When you are starting or running your own business, aside your skills, you need to be very optimistic about the success of the business. Even if your business faces harsh market challenges, your optimism and enthusiasm may just be enough to help you pull through. That’s the power of having a positive mindset as a business owner.
However, your optimism wouldn’t do everything for you. It’s necessary sometimes that you dim the light of your optimism a bit so you can face reality. Try not to mistake that for pessimism as it is a necessary step to help you identify the risks that your business is exposed to and to take necessary action to mitigate those risks. Buying business insurance policies is one of the smartest ways to mitigate risks when it comes to running a business.
While some business owners understand the importance of business insurance, they feel completely at sea when it comes to choosing the right business insurance policies for them. If you are looking to buy business insurance for your company, here are the various types of business insurance policies that you can choose from, the companies that offer such policies and how much they cost in premium.
Types of Small Business Insurance Policies
Table of Content
- 1. General liability insurance
- Types of Businesses General Liability Insurance Caters for
- Who is Covered by the General Liability Insurance?
- Business and its employees
- Wholesaler or Manufacturer
- Companies That Offer General Liability Insurance
- General Liability Insurance Cost
- 2. Business owner’s policy (BOP)
- What Does a Business Owner’s Policy Cover?
- How Much Does a Business Owner’s Policy Cost?
- Best Insurance Company for BOP
- 3. Worker’s Compensation
- How Much Does Workers’ Compensation Insurance Cost?
- Best Workers’ Compensation Insurance Companies
- 4. Professional Liability Insurance
- What Does Professional Liability Insurance Cover?
- How Much Does Professional Liability Insurance Cost?
- Best Insurance Company For Professional Liability
- 5. Property Insurance
- How Much Does Commercial Property Insurance Cost?
- Best Commercial Property Insurance company
- 6. Commercial Auto Insurance
- What Does Commercial Auto Insurance Cover?
- How Much Does Commercial Auto Insurance Cost?
- What Does Commercial Auto Insurance Not Cover?
- Best insurance Company for Commercial Auto
- 7. Data Breach
- Types of Cyber Insurance
- First-Party Cyber Insurance Coverage
- Third-Party Cyber Insurance Coverage
- How Much is Cyber Breach Insurance?
- Best Insurance Company for Cyber Liability Insurance
- 8. Renter’s Insurance
- What Does Rental Insurance Policy Cover?
- Personal property
- Loss of Use
- Average Cost of Renters Insurance
- The Best Renters Insurance Companies
One very versatile business insurance that every small business needs is general liability insurance. This policy provides protection against common customer or client incidents, including bodily injuries, property damage, and advertising injuries.
An accident involving a customer can lead to huge legal bills, making this an important policy for any business. A single accident could result in a lawsuit that you might not be able to handle. A great way to protect against this is to make sure you have liability coverage that matches your level of exposure.
Some employers or clients might also require you to carry a certain amount of general liability before you can work for them. This is especially true if you are a contractor. General liability insurance is often combined with property insurance in a Business Owners Policy (BOP), but it’s also available to many contractors as a stand-alone coverage.
If you’re a contractor, you might only want general liability – not a full BOP. For example, you might not own any commercial buildings that require property insurance, or need to cover payroll or other operating expenses. However, you’re still exposed to liability risks from your job so you need a part of this insurance. You might be eligible to get general liability insurance, without the extra coverage in a BOP.
Types of Businesses General Liability Insurance Caters for
- Artisan contractors
- Small business owners
- Landscaping companies
- IT contractors
- Real estate agents
- Janitorial Services, And more
Who is Covered by the General Liability Insurance?
Business and its employees
Most commonly this coverage is for the business and its employees when claims are made against them from an outside party that bodily injury or property damage was caused as a result of business operations.
Wholesaler or Manufacturer
If you sell any product and there is a chance a customer could become injured, General Liability insurance is often your first line of defense even though the product is from a wholesaler or manufacturer.
If you work with vendors, like contract sales people, you may have a written agreement to indemnify a person/organization. Under this type of policy, these people and organizations are protected against liability claims as a result of selling your products.
What General Liability Covers
- Bodily injury: Property damage, including to property you are a tenant at and someone else’s property you use in the course of doing business.
- Personal injury, such as slander: Defense costs, including court costs, witness fees, attorney’s fees, and police report costs, regardless of fault.
- Reasonable expenses incurred when the insurance company asks you to assist in your defense. For example, if you lost income while spending a day in court, you would be covered.
- Judgements and settlements, including medical expenses.
