What Is Business Insurance?

Running a business comes with risks every day: a customer gets hurt, a fire damages your shop, an employee is injured on the job. Business insurance can help pay for claims and losses like these. This guide covers what business insurance is, the main types, what the law requires, and how to get matched with a licensed partner.

What Is Business Insurance?

Business insurance is a group of policies that can help pay for claims, lawsuits, and losses tied to running a business. Most businesses carry a few policies together, based on their industry, size, and the contracts they sign.

Coverage usually falls into four areas:

1. Liability: claims from customers, clients, and others
2. Property: your building, equipment, and inventory
3. Employees: on-the-job injuries and workplace claims
4. Vehicles: cars, vans, and trucks used for work

What Does Business Insurance Cover?

Depending on the policies a business carries, business insurance can help cover:

1. Injury and property damage claims from customers, visitors, or clients
2. Lawsuits, including legal defense costs for covered claims
3. Damage to your building, equipment, and inventory from fire, theft, or vandalism
4. Income lost while your business can't operate after a covered loss
5. Medical bills and lost wages for employees hurt on the job
6. Accidents involving vehicles used for work

No single policy covers all of these. Each type of insurance below handles a different piece, and every policy has its own limits and exclusions.

What Are the Main Types of Business Insurance?

Liability Coverage

1. General liability insurance: Can cover third-party claims of bodily injury, damage to someone else's property, and advertising injury such as libel, plus legal costs for covered claims. It doesn't cover your own employees, your own property, or mistakes in professional work.
2. Professional liability insurance: Also called errors and omissions (E&O). Can cover claims that a mistake, missed deadline, or negligent advice in your professional work caused a client financial harm, including legal defense. Accountants, attorneys, and consultants often carry it.
3. Product liability insurance: Can cover claims that a product you make or sell caused injury or property damage, from food and medicine to toys and furniture.
4. Cyber liability insurance: Can cover costs after a data breach or cyberattack, such as notifying customers, recovering data, and related claims.
5. Directors and officers (D&O) insurance: Can protect a company's leaders and their personal assets if they're sued over actual or alleged wrongful acts in managing the business, including legal fees and settlements.
6. Commercial umbrella insurance: Adds extra limits on top of policies like general liability and commercial auto once their limits are used up.

Coverage for Employees

1. Workers' compensation insurance: Can cover medical bills and a portion of lost wages for employees hurt or made sick by their work, including long-term conditions like repetitive strain injuries.
2. Employment practices liability insurance (EPLI): Can cover claims from employees, former employees, or job applicants alleging discrimination, harassment, or wrongful termination, including defense costs and settlements.

Some businesses also offer group health and disability coverage as employee benefits.

Coverage for Vehicles

Commercial auto insurance: Can cover liability and vehicle damage when cars, vans, or trucks are used for business. Personal auto policies often exclude business use.

Coverage for Property

1. Commercial property insurance: Can cover the building you own or lease and the things inside it, like furniture, equipment, tools, inventory, and computers, after fire, theft, vandalism, or certain weather damage.
2. Business interruption insurance: Can help replace lost income and cover ongoing costs like payroll, rent, and taxes while a business is closed after a covered loss.
3. Commercial flood insurance: Flooding is excluded from most standard property policies, so businesses in flood-prone areas often carry a separate flood policy.
4. Home-based business insurance: A homeowners policy typically covers little or none of your business equipment or business liability. Home-based business coverage can fill that gap.

What Is a Business Owner's Policy (BOP)?

A business owner's policy (BOP) bundles general liability, commercial property, and business interruption coverage into one policy. Insurers usually offer BOPs to small and midsize businesses with lower-risk operations, such as offices, retail shops, and restaurants.

Is Business Insurance Required by Law?

Some business insurance is required by law, and some is required by the people you do business with. What applies depends on your state, your industry, and whether you have employees.

Coverage states commonly require:

1. Workers' compensation: Most states require it for businesses with employees. Rules, exemptions, and employee thresholds vary by state.
2. Commercial auto: Vehicles owned by a business typically need to meet the state's minimum auto liability requirements.
3. Disability insurance: A few states require employers to provide short-term disability coverage for employees.

Coverage contracts commonly require:

1. Landlords commonly require general liability, and sometimes property coverage, in a commercial lease.
2. Clients and general contractors often ask for proof of general liability or professional liability before work starts, usually through a certificate of insurance.
3. Some licensing boards require general liability, professional liability, or a surety bond before issuing a license.

Your state's insurance department or labor agency can confirm which requirements apply to your business.

How Do I Get Business Insurance?

Gather the basics. Insurers usually ask about:

1. The services you offer, since each one carries different risks
2. Your expected annual revenue
3. How many employees you have and your payroll
4. Any vehicles used for work
5. Your years of experience in the field
6. Any past claims

Check what's required. Look at your state's rules, your lease, and any client contracts for required coverage and limits.

Get matched with a licensed partner. Tell us about your business using the form at the top of this page, and a Tivly specialist will reach out to match you with a licensed partner.

When you talk with an insurance partner, it helps to ask:

1. Do you work with businesses in my industry?
2. Are you licensed in my state?
3. What does this policy cover, and what does it exclude?

Why Is My Quote Different From Another Business's Quote?

Business insurance is priced on each business's own risk, so two businesses can get very different quotes for the same coverage. Common factors include:

1. Your industry and the services you offer
2. Your location
3. Number of employees and payroll
4. Annual revenue
5. Claims history
6. The coverage limits and deductible you choose
7. Years in business and experience

Each insurer also weighs these factors differently. To see how general liability pricing varies by industry, browse our insights pages.

What Happens When a Business Has a Claim?

Here's how a typical claim works:

1. Something goes wrong. For example, a customer trips over a cord in your shop, breaks a wrist, and sends a letter asking you to pay the medical bills.
2. You report it. Contact your insurer as soon as you can, with photos, names, and notes on what happened.
3. An adjuster investigates. The insurer reviews what happened and whether the policy covers it.
4. The policy responds. If the claim is covered, the policy can pay for things like medical bills, a settlement, or legal defense, up to the policy's limits. For property claims, you usually pay the deductible first.

Without coverage, the business pays these costs itself.

How Does Tivly Match Me With a Licensed Partner?

Tivly works with 450+ licensed insurance partners in all 50 states. Tell us about your business using the form at the top of this page (it takes about 10 minutes), or call 877-907-5267. A Tivly specialist will reach out to match you with a licensed partner. Tivly is free to use.