15 Types of Business Insurance & Who Needs Them

Thang Truong
Thang Truong
Updated on:

Small business owners know that they need insurance, but what kind? There are so many types of business insurance, how do you know what kind you need, and how much? We’re here to help you sort it out. 

Here’s a list of the most common types of business insurance:

  1. General liability insurance
  2. Professional liability insurance
  3. Commercial property insurance
  4. Business Owners Policy (BOP) Insurance
  5. Workers compensation insurance
  6. Product liability insurance
  7. Cyber liability insurance
  8. Business identity insurance
  9. Commercial auto insurance
  10. Commercial fleet insurance
  11. Commercial umbrella insurance
  12. Key person insurance
  13. Directors & Officers insurance (D&O) 
  14. Employment practices liability insurance
  15. Employers’ Liability Insurance 

Here is the summary table for the 15 popular business insurance types:

Insurance type Pays out to youPays out to others Businesses that need this insurance
General liability         XAlmost every business
Professional liability            XBusinesses that provide a service that uses expertise
Commercial property      XIf you own anything valuable related to your business
Business Owners Policy (BOP)      XAlmost all small businesses need this policy
Workers’ compensation            XYou have employees
Product liability insurance            XYou sell products
Cyber liability insurance or data breach insurance      X            X You store data online
Business identity insurance    X          XYou’re afraid your business might be impersonated
Commercial auto insurance           XYou use vehicles for business
Commercial fleet    X          XYou have more than one vehicle used in business
Commercial umbrella          XYou want an extra layer of liability insurance
Key person insurance     XYour business could not survive without you (or another key person)
Directors & Officers Insurance (D&O)  XAll startups, small businesses, & nonprofits need this, especially when you have external funding
Employment practices liability insurance           XYou have employees
Employers liability insurance XIf you don’t have workers comp insurance, you’ll need this.

We discuss the details of these business insurance types below and recommend which types of business would need them for your consideration.

General liability insurance for small businesses

Most businesses will do well to get general liability insurance. General liability protects you from lawsuits related to third-party bodily injury and third-party property damage, plus copyright infringement. 

For example, if you have customers who come to your place of business, you need this insurance. An accountant who works from home but sees clients there would need this, just in case a customer falls down the stairs and breaks a wrist. 

Read more: How General Liability Insurance Protects Your Business; how much general liability insurance costs; the best general liability insurance companies; and the cheapest general liability insurance companies.

Professional liability insurance for small businesses and professionals

Professional liability insurance protects you if you make a mistake or accidentally leave something out in the context of your job. Sometimes this is called medical malpractice insurance if the person being insured is a doctor or other healthcare worker. It can also be called errors & omissions insurance. 

Professions that rely on specialized expertise, such as doctors, lawyers, accountants, financial advisors, need this insurance. For example, if you’re a financial advisor and you recommend a stock and then the company goes bankrupt, the client can sue you for this mistake. Professional liability insurance protects you from these lawsuits. 

Related: Professional Liability Insurance: What It Covers and Who Needs It; how much does professional liability insurance for different professionals; and the best professional liability insurance companies.

Commercial property insurance for small businesses

Commercial property insurance protects the building you lease or own, as well as the contents within that space. It protects your professional equipment, your computers, your business inventory, and your personal property. If you work from home, your homeowner’s insurance doesn’t cover business-related property, so you still need commercial property. 

Read more: Commercial Property Insurance: What It Covers and Who Needs it? and the best commercial property insurance companies.

Business Owners Policy (BOP) insurance for small businesses

Business Owners Policy (BOP) is often the most popular insurance coverage for small businesses. It bundles three most needed coverages into one convenient policy for small businesses: general liability insurance, commercial property insurance, and business income interruption coverage. This makes it easy and simple for small businesses to manage their business insurance coverage needs and saves a lot of money compared to having three separate policies.

It is also very easy to add additional coverages through endorsements to a BOP policy as well such as employment practices liability insurance (EPLI) or cyber security coverage or product liability coverage.

Learn more at the best BOP insurance companies.

Workers compensation insurance for small businesses

In almost every state (except Texas), if you have employees, you need workers’ compensation insurance. Some states vary in how many employees you need before it’s required though: many states require it if you have just one employee, and some states set the bar at four employees. However, you should have workers’ compensation insurance even if it isn’t required because it protects your employees if they get injured or become ill while on the job. 

Related: The Cheapest Workers Compensation Insurance and the best workers comp insurance companies.