Companies That Offer General Liability Insurance
Nationwide insurance is adjudged to be one of the best companies for General Liability Insurance. Nationwide traces its roots back to 1926 when it operated as Farm Bureau Mutual Automobile Insurance Company. The name was changed to Nationwide in 1955 during its efforts to expand coverage to all states from coast to coast. They have agents in every state except Hawaii and Alaska.
In addition to general liability, Nationwide offers many types of business insurance including business property, commercial auto, BOP, workers’ compensation, EPLI, equipment breakdown coverage, and umbrella insurance. The company also has 14 different industry specialties including retailers, medical clinics, professional service providers, and agricultural businesses.
General Liability Insurance Cost
The cost of general liability insurance varies. The coverage your business needs depends on the type of business you operate, as well as the perceived risk associated with you or your industry. For example, a marketing consultant would need less coverage than a building contractor.
Your location is also important as some states tend to award more in damages to plaintiffs claiming personal injury than others. If you live in one of those states, you’re likely to face higher premiums. Minimum premiums start from as little as around $350 per year.
However, most annual premiums for small businesses range from $750 to $2,000 depending on your type of work and coverage needs. That’s certainly a lot less than the thousands, if not millions, of dollars you may need to spend fighting your case in court.
A Business Owners Policy (BOP) is a policy that combines multiple types of business insurance in a single policy. Most BOPs include commercial general liability and property coverage, as well as small amounts of coverage for endorsements such as inland marine or umbrella coverage. By combining these coverages into a single policy, business owners are usually able to save money on their total premiums.
What Does a Business Owner’s Policy Cover?
A business owner’s policy bundles two policies to protect against liability and property risks. General liability insurance helps pay for common lawsuits, while commercial property insurance covers your business property. A business owner’s policy provides coverage for:
Third-party bodily injury: If a customer is hurt on your property, the general liability insurance portion of your BOP can help pay for medical expenses or legal expenses in the event of a lawsuit.
Example: A customer trips on an uneven front step at a restaurant and breaks her wrist. To recoup the cost of her medical expenses, she decides to sue. The restaurant’s BOP covers the cost of the resulting legal battle, including attorney’s fees and the court-ordered judgment over the injury.
Third-party property damage: The general liability portion of a BOP can help repair or replace damaged customer property. It can also pay legal fees if a customer sues over the damage.
Example: An employee at a lawn care business accidentally drives a riding mower into a home garden, causing $2,000 in damages. The company’s BOP pays to repair the garden. It would also cover legal costs if the homeowner decided to sue.
Product liability: Property damage or customer injuries don’t have to happen on you or your client’s property. If a business manufactures, distributes, or sells products, it can be sued over the harm those products cause to people or property.
Example: A janitorial services company sells cleaning products on the side. A customer accidentally gets the solution in his eye. He ends up in the emergency room and sues the cleaning company for damages. The company’s product liability insurance helps cover the legal expenses and eventual settlement.
Advertising injuries: If someone sues a business owner or employee over an advertising injury such as libel, slander, or copyright infringement, the liability portion of a BOP can help pay for lawsuit expenses.
Example: An employee at a house cleaning company posts a negative comment about a competing cleaning service on the company’s Facebook page. The competitor sues for defamation. The advertising injury coverage including in the cleaning company’s BOP helps pay for legal defense expenses and the resulting settlement.
Business property damage: The commercial property insurance portion of a BOP can help pay for expenses to repair or replace your business property when it’s damaged by fire, theft, and some weather-related events.
How Much Does a Business Owner’s Policy Cost?
Your business owners policy cost is based on a few factors, including:
- Amount of coverage
- Business property value
- Industry and business operations
- Business location
- Number of employees
Business owner’s policies cost an average of $53 per month. This is based on the median cost of policies.
Best Insurance Company for BOP
Liberty Mutual is one of the best providers of business owners policies (BOPs). The company combines multiple types of coverage into a single policy protecting against liability, property loss, and loss of income. With more than 40% of American business owners expected to file some type of insurance claim over the next 10 years, Liberty Mutual is in a unique position to help large numbers of business owners for a reasonable price, regardless of industry.
Liberty Mutual also advertises 24-hour claims assistance through its nationwide contractor referral network. The company is known for having adjusters around the country that can help settle claims quickly, even in rural communities. Liberty has been accredited by the BBB since 1931 and has an A+ rating.
Businesses in the United States are mandated to carry workers compensation insurance if they have employees, even if it is just one. This type of business insurance provides coverage for employees who are injured on the job. So, if you hire employees to work for you, you need to buy a worker’s compensation policy.
