8 Critical Questions to Ask Before You Buy Small Business Insurance

Most business insurance articles start by scaring you with worst-case scenarios. We won’t do that. In fact, this one starts with a confession: when you buy small business insurance, you’re purchasing something that admittedly sounds boring and technical.

But so are seatbelts until you need one.

Let’s face it: you’d rather walk barefoot on hot coals than learn how to buy small business insurance. It’s the entrepreneurial equivalent of eating your vegetables – necessary but hardly the highlight of your day.

But here’s the uncomfortable truth: skipping proper business insurance is like bungee jumping with dental floss. The odds might be in your favor today, but physics eventually wins. Always.

Before you buy small business insurance, you need a roadmap through this complex terrain. Most new entrepreneurs know they need insurance but have no idea what kind, how much coverage is appropriate, or what constitutes a fair premium.

You don’t have to navigate this labyrinth alone. Let us help you understand what you actually need — versus what someone’s trying to sell you because they’ve got quarterly quotas to meet.

The Small Business Insurance Buyer’s Checklist (No Fluff, No Fear-Mongering)

Every business is unique, which means cookie-cutter insurance packages rarely fit anyone well. Your cousin’s landscaping business needs different coverage than your graphic design studio.

To determine what insurance your specific business requires, you’ll need to examine where your particular risks lie — not where insurance salespeople think they might be hiding.

Note: This checklist is optimized for small to medium-sized businesses. If you’re running a large, complex operation, consult a specialized business insurance agent or risk management professional.

#1: The Non-Negotiable Basics: Liability

The foundation of your business insurance portfolio is liability coverage. It’s so fundamental that many people just call it “business insurance.” There are two flavors of liability insurance you’ll need to consider:

• General Liability Insurance: This is your first line of defense when someone claims your business caused them bodily injury or property damage. Think of general liability insurance as your business’s legal bodyguard for slip-and-falls, property damage claims, product liability issues, or advertising mishaps. Without it, one accident could force you to choose between legal bankruptcy or actual bankruptcy. (Fun fact: the boring old slip-and-fall lawsuit still bankrupts more businesses than any hacker ever has.)
• Professional Liability Insurance: (Also called Errors & Omissions or E&O Insurance) While general liability covers physical damages, professional liability insurance protects you when your advice, services, or professional recommendations cause financial harm to clients. If you’re in the business of providing expertise — this coverage is what stands between you and a client who believes your advice tanked their business.

Without liability insurance, you could win the argument in principle but lose everything in court. And the legal system doesn’t issue refunds for being technically correct.

#2: Do Your Business Have a Place to Call “Business Home”?

Whether you’ve purchased commercial real estate or you’re just leasing office space, you need protection for your physical business location.

Enter commercial property insurance — the coverage that ensures a fire, storm, or other disaster doesn’t leave your business literally homeless.

What to lease space? You’ll quickly realize your property manager will require general liability before you can move all your stuff in.

Here’s where it gets interesting for small businesses:

Instead of buying commercial property insurance separately, you can usually bundle it with general liability in something called a Business Owner’s Policy (BOP). This convenient package typically costs less than buying the coverages individually – one of the few instances where “bundle and save” isn’t just marketing hype.

Even better, a BOP also includes business personal property coverage, protecting all the stuff inside your business space — computers, furniture, equipment, and those motivational posters you put up ironically but secretly find inspiring.

#3: Do You Have (or Plan to Have) Employees?

If your business has grown beyond a solo operation, you’ve entered a new realm of insurance requirements. With employees come new responsibilities and risks:

• Workers’ Compensation Insurance: Unless you’re in Texas (which marches to its own regulatory drum), this coverage is legally required in every state once you have employees. Workers’ comp covers medical costs and lost wages when employees get hurt or sick on the job.

  Skip this and you’re not just risking financial penalties — you’re potentially facing criminal charges. Nothing kills business momentum like jail time.

• Employment Practices Liability Insurance (EPLI): This is the coverage that protects you when an employee claims wrongful termination, discrimination, harassment, or other employment-related issues.

  In today’s workplace climate, EPLI isn’t just recommended — it’s practically essential. Even the most conscientious employers can find themselves on the receiving end of an employment lawsuit, and the legal defense costs alone can be staggering.

