Small Business Insurance

No single insurance policy covers everything. In general, there are two broad areas of insurance coverage:

• Business liability insurance covers incidents in which someone holds your business accountable for an injury, property damage, or financial loss. It pays for legal defense costs, such as attorney's fees, court costs, judgments, and settlements.
• Commercial property insurance helps pay for theft and damaged business property, including your building if you own it. That includes damage from fires, storms, and vandalism.

A business owner's policy is a good place to start if you're unsure of which coverage you need. It includes both general liability insurance and property insurance at a discount, and protects against the most common lawsuits and damages.

Keep in mind that your homeowner's insurance, health insurance, and personal auto insurance will provide little to no coverage for business-related incidents. Learn more about small business insurance coverage and which policies are right for you.

Business insurance, also called commercial insurance, provides crucial protection for any small business owner. Here are the top reasons why you might need coverage:

• Lawsuits are expensive. If there’s an accident at your business, you could face a lawsuit. The high cost of litigation, medical bills, and property damage claims are the primary reasons businesses need insurance.
• Your state requires insurance. Almost every state requires businesses to carry workers' compensation insurance when they have employees, and commercial auto insurance for company-owned vehicles.
• You need to sign a lease, loan, or contract. Landlords, lenders, and clients all prefer to work with insured businesses. In many instances, they'll ask you to provide proof of insurance before you can rent an office, take out a business loan, or sign a contract.
• You need a license. Depending on your profession, your state might require you to get a license. Plumbers, electricians, and other contractors often need to carry general liability insurance to get licensed, while real estate agents often need errors and omissions insurance.

Learn more about why businesses need insurance.

Every business needs insurance, but the type of business can affect which policies you need. Small businesses have fewer resources to recover from costly lawsuits and accidents, which makes insurance a crucial part of risk management.

Here are a few examples of how business structure can impact the policies you need:

• Businesses that have a board of directors need D&O insurance. Directors and officers insurance protects board members from litigation costs related to their business decisions.
• Sole proprietors that drive their own car for work may need HNOA insurance. Hired and non-owned auto insurance covers legal costs if you get into an accident in a personal, leased, or rented vehicle used for business purposes.
• Independent contractors might need a certificate of insurance. Clients often require contractors to provide proof of insurance for general liability, workers' comp, or other policies to ensure they're protected in the event of a lawsuit or incident.

Many small businesses are both bonded and insured. This means they have bought a bond, in addition to carrying insurance. A bond acts as a financial guarantee that your business will complete a project as promised.

You might need a bond to sign a contract, bid on a project, or get a license. Here are the most common types of bonds:

• Surety bonds are a general category of bonds that guarantee your business will fulfill the terms of a contract.
• Fidelity bonds are a specific type of surety bond that provides reimbursement for clients in the event of employee theft or fraud.
• License and permit bonds refers to bonds you need for a license or a permit, such as a contractor's license or a permit for pesticide application.
• Janitorial bonds are bonds that guarantee reimbursement in the event of theft by employees of a cleaning company.
• Construction bonds refers to a range of bonds used in the construction industry, such as bid bonds, performance bonds, and payment bonds.

If your business fails to meet the terms of a contract, a bond will reimburse the client for their financial loss. Unlike an insurance claim, your business must then pay this amount back to the company that issued the bond.

Because coverage varies by state, it's important to have a knowledgeable agent. Our insurance agents are licensed in 50 states and Washington, D.C., and can help you comply with local requirements.

Here are several insurance products that you might need to comply with the laws in your state:

• Workers' compensation insurance is required in most states as soon as you hire your first employee. Only Texas and South Dakota don't mandate coverage.
• Commercial auto insurance is required for business-owned vehicles in every state except for New Hampshire.
• Professional liability insurance, also called errors and omissions insurance (E&O), is sometimes required for real estate agents, insurance agents, lawyers, and other professionals.
• Medical malpractice insurance is a type of professional liability insurance that's often required for doctors with admitting privileges.
• General liability insurance is often a licensing requirement for general contractors and other specialty trades. For example, all general contractors in California need this coverage.

If you need help finding insurance and you're not sure of the laws in your state, contact an agent. They can help make sure you get the right policies and the amount of coverage you need.