The policy will provide wage replacements and medical benefits to your injured employees. And due to these benefits, they will certainly give up their rights to sue you for the incident. Almost every business in the United States that has employees has to handle the problem of workers’ compensation.
Most states (with a few important exceptions) essentially require employers to purchase an insurance policy to handle their statutory obligations to workers who are injured or made ill due to a workplace exposure. Whether your business is small or large, handling the expense of meeting those statutory obligations is an ever-present challenge.
Workers’ compensation for small businesses may cover injury sustained in the workplace or in the course of employment. A delivery driver injured in an auto accident while on the clock may qualify for workers’ compensation. An employee’s injury need not be caused by an accident—like a fall from a ladder—to be covered by workers’ compensation. Workers’ compensation insurance also covers illnesses related to employment as defined by the state.
How Much Does Workers’ Compensation Insurance Cost?
Because workers’ compensation insurance is regulated on the state level, the cost of a policy depends on where your employees are located. Companies with more employees and risks pay more for workers’ comp. Physically demanding work usually results in higher premiums – so does a history of workplace accidents.
The state where your employees work can also influence the cost dramatically. A lot of customers pay a median premium of $47 per month, or $560 annually, for workers’ compensation. The average cost of a workers’ comp claim is $40,000, according to the National Safety Council.
A workers’ comp premium is likely a much better deal for your business. That’s why small business owners might purchase it even when it’s not required by law. 30% of small business customers pay less than $400 per year for workers’ compensation insurance and 39% pay between $400 and $800 per year.
Best Workers’ Compensation Insurance Companies
- biBERK Insurance Services: Best Overall
- CoverWallet: Best for Micro Businesses
- AmTrust Financial: Best for Retailers
- The Hartford: Best for Medical Providers
- Progressive: Best for Professional Offices
- Nationwide: Best for Construction and Contractors
- GTM Payroll Services: Best for Household Employers
4. Professional Liability Insurance
Also known as errors and omissions insurance, this policy provides defense and damages for failure to or improperly rendering professional services. So, the policy applies more to your business if you render professional services, such as legal services, real estate consulting, accounting services, technology services, and so on. However, you must bear in mind that general liability insurance does not provide this protection. So, you must buy the policy separately.
Professional liability insurance (PLI) is insurance that protects professionals such as accountants, lawyers, and physicians against negligence and other claims initiated by their clients. Professionals who have expertise in a specific area require this type of insurance because general liability insurance policies do not offer protection against claims arising out of business or professional practices such as negligence, malpractice, or misrepresentation.
Even the most experienced and thorough professional service provider makes mistakes. Unfortunately, clients may not be so understanding if your error costs them considerable time or revenue. Professional liability insurance helps protect you from unsatisfied clients. For example, if you miss a project deadline, make an omission in your work, or provide ineffective business advice, your client may sue.
What Does Professional Liability Insurance Cover?
- Alleged or Actual Negligence
- Defense Costs
- Personal Injury (e.g., Libel or Slander)
- Temporary Staff and Independent Contractors
- Claims Arising from Services Provided in the Past
- Worldwide Coverage
How Much Does Professional Liability Insurance Cost?
Regardless of policy limits, the median cost of professional liability insurance is $59 per month ($713 annually). The median cost offers a more accurate estimate of what your business is likely to pay than the average cost of business insurance because it excludes outlier high and low premiums.
Most small business owners (51%) pay between $500 and $1,000 per year for their policies, and 18% pay less than $500. These figures were derived from an analysis of thousands of insurance policies.
Best Insurance Company For Professional Liability
Hiscox has been lauded as the best insurance company for independent contractors as they provide better professional liability coverage. The company started in 1901 as an underwriter in Lloyd’s market. It’s based in Bermuda and trades on the London Stock Exchange but does business in 13 countries and all 50 states, plus the District of Columbia.
Hiscox offers a core lineup of business insurance products including commercial general liability, professional liability, business owners’ policies (BOPs), workers’ compensation, cyber liability, commercial auto, and employment practices liability insurance (EPLI). The company also writes all the business insurance policies sold by GEICO.
5. Property Insurance
If you own your office building or have valuable business property such as office equipment, computers, inventory, or tools, you should consider purchasing a property insurance policy. This policy will provide coverage if you are hit by fire, vandalism, theft, smoke, damage, etc.
Property insurance is typically included in the business owner’s policy (BOP). So, if you already have purchased a BOP, you need not purchase a separate property insurance policy. Commercial Property Insurance will compensate your business if property that you use in your business is damaged or lost due to accidents or disasters.
