13 Types Of Business Insurance You Should Consider

I’ve spent years helping businesses figure out which insurance they actually need versus which coverages agents try to upsell them on. The answer depends almost entirely on what your business does, how many employees you have, and what assets you’re trying to protect. A home-based freelance writer and a restaurant with 20 employees face completely different risks, and their insurance stacks should look nothing alike.

Below, I break down 13 types of business insurance, what each one covers, who actually needs it, and where the gaps are that catch business owners off guard. Some of these are legally required. Others are optional but worth every dollar if you ever face a claim. I’ve included current cost data and industry statistics where they matter.

1. Business Owners Policy

Insurers often combine more than one type of insurance coverage in a single package, which is then sold as one contract. This is the case in a business owners policy (BOP), which often includes property, liability, crime, and other types of coverage in one policy. However, they do not include workers’ compensation, health, disability, or auto insurance.

Because of the bundling, a BOP often sells at a reduced premium. Geared toward small and mid-sized businesses, BOPs can be more cost-effective than purchasing separate specialized policies. Eligibility requirements vary with the insurer, but they generally have limitations based on the class of business, location, size, and revenue.

Most BOPs are designed for businesses with fewer than 100 employees and under $5 million in annual revenue. If you outgrow those thresholds, you’ll likely need to transition to standalone policies for each coverage type.

The average BOP costs roughly $83 per month according to Insureon’s data on policies sold to small business customers, though a construction firm will pay several times what a consulting practice does. One thing I like about BOPs is that they’re customizable. You can usually add endorsements for equipment breakdown, hired and non-owned auto, data breach response, and business income coverage without buying separate policies.

2. Workers’ Compensation Insurance

Every state except Texas requires employers to carry workers’ compensation insurance, though the trigger point varies. Most states require coverage once you hire your first employee. A handful of states set the threshold at three, four, or five employees, and the rules can differ by industry. Agricultural employers, domestic workers, and sole proprietors face different requirements depending on where they operate.

It pays for medical care and replaces a portion of lost wages for the employee who is injured or becomes sick due to their job.

These claims do not take into account who is at fault, so it has no effect on the benefit amount.

In case an employee passes away due to work-related injuries, their family or estate will receive the benefits as stipulated in the contract. Employees receiving benefits under workers’ compensation insurance cannot sue so you avoid legal expenses and complications.

Four states operate monopolistic funds where you must buy coverage directly from the state: North Dakota, Ohio, Washington, and Wyoming. In those states, private insurers cannot sell workers’ comp policies. Everywhere else, you can purchase through private carriers, state competitive funds, or qualify for self-insurance if your business is large enough.

Workers’ comp rates saw only about a 1% increase in mid-2025, making it one of the most stable commercial lines. But don’t confuse rate stability with low cost. A roofing contractor will pay dramatically more per $100 of payroll than an accounting firm because the experience modification rate is based on industry classification and your own claims history. If your experience mod is above 1.0, you’re paying a surcharge. Below 1.0, you’re getting a discount.

3. Commercial Liability Insurance

Any business faces the risk of being sued due to human error, product issues, customer discontent, or other factors. Legal experts say most businesses are sued at least once, even when they follow best practices.

Commercial general liability insurance protects your business from the repercussions of liability due to your business’s negligence.

Negligence, in this case, means the failure to exercise the required amount of care to prevent injury to others, such as a customer, an employee, or even an innocent bystander, due to your business’s actions, services, or products.

For example, if a truck driver strikes another vehicle and injures a passenger in part because the company scheduled him to work 60 hours that week, that may be construed as company negligence. It could be argued that the company overworked the driver, which created an unsafe situation.

If someone sues your business, general liability insurance will kick in to cover legal fees, medical expenses, settlements, judgments, or appeals. It also protects your business against libel and slander.

And there’s another reason you need liability insurance. Some clients won’t work with your company unless you have it. This is a way for them to manage their own risks: they don’t want to rely on a company that may not be able to deliver because of a lawsuit.

Small businesses pay a median of about $45 per month for general liability. The Hartford puts its average at about $810 per year. Most small business owners carry $1 million per-occurrence and $2 million aggregate limits, which is the standard contract requirement you’ll see in most commercial leases and client agreements.

A Hartford study from 2025 found that slip-and-fall claims account for about 20% of all small business insurance claims, with an average cost of $45,000 per claim. That single statistic should end any debate about whether general liability is worth the premium.

