Small Business Insurance Checklist: Preparing Your Business for Insurance

What Type of Insurance Do You Need to Run a Business?

Your insurance needs for business depend on a variety of factors and your specific circumstances. And because there are many options for business insurance, it’s helpful to understand the different types of insurance out there. 

Here are the most common kinds of small business insurance:

• General liability insurance: Coverage for personal injury, property damage, and advertising injury claims made against your business.
• Errors and omissions (E&O) insurance: E&O insurance protects professionals and businesses from claims of negligence, errors, or omissions in the services they provide. It covers legal costs and settlements if clients sue over mistakes or failures in the services or advice offered by the insured party.
• Workers’ compensation insurance: Coverage for medical expenses and lost wages for employees who are injured or become ill while working for your business.
• Employment practices liability insurance (EPLI): Protects businesses against claims made by employees alleging wrongful acts such as discrimination, harassment, or wrongful termination. It covers legal costs, settlements, and judgments arising from employment-related lawsuits.
• Commercial property insurance: Protection for your business property, including buildings, equipment, inventory, and furniture, against damage or loss due to fire, theft, vandalism, or other covered perils.
• Commercial auto insurance: Coverage for vehicles owned or used by your business for work purposes, including liability, collision, and comprehensive coverage. You may need to consider employee auto insurance or commercial truck insurance for your business.
• Business interruption insurance: Coverage for lost income and extra expenses if your business is unable to operate due to a covered event, such as a fire or natural disaster.
• Cyber liability insurance: Protection against data breaches, cyber attacks, and other cyber threats that could result in financial losses or damage to your business’s reputation.
• Umbrella liability insurance: Additional liability coverage that extends beyond the limits of your other liability insurance policies.
• Specialized coverage (if applicable): Additional insurance tailored to specific risks or needs of your business, like inland marine insurance for goods in transit or equipment breakdown insurance.

A business owner’s policy (BOP) is a potentially simpler option: It’s a comprehensive insurance package designed for small to medium-sized businesses, bundling together several types of coverage into a single policy. Typically, a BOP includes general liability insurance, property insurance, and often business interruption insurance, offering cost savings and convenience for businesses seeking basic insurance coverage.

Also, check out our guide for insurance for freelancers and self-employed individuals. 

It’s a good idea to regularly review and update your insurance coverage to make sure it lines up with your business’s evolving needs and risks. 

What Does a Comprehensive Small Business Insurance Checklist Include?

Getting the right business insurance policies means looking at your specific business and its needs. Here’s a small business insurance checklist to help walk you through the process of finding the right business insurance for you.

Step #1: What kind of basic coverage do you need?

Your first box to check off when getting business coverage is figuring out which of the basics you need. The most basic form of business insurance is a liability policy, which includes both general liability and professional liability coverage. 

General liability insurance is like a safety net for businesses, helping cover costs if someone gets hurt, personal property gets damaged, or there’s a problem with advertising. 

Professional liability insurance, also known as errors and omissions insurance, protects professionals if they’re sued over mistakes or advice they give in their work. This insurance product is most frequently used in professional services like real estate, IT, and insurance.

Step #2: Do you have commercial property?

Whether you lease or own property for your business, you’ll probably want to add commercial property insurance — and your landlord or mortgage broker might require it. It covers any damage to the building that your business operates in.

This insurance would likely be included in a business owner’s policy, which bundles a few types of insurance to make it simpler for small business owners, if you choose to go that route.

Step # 3: Do you have employees?

If you’re an employer (or plan to be in the future), your insurance needs will shift. First, almost every U.S. state requires you to offer workers’ compensation. This provides medical benefits and wage replacement to employees who are injured or become ill while performing their job duties.

Another recommendation for small business owners who employ people is employment practices liability insurance. This insurance covers businesses from legal costs and settlements related to claims of wrongful acts, such as discrimination or harassment, brought by employees.

Step #4: Do you or your employees operate vehicles for work?

It may come as a surprise, but a personal auto insurance policy usually won’t offer protection for business vehicles. So you’ll likely need a commercial auto insurance policy that covers driving related to operating your business.

Step #5: Are you shipping products or equipment?

If you’re frequently shipping valuable products or equipment, it might be a good idea to get additional protection. An inland marine insurance policy covers damage that happens to equipment like computers, medical equipment, communications equipment, and more during the shipping process.

Step #6: Do you need extra liability protection?

A commercial umbrella policy might bring relief for business owners who prefer to lower their risks. This business insurance coverage provides additional liability protection beyond the limits of primary insurance policies, offering an extra layer of protection against large claims or lawsuits. It’s especially relevant if you have made a large investment in your business or want to lower your liability for any other reason. 

Step #7: How risk-averse are you?

A commercial umbrella policy might bring relief for business owners who prefer to lower their risks. This business insurance coverage provides additional liability protection beyond the limits of primary insurance policies, offering an extra layer of protection against large claims or lawsuits. It’s especially relevant if you have made a large investment in your business or want to lower your liability for any other reason. 

Step #8: Does your business need alcohol coverage?

If you sell or service alcohol, you might want to get liquor liability coverage. This protects your business from injuries or property damage from alcohol use that your general liability protection won’t cover.