Product liability insurance for small businesses

Businesses that sell anything that could potentially cause damage or injury should get product liability insurance. The most famous product liability lawsuit is probably the McDonald’s coffee lawsuit, where a woman spilled coffee on herself and then sued McDonald’s because the coffee was too hot. She won the case. 

Small businesses can get product liability insurance coverage in a stand-alone policy or as an endorsement to the general liability insurance policy.

Read more: Product Liability Insurance: What It Covers and Who Needs It

Cyber liability insurance for small businesses:

Scams, phishing, hacking, and ransomware attacks are on the rise. You’ve probably received a few suspicious emails yourself. These hackers often go after businesses that store sensitive data on the web, which these days, is practically everyone. A data breach could cause you to be sued, so you’ll want cyber liability insurance. 

Read more: Cyber Insurance: What It Covers and Why Every Business Needs It; the best cyber insurance companies; and the best data breach insurance companies.

Business identity insurance for small businesses

Identity theft is when someone steals your personal information to open new credit card accounts, embezzles money from online accounts, and poses as you for financial gain. Business identity theft is the same thing, only in this case, your business is impersonated. Small businesses are often targeted for this type of crime because they generally have deeper pockets than most individuals. They also have higher credit limits. Business identity theft is also known as corporate or commercial identity theft. 

If someone impersonates your business, it can affect all members of the company, from the CEO to the most recent employee. It can easily bankrupt a business and may take years to untangle. Emails that pretend to be from Amazon, asking you to click on a link to solve a problem with your account are examples of business identity theft (with Amazon being the victim here). Obviously, Amazon will be fine, but that might not be the case if it’s your business that’s targeted. 

Commercial auto insurance for small businesses

If you drive a car or a truck for business purposes (other than getting there and back) you need commercial auto insurance. It’s required in all 50 states. You may think you can just file a claim under your personal auto policy, but that would be a mistake. Your personal auto insurance policy doesn’t cover business-related claims. If you do file a claim under your personal policy and if your insurance company finds out, they can drop you as a client. Then you’ll have much higher premiums with your next insurance company. 

Related: Learn more at why small businesses need commercial auto insurance; the best commercial auto insurance companies; and how to find cheap commercial auto insurance.

Commercial fleet insurance for small businesses

If you have more than two vehicles that you use for business, you can cover them all under the same commercial fleet insurance policy. It works the same as commercial auto insurance, but for more than one vehicle, which saves you some money. 

Commercial umbrella insurance for small businesses

Commercial umbrella insurance provides an extra level of liability insurance. It kicks in when the other types of liability insurance you have been exhausted, i.e. they have met their policy limits. 

Why not just get a higher limit on your general liability insurance? You could, but what if you are sued by a former employee and your employment practice liability insurance is tapped out? In this case, commercial umbrella insurance will cover the lawsuit over what you have in EPLI insurance. You can also call on commercial umbrella insurance if your commercial auto policy reaches its limits. Commercial umbrella insurance offers flexibility. 

Read more: The 5 Best Providers of Commercial Umbrella Insurance

Key person insurance for small businesses

Key person insurance is a life insurance policy on someone critical to the operation of a business. In the event the key person dies, the life insurance pays out and therefore, the business has some cushion while they figure out how and if they can stay in business. For a small business owner, the key person is usually the owner. Key person insurance should also pays out if the key person suffers a catastrophic injury or illness and can no longer work. 

Generally, the company pays the premiums on the policy. You can get either a term life insurance policy or a permanent life insurance policy on a key person. The cost of this insurance will vary depending on the age and health of the key person. 

Learn more at the best key person insurance for small businesses.

Directors & Omissions or D&O insurance for small businesses

D&O insurance is a type of business liability coverage. It pays legal defense costs, settlements, and damages if the executives and members of the board of directors of a business are sued. It also pays costs related to them failing to meet regulatory requirements. Without D&O insurance, executives and officers are held personally liable in these law suits. In many cases, companies have to lean in to cover these law suits in these cases as well.

It is often thought that D&O insurance is for large corporation. It is often a misunderstood myth. Learn more why small businesses and startups need D&O insurance coverage. Similarly nonprofit organizations also need this type of coverage as well.

Learn more at the best D&O insurance companies and the best nonprofit insurance companies.

Employment practices liability insurance for small businesses

This type of insurance protects the representatives of a company from lawsuits from employees. Employees can sue for sexual misconduct, discrimination, wrongful termination, harassment, and payment disputes. You may think you’re all one big happy family where you work, but employment discrimination/wrongful termination is the most common reason why small businesses get sued. 