It covers property such as buildings, equipment, inventory, furniture, tools and computers. In some policies, theft is also covered, but even when theft is covered, employee theft is usually excluded. Examples of situations property insurance would cover include:
- A fire is accidentally started in your restaurant kitchen, destroying your kitchen appliances and your food inventory.
- The building your business owns has its roof damaged by a severe hailstorm.
- A pipe bursts in your retail store, destroying fixtures and ruining merchandise.
How Much Does Commercial Property Insurance Cost?
The median cost of commercial property insurance is $63 per month or $755 per year with a limit of $60,000 and a median deductible of $1,000. The median offers a more accurate estimate of what your business is likely to pay than the average cost of property insurance because it excludes outlier high and low premiums.
Many small business customers (16%) pay less than $500 per year and 42% pay between $500 and $1,000 annually for property insurance. However, most customers opt for a business owner’s policy, which combines commercial property insurance with general liability insurance at a discount.
Best Commercial Property Insurance company
Travelers is one insurance company that is estimated to provide better coverage and terms for commercial property insurance. The company’s history stretches back to 1864, when one of its founders started writing accident insurance for two-cent premiums. The company as it’s known today was formed in 2004 with the merger of Travelers and St. Paul Companies and has an A++ rating from AM Best.
Travelers has insurance solutions that are designed to meet the needs of companies in more than 20 industries including transportation, manufacturing, construction, retail, and public entities. However, the company has developed considerable expertise in commercial property insurance.
This policy applies to businesses that have vehicles. Commercial auto insurance protects all the vehicles you use for your business, including those that carry your employees, products, or equipment. This insurance policy will provide coverage for your work cars, SUVs, vans, and trucks during damages and collisions.
Even if you don’t have company vehicles, but your employees drive their own cars while handling company tasks, you should have non-owned auto liability insurance to provide coverage for your company in case the employee does not have insurance. If you have a BOP, you can add non-owned auto liability insurance to it.
Commercial auto insurance covers legal bills, medical expenses, and property damage if a business vehicle is involved in an accident. If your company owns a vehicle, you will very likely need commercial auto insurance. Nearly every state requires commercial auto insurance coverage for business-owned vehicles.
If your company owns a vehicle, you will very likely need commercial auto insurance. New Hampshire and Virginia are the only states where auto insurance isn’t required. However, drivers are still responsible for any damages they cause.
What Does Commercial Auto Insurance Cover?
Commercial auto insurance helps cover medical payments and property damage related to an accident. This coverage includes legal expenses if you’re sued. A policy may also cover vehicle theft, vandalism, and other losses and damages. Most commercial auto policies include liability insurance to cover your business’s legal costs if one of your employees gets into an accident.
How Much Does Commercial Auto Insurance Cost?
For a policy limit of $1 million, the median cost of commercial auto insurance is $142 per month or $1,704 per year. The median cost offers a more accurate estimate of what your business is likely to pay than the average cost of commercial auto insurance because it excludes outlier high and low premiums. It should be noted that many small business owners (44%) pay less than $1,500 per year for commercial auto insurance.
What Does Commercial Auto Insurance Not Cover?
- Wreck while committing a crime: If an employee is driving a company vehicle after hours and they are involved in a wreck while committing a crime, it is likely that the physical damage to the vehicle will not be covered.
- Damage incurred by moving company vehicles: Commercial Auto insurance does not include damages incurred by moving company vehicles.
- Damage incurred during war or civil disturbances: Any damage incurred during war or civil disturbances is excluded from Commercial Auto insurance.
- Wrecks resulting from employee relatives: Commercial Auto insurance does not include wrecks resulting from employee relatives driving the company vehicle.
Best insurance Company for Commercial Auto
Progressive Commercial was founded in 1937 and is one of the biggest auto insurance companies in the world. In fact, Progressive Commercial is the top-ranked commercial auto insurer in the U.S. by premiums written, according to business intelligence firm SNL Financial’s 2019 national data. The company offers commercial trucking insurance in all 50 states.
While commercial auto is one of Progressive’s major areas of focus, the company also offers other types of business insurance including general liability, workers’ compensation, BOPs, professional liability, and cyber insurance. Progressive has specially designed insurance solutions for 10 industries including beauty, health and wellness, professional firms, and skilled trades.
7. Data Breach
If your business handles sensitive, confidential information about customers and employees on computers, servers, or in paper files; you are responsible for protecting that information. And if a breach occurs either electronically or from a paper file, your data breach insurance policy will provide coverage for your company against the loss.
