insurance

Insurance for Small Business: Definition, Types, and Cost

  • Post author:
  • Post last modified:June 20, 2022
  • Reading time:21 mins read

If you’re a small baking business owner, you have tons of options when it comes to insurance for small business. However, no small business owner wants to go through messy paperwork and seemingly endless searching. 

So, if you are an entrepreneur looking for insurance for small business, HICAPS got your back.

In this article, we will talk about insurance for small business, its types, and its cost.

What Is Insurance for Small Business?

small business policy

Small business insurance covers a wide range of things. These include personnel, assets, income, and intellectual property.

Additionally, small business insurance types include commercial property, company income, and general liability, to name a few.

Many firms provide combination coverage as well. This particularly serves enterprises with multiple facets. 

Moreover, you’ll need to safeguard your assets, staff, customers, and income. A business owner’s policy (BOP)— the most common type of combination policy— often combines property and liability coverage. 

Furthermore, accidents can happen, so you should be legally and financially prepared for them with enough insurance. Remember, failing to do so might land you in serious legal trouble.

For example, an employee gets injured while working in your company. Perhaps a customer trips and falls in your establishment. In situations like this, you’ll require a workers’ compensation or general liability policy to cover their injuries.

Physical injuries aren’t the only dangers. For example, a corporation could use photographs from an internet search for in-store signage, only to face a copyright lawsuit for doing so. This usually happens if you don’t get express authorization from the company that owns the images.

Other bad possibilities, such as your business being robbed or your baking supplies store being devastated by a natural disaster, can also happen. You’ll very certainly need insurance for small business to cover these as well.

Types of Insurance for Small Business

small business insurance

Here are the different types of insurance for small business:

1. Commercial Property Insurance

A commercial property policy covers your small business’s physical location. It also covers equipment, computers, and office furnishings. This policy covers both owned and rented company equipment. 

Commercial property also covers tools, inventory, supplies, important papers, and business records. It also protects outdoor fittings such as signs and fences. 

Moreover, a commercial property policy covers any damage to your small business’s property caused by risks like lightning, wind, hail, and fire. It also covers vandalism, a common problem faced by businesses with physical stores. 

2. Business Interruption Insurance

If your small business needs to temporarily shut down due to a covered loss, a business owner’s policy covers your lost income. In particular, business interruption covers theft, wind, and falling items. 

If any of these issues occur in your small business,  this kind of small insurance for a business reimburses you money lost due to damaged merchandise, lost earnings, and other expenses. Such expenses include temporarily relocating the operation.

3. Commercial Umbrella Insurance

Commercial umbrella insurance adds an extra layer of protection to your small business’ other liability plans. Particularly, this type of insurance for small business will give additional liability protection once your underlying policy’s liability limit has been reached.

A commercial umbrella policy can be combined with general liability and commercial auto policies. 

For instance, your company gets sued for $1 million, but your commercial liability policy only covers $500,000. The $500,000 loss would be covered by a commercial umbrella policy.

The amount of coverage you choose and the level of risk your company faces determines the cost of this. 

4. Business Liability Insurance

A small business’ general liability policy protects it from claims of property damage and personal injury. If a person’s property gets harmed while visiting your business, company, or store, you could be held legally accountable. 

In addition, if your company becomes responsible for someone’s injuries (other than an employee’s), a general liability policy will cover their medical bills and lost income.

General liability covers reputational harm, advertising injury, copyright infringement, and more. 

Furthermore, your small business will be able to preserve financial stability with the help of business liability coverage if someone sues your company. A general liability policy covers your legal expenditures, as well as settlements. 

Before doing business, financial lenders, landlords, licensing boards, and business clients frequently require general liability. There are numerous reasons to put business general liability on your priority list. A certificate of general liability policy verifies that you are adequately insured.

5. Errors and Omissions Insurance

Errors and omissions insurance is an excellent fit for your small business if it offers a professional service or gives clients guidance.

Moreover, an errors and omissions (E&O) policy covers the costs associated with mistakes you make at work. 

Clients who submit a claim against your small business will be compensated through an errors and omissions policy. Examples include misrepresentation, breach of good faith and fair dealing, carelessness, and providing misleading advice. It also covers the costs of legal defense, verdicts, and settlements.

You’ll be on the hook for reimbursing customers out of pocket and paying for a lawyer for business if you don’t have E&O.

6. Technology Errors and Omissions Coverage

insurance for small business

If you work in the technology industry, getting a technology errors and omissions policy greatly helps. 

A technology mistakes and omission policy covers legal and other costs incurred by a small technology company as a result of consumer claims.

In particular, IT contractors, software developers, website developers, and the like can benefit from this.

7. Commercial Auto Insurance

If you own business automobiles, trucks, vans, or any other kind of motor vehicle, you need a commercial auto policy. 

Take note, personal auto insurance does not cover any business use of a car. For this reason, you must purchase a commercial auto policy if your business owns a car, truck, van, or any kind of motor vehicle.

Any claims you make for automobiles used by your company will not be honored if you do not have a business auto policy. You’d also be responsible for any accidents or other damage on your own, which might be extremely costly. 

Moreover, this type of insurance for small business covers employees who rent or use their personal cars for business purposes. 

So, if you rent a car for work or drive your own car for work, you’ll also need a hired non-owned auto liability policy. Any driving you perform for business won’t be covered by your personal insurance policy. 