A Note About Products Liability

Some industries have to carve out certain coverages typically covered under the General Liability policy due to the specific risks of the work they’re doing.

For example, a manufacturer will often need to obtain a separate Products Liability policy if they are making edible items or products that carry a higher degree of risk. This will protect the business if someone or something gets hurt due to their product.

It can also include coverage for product recalls if the manufacturer realizes an error in their product and needs to alert people to return it and compensate them if needed.

4. Business Auto Insurance

If you have company vehicles, then you should consider business auto insurance. This type of policy provides three main types of coverage for vehicles owned by a business:

Commercial auto led all coverage classes in rate increases during 2025, rising 6.7% in both Q1 and Q2 according to MarketScout. Distracted driving claims and rising vehicle repair costs are the main reasons. If your fleet premiums jumped at renewal, you’re not alone.

Insurance for Non-Owned or Hired Autos

If your business doesn’t own any vehicles, you may think you don’t need auto insurance. But Hired and Non-Owned Auto Liability exists specifically for businesses without commercial vehicles. It’s two separate coverages typically combined in insurance discussions.

Non-Owned Auto Liability

In the event you or your employees are using personal vehicles in the course of business, it leaves the organization unprotected. Personal auto policies do not extend coverage to a business.

For example, if your employee runs out to make a bank deposit and causes an accident, they are personally responsible. But the business could be held responsible as well. With Non-Owned Auto coverage, the company’s assets are protected.

Hired Auto Liability

If you or your employees ever rent or lease vehicles for business reasons, this coverage is worth having. The most common scenario occurs with rental vehicles. If your employee gets a rental car on their way to an out-of-town convention for work and they cause an accident, the driver is held responsible. In this case, the business is also vicariously liable and could face out-of-pocket costs without Hired Auto Liability.

Drive Other Car Coverage

On the flip side, if you are given a company vehicle and don’t own a personal vehicle or have personal auto insurance, you want to make sure you add Drive Other Car Coverage to your Commercial Auto policy. If there was ever a time when you need to borrow or test drive a car for personal reasons, your commercial auto policy may not cover non-company owned vehicles and you could be exposed.

5. Commercial Property Insurance

Commercial property insurance protects business property from loss or damage. Environmental forces, such as hail, lightning, fire, smoke, and wind, can strike quickly and harshly. Other threats like vandalism, theft, and civil disobedience may wipe out operations if you lack coverage.

Two basic types of commercial property insurance exist: named peril and all-risk. Named peril insurance policies only cover the specific risks listed in the policy. Earthquake and flood insurance are two examples.

They are less expensive, and the insured must prove that the peril caused the damage. On the other hand, most commercial property insurance policies are all-risk policies.

They cover any risk, except those listed as exclusions in the policy. Common exclusions are war, earthquake, flood or sewer backup, seepage, boiler explosion, governmental restrictions or interventions, as well as ordinary wear and tear. As these policies include most damage, insurance companies must prove that damage is due to exclusion to avoid paying out a claim.

I see a lot of business owners who haven’t updated their property coverage limits in years. With construction costs up and replacement values rising, an insured amount that was adequate in 2021 may leave you significantly underinsured in 2026. Your insurer should be doing a replacement cost analysis at renewal. If they’re not, ask for one.

Commercial property rates rose 3.6% in Q2 2025 per MarketScout, consistent with Q1. That’s actually an improvement from the sharper increases seen in 2023 and 2024, when catastrophic weather losses were driving double-digit hikes in some coastal and wildfire-prone areas.

6. Key Person Insurance

Usually, large corporations or larger businesses purchase this type of policy. Key person insurance is basically a disability or life insurance product that compensates a business if an important employee dies or becomes disabled. This coverage helps soften the financial blow that would result from the loss of an employee who is critical to business operations.

But it’s not only large companies that benefit. Any business where one person holds relationships, knowledge, or skills that would be extremely expensive to replace should consider key person coverage. If your top salesperson generates 40% of your revenue and they’re suddenly unable to work, the payout from a key person policy buys you time to recruit and train a replacement without bleeding cash.

The business owns the policy, pays the premiums, and receives the benefit. Premiums are not tax-deductible, but the death benefit is generally received tax-free.

7. Business Interruption Insurance

Disasters befall many businesses. Water tanks burst, structures weaken, and personnel make costly mistakes. Unpredictable natural events like flash floods, tornadoes, hurricanes, and fire can unexpectedly shut down a business too. They can wipe out stock, ruin equipment, and even topple buildings.