Related: 6 Best Providers of Employment Practices Liability Insurance 

Employers liability insurance for small businesses

Employers liability insurance is also known as part 2 of workers comp insurance. The first part is to pay for medical costs and other benefits to employees when they get injured or become sick at work. The second part is employers liability insurance. It pays for legal costs when your employees sue you.

Businesses do not usually have both parts. If you offer workers comp insurance to your employees, by default, your employees waive their rights to sue you. If you don’t have workers comp insurance, when your employees get injured and sue you for benefits, you will need employers liability insurance to cover the legal defense cost.

Learn more at the best employers liability insurance companies.

Last thoughts

These are all the different types of business insurance you can get, but it’s unlikely you will need them all. You have to weigh the risks against the cost of the insurance. Remember to compare quotes and shop around, no matter what type of insurance policy you need. It’s the best way to save money on insurance.

Thang Truong

Thang Truong covers small business insurance and small business success at BravoPolicy. He is a licensed P&C insurance agent. Previously, he held product leadership positions at realtor.com, Capital One, NerdWallet, and Mulberry Technology. He holds a MBA degree from UC Berkeley - Haas School of Business.

More Stories

9 Best General Liability Insurance Companies for 2024

General liability insurance is probably the most popular business insurance that almost all businesses should have. It is required for some professions such as construction. The good news is that many insurance companies offer this product, so it is easy to find one that is the best for your business. In our intensive research, here […]

9 Best Commercial Auto Insurance Companies & Quotes in 2024

If you use your vehicles for work, you need to get a commercial auto insurance policy. Your personal auto insurance policy won’t cover the vehicles when you use for business. Commercial auto insurance is necessary when cars, trucks, or vans are used to conduct business. We cover everything you need to know about commercial auto […]

The 5 Best Business Owners Policy (BOP) Insurance for 2024

A Business Owner’s Policy (or BOP Insurance) is important to any small business to cover potential damages and losses when unexpected events happen. A BOP policy includes the coverages of general liability, commercial property, and business interruption in one master policy. If a small business can only afford one insurance policy, it should be a […]

11 Best Professional Liability Insurance Companies for 2024

If you’re a small business and in the market for professional liability insurance, below are 11 best companies offering this type of insurance for small businesses. In order to get an idea of the prices where online quotes were offered, we looked at a hypothetical accounting business in Wisconsin that had been in business for […]

Milepost Joins Truckstop: A New Dawn for Commercial Truck Insurance

The trucking industry is about to witness a significant shift in how insurance policies are procured, managed, and serviced. Milepost Insurance Agency LLC, a renowned Berkshire Hathaway enterprise, has recently collaborated with Truckstop, thereby pioneering a new era in trucking insurance for independent owner-operators. Revolutionizing the Insurance Experience The primary aim behind this dynamic partnership […]

Navigating Commercial Truck Insurance Premiums in 2023

Commercial truck insurance has become a focal point for many in the transportation sector as we delve deeper into 2023. With premiums seeing significant spikes in recent years, stakeholders are asking: Are we approaching a stabilization or even a decrease in these rates? Insights from industry experts provide clarity on this critical concern. Trends in […]

Regulatory Changes and Rising Commercial Truck Insurance Costs in California

In the wake of the passing of California’s AB5 bill, the trucking industry, including drivers and insurers, face unforeseen challenges. The legislation threatens to severely disrupt contractual trucking gigs, leading to rising insurance costs and potential operational changes. AB5 – A Potential Setback for Owner-Operators AB5, signed into law by Governor Gavin Newsom in 2019, […]

Finding Balance in Commercial Truck Insurance: Costs, Value, Services, and Long-Term Benefits

Navigating the maze of truck insurance offerings is not just a matter of finding the lowest price. It’s about understanding the nuances of what you’re buying, considering long-term benefits, and ensuring a harmonious relationship with your provider. This article offers a detailed examination of the process, unfolding the aspects of costs, value, services, honesty, and […]

New SEC Regulations on Cybersecurity and AI: A Comprehensive Overview

In an era where technology is at the forefront of business operations, the U.S. Securities and Exchange Commission (SEC) is taking decisive steps to ensure transparency and ethical practices. On Wednesday, the SEC was set to introduce new regulations that will impact publicly traded companies in two significant areas: cybersecurity and artificial intelligence (AI). These […]

6 Best Malpractice Insurance for Nurse Practitioners for 2023

Nurse practitioners have a great deal of responsibility when it comes to patient care. Many nurse practitioners assume that because they work under a doctor and their employer provides some level of malpractice insurance, they’re covered. It may be worth it to purchase your own policy, however. Employer malpractice insurance is to protect the employer, […]