This will provide you with the necessary coverage. It will also protect you from a large claim if you get into an accident while driving for business.

8. Workers’ Compensation Insurance

If your small business has even just one employee, you’ll need to purchase workers’ compensation insurance. Workers’ compensation covers your employees’ illnesses and injuries acquired on the job. 

What type of insurance for small business covers your employee’s medical care, lost income, and disability.

9. Cyber Liability Insurance

Cyber liability insurance covers the expenses of cyberattacks or any data breach. 

For instance, your company’s database contains some sensitive client information. Cyber liability can cover the costs if a consumer brings a claim against your company. This small business insurance will also cover costs such as alerting consumers who have been affected by a data breach and providing free credit monitoring.

10. Business Owner’s Policy

A business owner’s policy (BOP) usually includes general liability, commercial property, and business interruption insurance together. This type of small business insurance serves as an all-in-one solution to your needs. 

If you own a business and you feel like you need the three specific policies mentioned above, getting a BOP saves you money in the long run. Buying the policies one by one means paying for more. 

How Much Does Insurance for Small Business Cost? 

business owner insurance

Small businesses, regardless of industry, must safeguard their work and assets. While small business insurance may appear to be a hassle, it is an essential component of running a business. 

But how much should your business insurance cost? How can you be certain that your policy adequately safeguards your company? 

The cost of small business insurance will vary depending on your selected type of coverage and sector. If you want small-scale insurance for the businesses, understanding some typical pricing for your industry can help.  By doing this, you can go through the many bids and select the best policy and provider for you.

Moreover, the provider determine the scope of your small-scale insurance for the businesses. A solo entrepreneur, for example, may not require workers’ compensation coverage. Whereas, a business owner with a storefront and many employees may.

To get the exact amount of your insurance for the businesses, ask for a quote from the providers you are eyeing. Make sure to do your own research and ask other business owners before you contact any provider. 

Average Cost for Small Business Insurance

To give you an idea of how much a policy costs, we looked up the average cost for you. 

Small company insurance costs an average of $400 to $800 per year. This equates to $34 to $67 per month. However, as you might expect, getting more coverage will result in higher prices.

For example, you may get a $100 per month business owner’s policy and add a commercial auto policy  for another $150 per month.

Thus, the exact cost of your insurance for the businesses depends on how many policies you get. It also depends on the extra charges the provider put on top of your coverage. 

Small Business Insurance Costs by Type

business insurance

Different kinds of insurance for the businesses provide varying levels of protection. Given this, they also differ in cost. Some policies protect your intellectual property or income, while others safeguard your physical possessions or cover bodily injuries. 

Here are the most common types of insurance for the businesses and their costs: 

Business Owner’s Policy

A BOP typically costs $50 to $100. This type of insurance for the businesses usually covers property and liability policies. A BOP also comes with optional add-ons.

General Liability

General liability normally costs $40 per month. This type of insurance for the businesses covers the firm in the event of property damage, physical injury, defamation, or libel.

Professional Liability

Also known as errors and omissions, a professional liability policy protects your firm in the event of a mistake or oversight. This will cost you roughly $60 per month.

Commercial Auto Insurance

If your company provides cars for employees to drive to and from work, you must insure the vehicles. The same thing applies if your business owns automobiles. The cost of a commercial auto policy comes up to around $150 per month. However, it varies depending on where you live and the provider. 

Workers’ Compensation

This coverage will cover your employees’ medical bills as well as lost pay for job-related injuries or illnesses. Workers’ compensation costs roughly $50 per month. However, it may cost more depending on where you live.

Frequently Asked Questions

What types of insurance does a small business owner need?

Every business operates differently. However, a small business owner usually needs general liability and property, workers’ compensation, and commercial auto insurance. 

Do I need liability insurance for my small business?

Yes, you need liability insurance for your small business. The two most important for your small business include general liability and professional liability insurance. General liability insurance helps pay for lawsuits alleging that your business caused bodily injury or property damage. Meanwhile, professional liability insurance helps pay for lawsuits alleging that you made errors or omissions in the services your business provides.

How much does small business insurance cost?

The cost of business insurance varies depending on the plans you buy and the coverage limits you choose. Other pricing factors include your industry, personnel count, revenue, and location. Small business insurance usually costs less than big business or corporation insurance. 

How do I get small business insurance?

You have to file an application to get small business insurance. If you have your company’s details on hand, getting it becomes easier. An application usually requires basic information about your company. This includes employee count, vehicle count, and revenue. 

Conclusion

Small business insurance can save you a lot of money in case of property damages and employee accidents. Thus, if you want to secure your business and your assets, you must get certain policies.

Which type of insurance for small business mentioned above fits your company? Let us know in the comment section below. 

About HICAPS

Over the years, HICAPS has helped bakers and businesses make delicious products by offering ingredients like ChiffonAide Cake Oil, Magic Whizk Whipping Cream, Red Velvet Flavor Emulco, and Instabake Brownie Mix

HICAPS also provides tools and resources to valued partners such as the free “How to Increase Your Sales Amidst the Pandemic” E-book and free dealer locator that helps look for baking ingredients near me

Want more free tips and tutorials? Follow us on Facebook at Hicaps Mktg. Corp. and on YouTube at HicapsTV

Want to be one of our valued partners? Fill this form out. Looking forward to talking to you soon!  

Leave a Reply