Data breach insurance is designed to protect and support a business if it becomes the victim of a cyber-attack. This specific type of insurance provides comprehensive cover in the event of a claim related to a malicious cyber-attack or breach of data.
Data breach insurance offers protection if a hacker attempts to hold a business to ransom. The insurance can cover the ransom you are forced to pay the hacker, as well as helping you manage the whole stressful situation.
Comprehensive data breach insurance will also offer practical support in the event of a cyber-attack on your business. Such support includes providing a business with legal advice, forensic investigations, notifications to clients, customers and regulators and support to affected customers, such as credit card monitoring.
Types of Cyber Insurance
First-Party Cyber Insurance Coverage
These apply to expenses your firm directly incurs as a result of the breach. For instance, this could include the cost of informing your client about a hacker attack. Coverages here include Loss or Damage to Electronic Data, Loss of Income and Extra Expenses, Cyber Extortion and others.
Third-Party Cyber Insurance Coverage
These apply to claims against your company by individuals that have been injured as a result of your actions. For instance, a client sues you for negligence after a hacker steals his data from your computer system and leaks it. Coverage here typically applies to damages or settlements that result from covered claims as well as the cost of your defence.
How Much is Cyber Breach Insurance?
Your cost for comprehensive cyber liability insurance will depend on various underwriting factors that allow the insurer to determine your potential risk. These underwriting factors include your type of business (some are targeted more than others), the number of transactions each year, what information you collect, the number of computers or devices, and the type of security you have implemented.
A typical example of insurance costs for the following high target small businesses is as follows:
Although your cost of cyber liability will depend primarily on your type of business, annual revenue, and the limit of liability you select, you can expect to pay from $750 on the low end and up to $8,000 on the high end. These estimates are for small businesses. Mid-size and large businesses will typically pay many times these amounts because of the exposure to the insurer.
Best Insurance Company for Cyber Liability Insurance
State Farm has been dubbed the better insurance company for cyber liability coverage. The company was established in 1922 by G.J. Mecherle, a retired farmer and insurance salesman. Though best known for auto and home insurance, State Farm has more than 100 products including cyber liability, financial services, banking, and commercial insurance. It has an A++ rating for financial stability.
State Farm sells insurance in every state and offers policies designed for each stage of a company’s growth cycle including general liability, professional liability, and other types of coverage that can be added onto policies to suit individual needs. State Farm also offers business insurance that is designed specifically for certain industries such as contractors, professional services, restaurants, and retailers.
8. Renter’s Insurance
If you have rented your office space or other facility you use for business, you need a renter’s insurance policy. This will offer protection against damage to the rented property and its contents. This insurance is for those who rent their property for commercial or private use.
It protects against damage to physical property, its contents or personal injury within a property. Only 40% of renters have renters insurance coverage, but that doesn’t mean you should pass on getting a policy for yourself. Renters insurance is a cost-effective way to protect your belongings against theft, accidental damage and more
What Does Rental Insurance Policy Cover?
The policy offers liability coverage in cases of negligence. For example, if you leave the tap in your kitchen running and it overflows into a neighbour’s apartment, you could be liable for that damage and required to foot the repair or medical bills related to the accident. Renter’s insurance provides coverage for such costs.
Most rental insurance policies offer protection for a tenant’s property in case of accidents such as power surges, fire, burglary, theft, water damage or other unforeseen events. It is important to note that only certain types of property are covered by renter’s insurance. Still, it is possible to have add ons on your policy to protect items that you consider important, and that may be expensive to replace.
Loss of Use
The policy also offers coverage in case you have to leave your apartment after an accident. If, for instance, you got burgled and have to make use of a hotel during the time the safety of your apartment is being restored or assured, the renter’s insurance policy will cover the expenses incurred during this period.
Average Cost of Renters Insurance
How much will renters insurance and the protection it brings cost you? Rates for renters insurance vary, but you don’t need to worry about this adding a huge amount to the overall cost of an apartment. Renters insurance is affordable for most people, especially considering what you get for your premium.
According to the Insurance Information Institute(III), the average cost of renters insurance in the United States was just $180 a year in 2017, the most recent year with aggregate data to study.
The Best Renters Insurance Companies
- Best for online tools: Allstate
- Best for extended coverages: Nationwide
- Best for discounts: Liberty Mutual
- Best for competitive rates: American Family
- Best renters insurance for policy management: State Farm
- Best for customer support: MetLife
- Best renters insurance for military members and families: USAA
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