Pro-Tip: If you’re not sure when to buy Workers’ Compensation insurance. Here’s an easy tip: before you hire your first employee. 

#4: Does Your Business Involve Driving?

Here’s a common and potentially costly misconception: personal auto insurance covers business driving. It typically doesn’t. In fact, most personal auto policies explicitly exclude business use.

If you’re delivering products, visiting clients, or otherwise driving for business purposes, you need:

• Commercial Auto Insurance: This covers vehicles owned by your business for work-related driving. Your personal auto insurance won’t cover that company van or the accident your employee had while making deliveries in the company car.
• Hired and Non-Owned Auto Insurance: If employees use their personal vehicles for work tasks (like picking up supplies or visiting clients), you need this coverage. Without it, your business could be held liable for accidents that occur during these work-related trips — even though the vehicle doesn’t belong to your company.

Pro Tip: If you don’t need a full commercial auto policy, this coverage can often be added to your BOP, simplifying your business insurance.

#5: Do You Handle Customer Data?

In today’s digital age, most businesses collect and store customer information. This makes you a potential target for cyber criminals, who don’t discriminate between Fortune 500 companies and small businesses.

Cyber Liability Insurance protects your business when hackers or data breaches expose customer information. It helps cover notification costs, credit monitoring for affected customers, legal expenses, and regulatory fines.

Perhaps most valuably, good cyber insurance provides expert guidance during the crisis, when you’re trying to comply with the labyrinth of state and federal data breach laws.

#6: Will Your Business Serve or Sell Alcohol?

If your establishment serves alcohol, you need specialized coverage known as liquor liability insurance. Your general liability policy likely excludes alcohol-related incidents, creating a potentially devastating coverage gap.

Liquor liability protects your business when alcohol served on your premises leads to injury or property damage. Without it, you could be held responsible for the actions of intoxicated patrons long after they’ve left your establishment.

It’s the insurance equivalent of “you don’t have to go home, but you can’t stay uncovered.”

#7: Do You Want Extra Protection Against Lawsuits?

If you’ve built significant equity in your business or simply want maximum peace of mind, consider a commercial umbrella policy. Think of it as an extra layer of liability protection that kicks in when your underlying policies (like general liability or commercial auto) reach their limits.

In our increasingly litigious society, judgment amounts regularly exceed standard policy limits. An umbrella policy provides additional millions in coverage for a relatively modest premium increase – like buying wholesale catastrophe protection.

#8: Will You Be Transporting Valuable Equipment or Products?

For most small businesses, the property coverage in your BOP adequately protects your business property at your designated location and even covers tools and equipment that travel with employees to nearby job sites.

However, if your business regularly ships products or equipment – especially high-value items – you should consider inland marine insurance. Despite its nautical-sounding name, this coverage protects property in transit over land, filling gaps in your standard property coverage.

It’s particularly important for businesses that transport:

• Computers and servers
• Networking equipment
• Construction or contracting equipment
• Medical or scientific instruments
• Photography gear
• Valuable inventory being shipped to customers

The Million-Dollar (or Thousand Dollar) Question: What Will All This Cost?

This is undoubtedly the question burning a hole in your entrepreneurial mind, and hopefully not your pocketbook. The unsatisfying but honest answer is: it depends. Your business insurance cost is influenced by factors like:

• Industry and risk profile (selling pillows vs. selling fireworks)
• Location
• Claims history
• Coverage limits and deductibles
• Number of employees
• Revenue and size of operations

You can research average costs online, but the only way to know your specific business insurance cost is to get quotes tailored to your situation.

The good news is that business insurance is generally more affordable than most entrepreneurs fear, especially when balanced against the potentially business-ending costs of going without it.

The Bottom Line: Insurance is a Business Tool, Not Just an Expense

As your business grows, you’ll become more familiar with your insurance needs.

The right business insurance portfolio isn’t about checking regulatory boxes. It’s about creating a foundation that allows you to take calculated business risks without risking everything.

Business insurance isn’t sexy. Neither are the airbags in your car. But both let you wake up tomorrow when things go terribly wrong today.

Ready to buy small business insurance that actually protects what you’ve built? Get a quote online and see what comprehensive coverage will cost for your business.

Your future self – the one not filing for bankruptcy after a lawsuit – will thank you.