Insurance policy and dollar bills on an office desk. Concept: Business insurance
Timothy R
By: timothy-ronaldson
Read in 14 minutes

What Types Of Business Insurance Does Your Small Business Need?

As a business owner, you need to have different types of business insurance to keep your company protected in times of need

Small business insurance is imperative to help your business get through tough times if they ever happen. It protects your business in situations of liability claims if you suffer property damage, or in other unfortunate scenarios.

If you don’t have the right insurance in place, you could find yourself in a very difficult position if the unexpected occurs. You could be held liable for damages sustained by employees hurt on the job, for example, or against a claim from a client and/or business partner.

That’s why having the proper business insurance coverages is of the utmost importance.

What types of insurance does a small business need?

Many business owners think that insurance is an unnecessary expense. After all, having the insurance needed for small business might be a big investment, but it’s definitely a very important one. It will help you protect yourself, your company, your finances, and your assets.

Partnering with an insurance company is vital if you want to run a successful business.

But exactly what type of insurance you need depends on a number of factors. These include the type of business you have, whether you have employees, whether you drive for your business, what state you are located in, and what industry your business is in. And while some types of coverages are not typically compulsory, some others are obligatory (see the next sections to discover what are the most common coverages and the ones required by law).

The most common business insurance you may need

These are some of the most common different types of insurance for small business:

  • General liability insurance
  • Professional liability insurance
  • Commercial property insurance
  • Employment practices liability insurance
  • Umbrella insurance
  • Liquor liability insurance
  • Product liability insurance
  • Directors and officers insurance
  • Business income insurance
  • Business owner’s policy (BOP)
  • Employment practices liability insurance
  • Commercial Auto Insurance
  • Cyber insurance
  • Errors and omissions insurance
  • Board member liability insurance
  • Commercial crime insurance or Crime related losses insurance

Different types of liability insurance?
Both types protect you against third party claims. General liability covers risks that are physical, like bodily injury or property damage. On the other hand, professional liability insurance is made for businesses that offer professional services and covers risks like errors and omissions.

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Types of business insurance required by law

But out of all these different types of business insurance, some you need to have to comply with the federal government if you have employees. If you don’t have them, we recommend you find the best insurance company and get them as soon as possible.

These required types of insurance are:

  • Workers’ compensation insurance
  • Unemployment insurance
  • Disability insurance

And, depending on your state, there might be additional types of small business insurance you are required to have.

Types of business insurance coverage by industry

Not all businesses are the same. Exactly what you need will depend on your small business, if you have employees, or your industry. You will need different types of business liability insurance policies depending on your industry.

Business property insurance is one of the most important types of coverage for any small business.

Below, we’ll break down the type of insurance you should have in a few specific industries.

young woman using knife in commercial kitchen representing bodily injury and business insurance

Business Insurance Types Needed in the Restaurant Industry

Small businesses in the restaurant industry are recommended to carry some general insurance policies as well as some specific policies for their type of business. Your insurance company might have special packaged coverages that include all the policies you need in a restaurant.

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Liability policies

First and foremost, restaurants should carry commercial general liability insurance

This will protect your business in case a patron sues your restaurant due to damages sustained while at your restaurant. For example, a bodily injury or bodily harm: if a patron slips and falls on a wet floor at your restaurant, your commercial general liability insurance will cover these losses. This insurance will also cover other potential losses.

A good insurance company might offer a Business Owners Policy. This insurance covers the same things that business property and business liability insurance cover.

If your restaurant serves liquor, you’ll also want to consider carrying liquor liability insurance. It could happen that, people who you served alcohol get injured after they leave, sue your restaurant to try to hold it accountable for the injuries sustained. Your liquor liability business insurance would cover you in this case.

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Property insurance

You’ll also want to carry property coverage to protect your building and the contents of your restaurant. This will cover your business in the case of vandalism, fire, flooding, or any other types of natural disaster, for example. This will cover the losses of your restaurant and its contents sustain. Insurance to protect your business equipment is important too.

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Employee coverage

If you run a restaurant, you have employees. Therefore, it’s important that you cover workers’ compensation in case an employee is hurt while on the job. Burns, falls and other injuries can sometimes occur in a restaurant, so you’ll want to make sure you have a business insurance plan that can cover your employees’ medical bills and expenses, lost wages, and rehab costs.

It’s also a good idea to have good health insurance for your employees.

The average annual cost of these types of insurances for a restaurant is about $4,300.

