What Is Business Insurance and How Does It Work?

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Business insurance protects companies both large and small from liability and property damage claims and other risks. The cost of coverage will vary depending on the various types of insurance you include in your policy.

Learn about the different business insurance types you can purchase, their cost, and how you can get the right coverage for your company.

Key Takeaways

  • Business insurance can cover a wide range of risks and liabilities including property damage, bodily injury liability, cyber threats and workplace injuries.
  • Businesses that employ workers are usually required to have unemployment, disability insurance and workers’ compensation.
  • The cost of business insurance varies depending on the types of coverage you include in your policy.

Do I Need Insurance for My Business?

Small business owners as well as large companies will likely be required to carry at least some level of commercial insurance, either for licensure or if they have employees. Keep in mind that state and federal requirements will differ. To find out what types of insurance are required for your business, you can contact your state's insurance department or a licensed insurance agent.

It is recommended to consult an attorney who specializes in your specific industry to ensure your business complies with necessary insurance requirements.

Failing to have the required insurance for your company can result in hefty fines you will have to pay out-of-pocket, as well as felony charges.

What Does Business Insurance Cover?

Business insurance can cover a wide range of risks and liabilities that your company may face, including:

  • Property damage: This includes damage or loss of physical assets, such as buildings, equipment, inventory and other property.
  • Liability: Coverage typically involves bodily injury or property damage caused by the business or its employees. Slip-and-falls are common types of accidents in which the business would be held liable.
  • Product liability: Business insurance can cover liability claims arising from the use of products (e.g., a helmet that does not properly protect the user’s head).
  • Business interruption: Lost income and additional expenses incurred as a result of an interruption in business operations due to a covered event, such as a fire or natural disaster can be covered.
  • Cybersecurity: Business insurance can cover losses and liabilities related to data breaches and other cyber risks.
  • Professional liability: Covers liability claims that arise from errors or omissions in professional services provided by the business, such as a breach of contract or negligence.
  • Workers' compensation: A type of insurance that provides wage replacement and medical benefits to employees who are injured or become ill as a result of their job.

How Much Does Business Insurance Cost?

The cost of business insurance will vary depending on the types of coverage you include in your policy with prices typically being $500 a month and up. The calculation of your business insurance premium depends on several factors. Some of the common factors that influence the calculation of your business insurance are:

  • Business type and size: Businesses that are involved in high-risk activities such as construction or transportation or that have hundreds of employees, may have higher premiums than a small retail store.
  • Location: If your business is located in an area with a higher crime rate or prone to natural disasters, your insurance cost may be higher.
  • Coverage types: If you choose more coverage types to include on your policy, your premium will be higher.
  • Claim history: Businesses with a history of frequent claims will have higher premiums.
  • Deductible: Choosing a higher deductible can lower your insurance cost.
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What Types of Business Insurance Are There?

There are several options you can choose from when looking for insurance for your business, depending on your needs and risks. Below is a breakdown of the various business insurance types available to you so your business can get the coverage it needs



Cost Per Month

General Liability

Protects your business from bodily injury or property damage caused by you or an employee.


Commercial Property

Office space will be covered if it is damaged or destroyed by a covered event.

$25 - $100[2]

Business Income

Also known as business interruption insurance, covers lost income and operating expenses of a business due to a covered event, such as a fire, natural disaster or other unforeseen circumstance that causes the business to temporarily close or reduces its ability to operate.


Business Owners Policy

Bundled policy that includes general liability coverage, commercial property coverage and business interruption insurance.


Errors and Omissions

Company will be covered for claims of negligence, misrepresentation, inaccurate advice and personal injury such as libel or slander. 

$42 - $83[4]

Workers’ Compensation

Provides benefits to employees that can help them recover from a work-related illness or injury.

$70 - $111[5]

Commercial Auto

Liability coverage when an employee is at fault for hurting someone or damaging another’s property while driving a company car. May also include first-party benefits, like physical damage and medical coverage.

$50 - $200[6]


Inland Marine

Equipment or tools owned by your business will be protected while in transit between job sites.



Provides income replacement to an individual in the event that they are unable to work due to a disability or illness that is not caused by work.

$25 - $500[8]

Cyber Liability

Protects businesses from financial losses due to cyber attacks or data breaches.


Commercial Umbrella

Type of insurance that provides additional liability coverage beyond the limits of a company's primary liability policies, such as general liability and auto liability.


How Do I Get Business Insurance?

You can get business insurance by looking for insurance providers that specialize in commercial coverage. Here are the steps you can follow to get business insurance:

  1. Identify the type of insurance you need: Consider whether you should purchase or are required to have general liability, property, professional liability, worker’s compensation or some other policy.
  2. Research insurance providers: You can search online, ask for referrals from other business owners or consult with an insurance broker to narrow down your search.
  3. Compare quotes: Contact the insurance providers and get quotes from them. Look at the coverage, premiums, deductibles and other terms and conditions to find the best option for your business.
  4. Apply for insurance: To provide your final rate, the insurer may ask for details about your business, such as its industry, number of employees and annual revenue.
  5. Pay premiums: The premiums may be paid on a monthly, quarterly or annual basis.
  6. Review and renew: Look at your insurance policy periodically to ensure it meets your needs. You may need to renew your policy annually or as specified in the terms of the policy.


What type of business insurance is required?

Business insurance requirements are going to differ federally and locally. For the most part, businesses are federally required to have unemployment, disability insurance and workers’ compensation, though each state may have additional requirements.[11]

Do I need business insurance for my LLC?

LLCs will usually need to purchase disability insurance, workers' compensation and unemployment if they employ workers. Certain licenses, like a real estate license, may also require you to buy business insurance.

What happens if I don’t have business insurance for my company?

Without business insurance, you may be personally liable for any damages, losses or legal expenses that arise as a result of accidents, injuries or other accidents. A costly lawsuit paid out of pocket can bankrupt your business.

Should I get a BOP?

A business owners policy is a great starting place for small business owners of small- to medium-sized enterprises because it conveniently bundles multiple types of commercial coverage, including general liability, commercial property and business interruption.

Will commercial property insurance cover my personal belongings?

It is unlikely, as commercial property insurance is meant to protect business property, such as inventory, the building structure, exterior signs, documents and landscaping. To get coverage, you’ll need to buy business personal property insurance.


  1. The Hartford. “General Liability Insurance Cost.” Feb. 16, 2023.
  2. Next Insurance. “Commercial Property Insurance Costs.” Accessed Feb. 16, 2023. 
  3. The Hartford. “How Much Does Small Business Insurance Cost?” Accessed Feb. 16, 2023.
  4. The Hartford. “Errors and Omissions Insurance Cost.” Accessed Feb. 16, 2023. 
  5. The Hartford. “How Much Does Workers’ Comp Insurance Cost?” Accessed Feb. 16, 2023. 
  6. Insurance Navy. “How Much Does Commercial Auto Insurance Cost?” Accessed Feb. 16, 2023. 
  7. AdvisorSmith. “Inland Marine Insurance.” Accessed Feb. 16, 2023. 
  8. Guardian. “The Cost of Long Term Disability Insurance.” Accessed Feb. 16, 2023. 
  9. Rogue Risk. “Cyber Insurance Cost.” Accessed Feb. 16, 2023.
  10. AdvisorSmith. “Commercial Umbrella Insurance.” Accessed Feb. 16, 2023. 
  11. Small Business Administration. “Get Business Insurance.” Accessed Feb. 16, 2023.

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