Although commercial property insurance pays to fix or replace equipment, buildings and your inventory, it does not cover the money lost because you cannot continue operations. If your building is under three feet of water, or every piece of specialized machinery needs replacement, it could take months to start up again.

You could lose valuable staff members because they can’t afford to stick around once their paycheck stops coming. As time drags on, customers will need to look for another company to supply them with what they need. Without the proper insurance, your business finances could stretch to the breaking point.

Business interruption insurance provides you with funds to compensate for your loss of income immediately after a forced shutdown and while your business cannot operate. This income includes your net loss, your operating expenses and your payroll.

It pays your mortgage payments, utilities, and taxes even though your business has temporarily ground to a halt. Business interruption insurance is especially important if you carry a substantial amount of stock or you need specialized premises to operate.

The part that trips people up is the waiting period. Most business interruption policies have a 48- to 72-hour waiting period before coverage activates, and some go as long as 30 days. That gap can cost you thousands depending on your daily revenue. I always recommend checking the waiting period before you sign, because it’s often negotiable.

8. Data Breach

A data breach policy covers the costs of responding to an unauthorized exposure of personal or sensitive information, whether the breach involves electronic files or paper records. This means notification costs, credit monitoring services for affected individuals, forensic investigation expenses, and in some cases regulatory fines.

The FBI’s Internet Crime Complaint Center received 858,532 reports of suspected online crime in 2024, with victims reporting financial losses totaling nearly $16.6 billion. Those are only the incidents that were actually reported. Many smaller breaches go unreported because the business either doesn’t realize it happened or doesn’t want the attention.

The average cost of a data breach globally hit $4.88 million in 2024, according to IBM’s annual Cost of a Data Breach Report. Healthcare breaches are even more expensive, averaging $9.77 million. Even if your business isn’t in healthcare or finance, any company that stores customer names, emails, payment information, or Social Security numbers is holding data that has real value to criminals.

A standalone data breach policy is typically inexpensive for small businesses because the limits are lower and the scope is narrower than a full cyber liability policy. It’s a reasonable starting point if your budget doesn’t stretch to a full cyber policy yet.

9. Cyber Liability

Cyber liability goes beyond data breach response. It covers a broader range of digital risks including ransomware attacks, business email compromise, wire fraud, network security failures, and third-party lawsuits arising from a cyber event. If data breach insurance is a first-aid kit, cyber liability is the full emergency room.

Cybersecurity Ventures projected global cybercrime damages at $10.5 trillion annually by 2025, up from $3 trillion in 2015. Even the more conservative estimates from groups like the FBI and McKinsey put the real, measurable cost at somewhere between $1.2 and $1.5 trillion per year. Either way, it’s an enormous drain on businesses of all sizes.

Small businesses get hit disproportionately hard. More than half of all cyberattacks target small and mid-sized businesses, and 60% of those that suffer a breach go out of business within six months, according to data cited by Cybersecurity Ventures. Ransomware operators know that smaller companies are less likely to have usable backups, incident response plans, or the cash to survive extended downtime.

Cyber liability premiums have moderated recently. MarketScout reported just a 1% increase in Q2 2025. But don’t let that fool you into thinking coverage is easy to buy. Underwriters have gotten much pickier about who they’ll insure. They want to see multi-factor authentication, endpoint detection, encrypted backups, and employee security training before they’ll issue a policy. If you can’t demonstrate those controls, expect either higher premiums or outright declination.

When discussing Cyber Liability, be sure you and your agent have a good understanding of exactly what coverage the policy is providing. The gap between what people think their cyber policy covers and what it actually covers is one of the biggest problems I see. Social engineering fraud, voluntary wire transfers, and acts of war are commonly excluded or sublimited.

10. Employment Practices Liability

If your business has employees, then Employment Practices Liability is becoming a must. The EEOC received 88,531 new charges of discrimination in fiscal year 2024, a 9.2% increase over the prior year. That’s the third consecutive year of rising charge volumes. The EEOC also secured nearly $700 million for over 21,000 victims of employment discrimination in the same period, the highest monetary recovery in the agency’s history.

Retaliation remains the most frequently filed charge type, making up nearly 50% of all EEOC filings in 2024. Disability discrimination, race discrimination, and sex discrimination round out the top four categories. The Pregnant Workers Fairness Act, which took effect in mid-2023, has already generated a surge in charges, jumping from 188 in its first partial year to 2,729 in fiscal year 2024.