By including these items in your small business insurance checklist, you can help make sure that your business is adequately protected against a wide range of potential risks and liabilities. 

What Are Some Considerations in Determining a Small Business’s Need for Insurance?

You’ll need to think through a few factors before you can determine your small business’s insurance needs. 

These include:

• Nature of business: The type of business you operate influences the types of insurance you may need. For example, a retail store may require different coverage than a consulting firm.
• Legal requirements: Some types of insurance, like workers’ compensation or commercial auto insurance, may be required by law depending on your location and the nature of your business.
• Business assets: Consider the value of your business assets, including property, equipment, inventory, and intellectual property. Insurance can help protect these assets from damage, theft, or loss.
• Liability risks: Assess potential liability risks your business may face, like lawsuits from customers, employees, or third parties. General liability insurance can provide coverage for bodily injury, property damage, and advertising injury claims.
• Business interruption risks: Think about how your business would cope if it couldn’t operate for a period due to unforeseen events like natural disasters or equipment breakdowns. Business interruption insurance can help cover lost income and ongoing expenses during such times.
• Future applications: If you’re planning to apply for specific small business loans, you might need specific kinds of insurance. SBA loans are one example of business financing that often requires applicants to have certain insurance. 
• Employee needs: If you have employees, consider their needs for health insurance, workers’ compensation, and other benefits. Providing adequate insurance coverage can help attract and retain talent while also complying with legal requirements.
• Client contracts: Some clients may require proof of insurance before doing business with you. Having the right insurance coverage in place can help you win contracts and maintain good relationships with clients.
• Financial stability: Assess your business’s financial stability and ability to absorb unexpected losses. Insurance can provide a safety net to help protect your business’s finances in case of emergencies.
• Industry regulations: Certain industries may have specific insurance requirements or risks that need to be addressed. For example, healthcare businesses may need malpractice insurance, while construction firms may require surety bonds.
• Risk tolerance: Consider your own risk tolerance and how much risk you’re willing to assume personally versus transferring to an insurance provider. Insurance allows you to mitigate risks and protect your business and personal assets from potential liabilities.

Carefully evaluating these considerations can help you determine the appropriate types and levels of insurance coverage needed to protect your small business effectively. 

Keep in mind that your ability to get business insurance can be impacted by your business credit score. If you need an intro to business credit, learn how to establish business credit from Nav’s experts today.

Which Insurance Company Is Best for Small Business?

The company that would work best for your small business insurance depends on your unique needs. 

Some popular small business insurance companies include:

• Mylo
• Allstate
• Chubb
• Hiscox
• Nationwide 
• The Hartford
• Travelers

Prices for particular kinds of insurance can vary from company to company. So it’s a good idea to get a few quotes from several business insurance providers to make sure you’re getting the best deal. 

Does Your Insurance Coverage Still Meet the Needs of Your Business?

It’s smart to check at least annually to make sure your business insurance adequately covers your needs. That way, you’re making sure you’re protected from potential risks. 

Here’s a step-by-step guide to help you determine if your business insurance still covers what you need:

1. Review your policy documents: Start by gathering all your insurance policy documents, including any amendments or endorsements. These documents outline the terms, coverage limits, and exclusions of your insurance policies.
2. Understand your coverage types: Familiarize yourself with the different types of insurance coverage you have for your business. Common types include general liability, property, workers’ compensation, professional liability (errors and omissions), commercial auto, and business interruption insurance.
3. Evaluate your business needs: Look at your current business operations and any changes that have happened since you last reviewed your insurance coverage. Consider factors like business growth, expansion into new markets, changes in revenue, new products or services offered, and any regulatory or legal changes that may affect your business.
4. Identify potential risks: Spot potential risks and liabilities that your business may face. This could include risks related to property damage, bodily injury, data breaches, professional negligence, employee injuries, natural disasters, or other unforeseen events.
5. Review coverage limits: Check the coverage limits of your insurance policies to ensure they adequately protect your business assets and liabilities. Assess whether your coverage limits are sufficient based on the value of your property, revenue, number of employees, and potential legal liabilities.
6. Check exclusions: Review the exclusions listed in your insurance policies to understand what isn’t covered. Pay close attention to any changes in exclusions or limitations that may have been introduced since you last reviewed your policies.
7. Find coverage gaps: Figure out if there are any additional coverage options that may be necessary to address gaps in your current insurance protection. For example, you may need cyber liability insurance to protect against data breaches or product liability insurance if you manufacture or sell products.
8. Consult with an insurance professional: If you’re unsure about your insurance coverage or need help evaluating your insurance needs, consider consulting with an insurance broker or agent who specializes in commercial insurance. They can provide expert advice and help you tailor your coverage to suit your specific business requirements.
9. Update your policies: Once you’ve assessed your insurance needs and identified any gaps in coverage, work with your insurance provider to update your policies accordingly. This may involve adjusting coverage limits, adding endorsements or riders, or purchasing additional insurance policies to address specific risks.
10. Regularly review your coverage: Business needs and risks can evolve over time, so it’s essential to regularly review your insurance coverage, ideally at least once a year or whenever significant changes occur in your business operations. Stay proactive in managing your insurance needs to ensure ongoing protection for your business.