Insurance for a New Business or Side Hustle 2023

Starting a new business is exciting, and insurance may be the last thing on your mind, but it’s one of the most important parts of operating any type of business, whether you’re a freelance writer, a landscaper, or a CEO of a tech startup. Each business must have the right insurance products to safeguard its longevity despite inevitable setbacks along the way. Each industry is prone to various risks so it’s a good idea to research the business type that you’re interested in starting. We’ve done some of your footwork here.

On This Page

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  3 Ways a New Company May Need to Defend Itself

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  The Types of Business Insurance

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  Which Coverages Does Your Business Type Need?

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  Starting With Business Insurance FAQs

3 Ways a New Company May Need to Defend Itself

Defending and Settling Claims Filed by Employees

What would you do if a disgruntled employee quit and sued you for what they believe they are owed. As bogus as the claim may be, you will need to spend money defending yourself. Business insurance, specifically employment practices liability (EPL) insurance would cover your costs. EPL coverage is included in a BOP policy, which is perfect for many small businesses and can save you because it bundles the most commonly needed coverages. ^[2]

Falling Victim to Cybercrime, Wire and Email Fraud

Yes, technology is great, especially for running a business. However, many startups are prey to malicious players, whether it be competitors or opportunistic bad actors. Security breaches may lead to customers and other parties filing claims against that company. You’d be surprised at how thieves come sniffing around new businesses after they announce funding or revenue growth. Cyber insurance would cover the costs to get your business back in shape after a malicious attack. ^[2]

Defending and Settling Claims Filed by Customers

You know the demographic you’re doing business with, which may reflect how much harm they can do to your business but claiming that you failed to fulfill your obligations. In these instances, it’s not uncommon to be sued. Attorneys and court costs are expensive, but if you have errors and omissions (E&O) coverage, you won’t have to pay to defend yourself. ^[2]

Commercial insurance premiums are tax deductible.

Not all businesses need these coverages, but if you think your business runs a risk in these types of scenarios, it’s best to speak with your insurer about it.

The Types of Business Insurance

Here is a list of all the insurance products available to business owners. Many small businesses start out only needing General Liability, Business Property Insurance and Business Income Insurance or they bundle them with Business Owners Policy (BOP), which is cheaper. As they take note of risks they can add on optional coverages. Workers compensation is required by law if the business has one employee or more. If you live in a flood zone or have a higher risk than most of experiencing a flood where your business is located, you’d be wise to buy Commercial Flood Insurance.

Here are all business insurance coverages and scenarios in which they apply ^[4][5][6]:

1. General Liability: If a person comes in to inquire about your products or services and trips over your equipment and breaks a leg, you’d be liable for their injuries. General liability, in this situation, would pay for the third party’s medical bills, up to limits. Anyone who is not an employee (employees can file workers compensation) is a potential liability if they get hurt
2. Business Property Insurance: Say there is a robbery or major vandalism to your work space and the tools you need for your job are stolen and/or destroyed. Whether you own or rent the building the business is housed in you’re covered with business property insurance to repair the space. You’re also covered for expensive equipment used for the job. Without business property insurance, you’d be at a total loss and would have to repair and replace everything out-of-pocket. Other perils besides robbery are covered, such as severe storm damage.
3. Business Owners Policy (BOP): A business owners policy (BOP) combines general liability insurance, property insurance and business interruption insurance, also called business income insurance (#5 on this list). It’s a great savings compared with buying each coverage separately..
4. Commercial Flood Insurance: In mid-April Florida had a huge flood that was a 1 in 1,000 year event! You never know when you’ll experience flooding with severe weather these days, but your best bet is to have this coverage if you’re even in moderate flood zones.
5. Business Income Insurance: Let’s say your roof caved in at your hair salon and you had to close for an entire week to get it fixed. You’d lose clients and your employees would too. Now, hair salons are interesting because some staff are paid employees and others rent a chair. Either way, it’s on you as the owner to pay these people and pay the bills despite the hiccup in business. If this were to happen to you, business income insurance would help you fill the gap in work with a check so you can resume business without being in the hole.
6. Commercial Auto Insurance: A big mistake people make is that they don’t buy commercial auto insurance. But what happens if you are a real estate professional and you have an accident after an open house? Insurers rarely cover an accident for a car that’s used for business purposes. They may look into why you were on the road and determine that you are not covered with your personal auto policy. Even if you use the vehicle for personal use too, it’s a good idea to speak with your agent about your commercial use so you have coverage without buying two auto policies.
7. Professional Liability Insurance: Also called Errors and Omission (E&O) coverage or Malpractice insurance, will protect you in cases of negligence or for failure to perform professional duties. Let’s say you are a dog groomer and you were negligent with a dog and it ran outside and got hit by a car. Professional liability would cover you. If you’re an accountant and your work caused losses, you’d be covered if a claim was filed against you.
8. Cyber Liability Insurance: What will you do if there is a data breach and all your customers’ personal and banking information was compromised. Without cyber liability insurance, you’ll have to take care of restoring your network security and litigation expenses.
9. Home-based Business Insurance: Home-based business insurance can be bought as a homeowners insurance endorsement or a traditional commercial policy. It’s required if you have one or more employees and may also be required if you have a business loan.
10. Directors and Officers Insurance: This type of business insurance that protects directors and officers of a company when they are sued for alleged wrongdoing while serving in their roles as corporate executives.
11. Life Insurance: When you pass away, a death benefit may be divided amongst beneficiaries, one of which can be a business. It’s not uncommon for founders to leave their companies a legacy. You may or may not want your business to thrive in your absence, but if you do, this is one tax-saving way to do it.
12. Workers Compensation Insurance: In most states, you are required to have workers compensation insurance if you have one or more employees, in case they are injured or fall ill due to their job. Workers compensation pays for healthcare costs, lost wages and more. Without it, you may be breaking the law and you may risk a lawsuit against your business.
13. Commercial Crime Insurance: With retail crime on a steady incline over the past few years, this is essential coverage for any retail business.
14. Landlord Insurance: If you regularly rent a property you own or have a mortgage on, you’ll need landlord insurance.
15. Excess Liability Insurance: Excess liability insurance is a type of insurance policy that provides higher coverage limits when placed on top of an original, primary policy.
16. Employment Practices Liability Insurance (EPLI): EPLI provides coverage against claims made by employees alleging: discrimination or wrongful termination.

Which Coverages Does Your Business Type Need?

Some clients will require a particular type of coverage or even a bond before they do business with you. Some will even ask for an ACORD certificate of insurance. There are also some coverages required by law. Here is a list of common coverages per business type:

Decide what kinds of business insurance coverage you need to stay afloat before comparing quotes for the best price.

Starting a new business can be just as exciting as you imagined it would be, but you must still do your due diligence by finding the right insurance before you officially begin. One insurer may offer you a policy that is hundreds of dollars less than what you’re paying now for a more robust policy. Also, it’s important to shop at least once a year. Your rate drops if you file no claims and fluctuates according to market conditions. If you enter your zip code on this page, you can get started on finding the right price for free.