. states. Since 2013, Brian has been a member of Million Dollar Round Table, a designation for the top 1% of financial advisors worldwide. Brian has been featured in Yahoo! Finance, Money.com, Entrepreneur.com, Life Happens, Forbes, MSN, and Good Financial Cents. Brian’s goal is to show customers the best products, the quickest answers to their questions, and provide expert advice.
I've worked for Safeco and Liberty Mutual as a sales agent and claims adjuster for the last five years. My claims experience is primarily auto insurance, but I am licensed to sell auto and property insurance (homeowners, condo, renters, long-term renter, etc) currently.