An Employment Practices Liability policy pays legal expenses and other fees for your business if there are ever allegations of unfair hiring or terminations, discrimination, harassment, or incorrectly paid wages.

It not only protects the business if employees are the ones accused of the unfair treatment (considered First Party Liability) but also protects the business if the harassment came from non-employees such as vendors or delivery drivers (called Third Party Liability.)

While businesses strive to do what is right, the key to this coverage is that it covers allegations of unfair treatment. You don’t need to have actually done anything wrong to get sued, and defending even a baseless claim can cost $75,000 to $250,000 in legal fees. The Employment Practices policy can pay for the attorney fees to defend any allegation of these acts.

11. Professional Liability (or Errors and Omissions Coverage)

The need for professional liability coverage is becoming common. It was originally designed for professional service providers such as attorneys, accountants, physicians, engineers, insurance agents, and realtors, jobs where clients make decisions based on your professional advice.

It provides coverage when the end product is a professional opinion. However, more industries require this coverage and it is commonly being offered for contractors, advertisers, and consultants of all types.

For example, let’s assume a contractor installs a driveway and it begins to crack after a week. After an investigation, it is found that the concrete was mixed incorrectly. It would be the contractor’s responsibility to replace the driveway.

It would be considered faulty workmanship and not covered under the General Liability policy. But the expenses to replace it could be provided under the contractor’s Professional Liability policy.

Without this coverage, the business would be left to pay for the loss on its own.

Professional liability rates saw only about a 1% increase in Q2 2025, making it one of the softer markets right now. If you’ve been putting off buying E&O because of cost, this is a good time to get quotes. For most service-based small businesses, premiums run between $500 and $1,500 per year.

12. Employee Benefits Liability

If your business has employees and offers benefits such as health insurance, pension, vacation, tuition assistance, unemployment, etc. this coverage is a must. It provides protection for any administrative errors or incorrect explanations of benefits by the business.

Benefits administration is a tedious process and mistakes do happen. For example, if a new employee was inadvertently left off the health insurance and 6 months later had a serious injury only to realize their health insurance was not in effect, Employee Benefits Liability would respond. Otherwise, your employee would most likely sue the business directly to get the medical bills covered, at the least making it an uncomfortable work environment for all involved.

This is one of those coverages that sounds obscure until you need it. I’ve seen claims where an HR manager gave incorrect information about what a health plan covered, the employee relied on that information, and the business ended up on the hook for six figures in medical costs. The EBL policy would have handled that defense and settlement.

13. Foreign Liability

Depending on the type of work you’re doing and the frequency of international travel you need to do, you may need to consider foreign liability coverage. It provides coverage for bodily injury and property damage occurring overseas, including claims and suits brought in foreign jurisdictions.

A typical General Liability limits coverage to charges filed in a defined territory, which is usually the United States, Canada, and Puerto Rico. Most will not cover legal expenses and lawsuits brought in other foreign courts.

If you send employees abroad regularly, have international clients visiting your facilities, or perform any contracted work outside the U.S. and Canada, this coverage fills a real gap. Even a short-term project overseas can generate a claim that your domestic policy won’t touch.

These six insurance coverages are a good start at comprehensive insurance protection for your business. Keep in mind that depending on your exact operations, there could be special insurance you may need to take a look at.

Things like Trash Keepers coverage for apartments offering valet trash service and Non-owned Spacecraft coverage for universities sending projects into space on private spaceships are even available.

What Does Business Insurance Cost?

Costs vary dramatically by industry, location, payroll, and claims history. These are typical small business premiums based on data from insurers and insurance marketplaces:

These figures represent medians for small businesses with fewer than 50 employees. Construction, manufacturing, and food service businesses will typically pay above these ranges. Low-risk office-based businesses may pay below them.

Conclusion

Having the right insurance policies could literally save your business and ensure its continued profitability. Knowing about the basic types available is half the battle; purchasing the necessary coverage is the other. So get the insurance you need to help make sure that your business remains yours and remains solvent.

I’d add one more thing. Review your policies every year, not just at renewal. Your business changes faster than your insurance keeps up with. New hires, new services, new equipment, new locations all create exposures your current policies may not cover. A 30-minute annual review with your agent costs nothing and can prevent a six-figure gap in coverage.