Running a small business comes with risks—property damage, lawsuits, employee injuries, and more. Without proper insurance, a single unexpected event can lead to financial ruin. But what type of business insurance do you need?
In this guide, we’ll explore the best small business insurance policies, their costs, and how to choose the right one for your needs in 2025.
Why Small Business Insurance Matters
1. Legal Protection
Lawsuits can happen at any time, whether from customers, employees, or other businesses. Liability insurance helps cover legal expenses and settlements.
2. Asset Protection
Property insurance covers damages to office buildings, inventory, and equipment due to fire, theft, or natural disasters.
3. Employee Coverage
Workers’ compensation provides medical and wage benefits if an employee is injured on the job.
4. Contract & Loan Requirements
Many clients, landlords, and lenders require businesses to carry specific types of insurance before signing contracts or approving loans.
Best Small Business Insurance Policies for 2025
1. General Liability Insurance – Essential for All Businesses
Covers:
- Customer injuries (slips, falls, etc.).
- Third-party property damage.
- Libel, slander, and advertising injuries.
Best Providers: Hiscox, The Hartford, Next Insurance
Average Cost: $40-$80/month
2. Professional Liability Insurance – Best for Service Providers
Also known as: Errors & Omissions (E&O) Insurance.
Covers:
- Mistakes and negligence claims.
- Missed deadlines or failure to deliver promised services.
- Legal defense costs.
Best Providers: Chubb, Travelers, CNA Insurance
Average Cost: $50-$150/month
3. Business Owner’s Policy (BOP) – Best Bundle for Small Businesses
Combines general liability and commercial property insurance into one affordable package.
Covers:
- Customer injuries and legal claims.
- Damage to business property (buildings, inventory, equipment).
- Business interruption coverage (lost income due to covered disasters).
Best Providers: State Farm, Nationwide, Liberty Mutual
Average Cost: $80-$200/month
4. Workers’ Compensation Insurance – Required if You Have Employees
Covers:
- Employee medical expenses for work-related injuries.
- Lost wages during recovery.
- Employer liability if sued by an injured employee.
Best Providers: Travelers, AmTrust, The Hartford
Average Cost: Varies by state and industry; typically $0.75-$2 per $100 of payroll.
5. Commercial Auto Insurance – Essential for Business Vehicles
Covers:
- Accidents involving business-owned vehicles.
- Property damage and medical expenses.
- Uninsured motorists.
Best Providers: Geico, Progressive, Farmers Insurance
Average Cost: $100-$200/month per vehicle
6. Cyber Liability Insurance – Best for Online & Tech Businesses
Covers:
- Data breaches and cyberattacks.
- Customer notification and credit monitoring.
- Legal fees and penalties.
Best Providers: Hiscox, Chubb, AXA XL
Average Cost: $50-$150/month
7. Product Liability Insurance – Best for Manufacturers & Retailers
Covers:
- Claims of defective or harmful products.
- Legal defense fees and settlements.
- Medical costs from customer injuries.
Best Providers: The Hartford, Liberty Mutual, AIG
Average Cost: $50-$200/month
8. Business Interruption Insurance – Best for Disaster Recovery
Covers:
- Lost income due to events like fires, natural disasters, or forced closures.
- Fixed expenses like rent and payroll.
- Temporary relocation costs.
Best Providers: Nationwide, Allstate, Travelers
Average Cost: Typically included in BOP; standalone policy costs $40-$120/month.
How Much Does Small Business Insurance Cost?
Estimated Monthly Premiums by Business Type
| Business Type | General Liability | BOP Policy | Workers’ Comp |
|---|---|---|---|
| Retail Store | $50 – $80 | $100 – $250 | $80 – $200 |
| Consultant/Freelancer | $40 – $60 | $80 – $150 | N/A |
| Restaurant | $75 – $150 | $150 – $350 | $100 – $300 |
| Construction Company | $100 – $250 | $250 – $500 | $200 – $500 |
How to Choose the Right Small Business Insurance
Step 1: Assess Your Business Risks
- Does your business involve physical interactions with customers? (General liability is a must.)
- Do you provide professional services? (Get professional liability coverage.)
- Do you have employees? (Workers’ comp is legally required in most states.)
Step 2: Compare Quotes from Top Providers
- Use online comparison tools from Hiscox, The Hartford, and Progressive.
- Work with an insurance broker for tailored advice.
Step 3: Choose a Reputable Insurer
- Look at financial strength ratings (AM Best, Moody’s, J.D. Power).
- Read customer reviews for claim processing speed and customer support.
Step 4: Customize Your Coverage
- Higher deductibles lower premiums but increase out-of-pocket costs.
- Add optional endorsements (e.g., cyber insurance for online businesses).
Step 5: Review & Update Annually
- As your business grows, adjust coverage limits.
- If you expand into new services, update your policy.
FAQs & Final Thoughts
FAQs
1. What’s the most important type of small business insurance?
General liability insurance is essential for most businesses, covering customer injuries, legal fees, and third-party property damage.
2. Is small business insurance required by law?
Some types are legally required, such as workers’ compensation (if you have employees) and commercial auto insurance (if you use business vehicles).
3. How can I save money on business insurance?
- Bundle policies into a BOP (Business Owner’s Policy).
- Increase your deductible to lower premiums.
- Maintain a good claims history to get lower rates.
4. Do freelancers need business insurance?
Yes. Professional liability insurance protects against claims of negligence, errors, or contract disputes.
Final Thoughts
Small business insurance is a crucial investment in protecting your company from unexpected risks. By choosing the right policies, comparing providers, and tailoring coverage to your needs, you can ensure your business stays protected while keeping costs manageable.
Key Takeaways:
- General liability and a BOP policy are essential for most small businesses.
- Compare multiple quotes to find the best coverage at the best price.
- Review and update your policies annually as your business grows.
Ready to get insured? Start comparing quotes from top providers today to secure the best coverage for your small business!
