Updated: August 2019
Small business insurance, sometimes called commercial insurance, helps protect a business's assets, property and income. A business owners policy (BOP) is the most common policy for small businesses, according to the Insurance Information Institute. A BOP typically includes three basic types of coverage to help protect a business: business property coverage, general liability coverage and business interruption coverage.
If you're a small business owner, you may also be able to buy additional insurance coverages to customize your policy based on your specific operation and needs.
Depending on the coverage you choose, a business owners policy helps protect your business against things like financial losses and covered perils. Covered perils may include theft, fire, wind, falling objects and lightning. It's important to read your policy documents carefully to understand which coverages are included and what perils are covered by your insurer.
Each coverage in your BOP has a coverage limit. A limit is the maximum amount your insurer will pay for a covered claim. It's also important to note that each coverage in a policy is typically subject to its own limit.
And, some coverages may come with a deductible. A deductible is the amount of money you pay out of pocket toward a covered claim.
The property coverage in a business owners policy helps protect your business's building and its contents against covered perils. For example, if there is a fire at your business, a BOP may help pay for building repairs (if you own the building). This coverage also helps replace business property, such as office furniture, computers or machinery.
Keep in mind that business property coverage will be subject to a deductible and limits. You can typically choose your property coverage limits based on the estimated cost to repair, rebuild or replace your business's property. But, if your losses exceed the coverage limit you chose, you'll then need to pay out of pocket to finish building repairs or replacement of your business's property. It's important to note that having insufficient policy limits may also result in a penalty. This is a fine you'd need to pay for not purchasing enough insurance. To help avoid penalties, make sure you purchase enough insurance to cover your business and its contents.
A business owners policy usually includes general liability coverage (sometimes called commercial general liability, or CGL). If a customer or visitor is injured at your business, and you're found liable, general liability coverage may help pay for the injured party's medical expenses. It may also help pay for legal costs if you're taken to court over an accident that occurred at your business.
Commercial general liability insurance is also subject to a coverage limit. That means if an injured person's medical bills exceed your coverage limit, you may have to pay out of pocket to cover the rest.
Business interruption coverage, sometimes called business income coverage, is also typically part of a business owners policy. This coverage helps replace lost income and extra expenses if your business is affected by a covered peril.
For example, say a tornado or fire makes your office uninhabitable. Business interruption coverage may help pay for rent costs at a temporary office while repairs are made. Business interruption coverage may also help replace lost business income due to a covered peril. Similar to other coverages in a BOP, you will be subject to a limit. You may also be subject to a time period. This means the coverage may only last for 6 months, for example, so be sure to ask an agent about specific limits.
There may be additional coverages you can add to your business owners policy. Some available coverages may include:
Talk to your agent about your specific business insurance needs, so they can help you customize your policy with coverages that may work for your situation.
The cost of a small business insurance policy depends on many factors. These factors may include what kind of business you're insuring, the types of optional coverage you choose and the deductibles and limits you select for each coverage. Get a small business insurance quote or talk to an agent to get an idea of what you might pay for a policy.