Of course, this cost will vary greatly depending on your location, the size of your business, and what types of insurance plans you choose.

woman engineer thinking about the right insurance for a new project in power plant

Business Insurance Needed in the Construction Industry

If you are in the construction industry, you will most likely be required by law to carry specific business insurances, what types you will be required to have, and how much they cost, will depend on your state. Consult with an insurance company in your locality.

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Liability policies

The first type of business insurance you should carry is general liability insurance.

This type of insurance policy will cover your business for the most common accidents that happen on a construction site. Included in this are bodily injuries to people and any damage to property that happens while you or your employees are working on a job site.

The median policy premium of this type of insurance varies between $361 and $924 per year.

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Employee coverage

The second type of business insurance you should carry is workers’ compensation.

Injuries can happen because of the physical activity and the use of heavy machinery that is required of employees in construction. This policy will cover your employees in case they get injured on the job.

This type of insurance ranges from 75 cents per $100 in employee wages to $2.74 per $100 in employee wages, depending on your state and the insurance company you select.

You can also offer health insurance to your workers, they will appreciate the help with their medical expenses.

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Vehicle or car insurance

Because most likely you will have company vehicles that you, and possibly even employees, will drive for the job, it’s important that you carry commercial auto insurance as well. Any person who drives one of your company vehicles for a job is required by law to have auto insurance. With this auto coverage, you’ll keep your assets safe.

The average cost of this insurance for business owners ranges from $750 to $1,200 annually per vehicle.

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Other types

Small businesses in the construction industry also should consider license/permit bonds. This type of business insurance protects you in case a contractor you hire doesn’t deliver on their responsibilities as outlined in a contract.

You can expect that the median policy premium from your insurance company is between $100 to $185.

Businessman walking in hotel lobby, showing the risk of being hurt and the importance of different types of liability insurance

Business Insurance Needed in the Hospitality Industry

Those small businesses in the hospitality industry are recommended to carry the main types of business insurance: 

  • general liability insurance
  • commercial property insurance
  • workers compensation insurance
  • employees health insurance
  • commercial vehicle insurance
  • liquor liability insurance

The insurance needs for the hospitality industry can vary greatly depending on the type of business you own and where it is located.

For example, if you run a resort hotel on the beach, you will probably want to carry business interruption insurance or another type that protects you from floods or other natural disasters and covers lost income.

Your costs will also be significantly higher in this situation compared to the costs if you own a small boutique hotel.

You can definitely find an insurance company specialized in the hospitality industry.

The average business insurance costs for a limited-service hotel may be approximately $280 per available room, while that cost may average $1,126 per available room in a resort hotel.

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Property coverage

You’ll also want to make sure that you carry building insurance and contents insurance to protect both the building and everything inside in case of a fire, flood, vandalism, burglary, or other events.

These small business insurance types are extremely important in the hospitality industry, as the buildings are large and often have a lot of valuable things inside.

A company property and casualty insurance includes many of these things.

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Liability insurance

In addition to those forms of insurance, you need general liability to protect you from potential accidents, as well as food-borne illness and liquor liability coverage (if you serve food and drinks).

You might also want to consider carrying business insurance for product liability if your business will sell products, and you want to make sure your business is protected in case a product you sell causes injury or sickness to one of your customers.

Keep learning: What a Corp to Corp (C2C) is 

happy business owner smiling because he has business liability insurance policies to keep a strong and successful small business

While you need to protect your business, don’t forget yourself with a life insurance policy and your personal assets with other types of personal property insurances.

Find the Right Business Insurance for Your Company

While having good business insurance coverage is not a cost that most business owners like to pay, but it’s a necessary evil if you own a business, no matter what industry you’re in. All of these insurance products will help you ensure that your business grows. The good news is that there are a variety of insurance companies with pricing that can adapt to your needs.

Insurance can help protect your business.

There are situations that arise when you own a business that may result in you getting sued or being liable for damages someone else incurs.

At the same time, you may have a situation where your business sustained damages as a result of bad weather.

In all of these circumstances, having a good business insurance policy will ensure that you don’t suffer too many long-term damages as a result. While insurance can sometimes be more expensive than what you intended to spend, it’s always a good financial decision to have proper business insurance, as it can save you a lot of money if you run into any problems or inconveniences.

If you need extra money to help you pay for business insurance or other costs, consider taking out a business loan with us. Whatever your financial needs, Camino Financial is here to help, after all, our motto is “No Business Left Behind.”

By using our small business loan calculator, it’ll be easy to figure out how much a business loan might cost you. Simply plug in your desired loan amount, payment term, and monthly interest rate, and you’ll be able to see how much your monthly payment will be.

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