What Does Business Insurance Cover? (2025)

Most small-business owners take out a business owners policy (BOP), which covers major property damage, liability risks, workers’ compensation, and commercial auto insurance.^[1]

Some U.S. states require businesses to purchase insurance — especially companies with commercial vehicles. Even when not required, many business owners opt for coverage to protect against unexpected events, like a data breach, flood damage, or employee injury.

To choose the right policy for your business operations, it’s essential to know what business insurance covers, what it excludes, and how much it costs.

Here’s what you should know about business insurance.

What business insurance typically covers

Small-business insurance policies typically involve liability, income, and property insurance that cater to the unique coverage needs of home-based businesses, startups, and main-street businesses. Specific policy options and coverage limits vary by insurance company.

Here are several coverages that business insurance usually includes:

• General liability: General liability insurance covers bodily injury to others. This includes coverage for customer injuries, medical expenses, libel, slander, legal expenses, defense costs, and property damage.^[2]

• Commercial property: Business property insurance covers replacement costs for damaged or destroyed structures, buildings, and business personal property, such as raw materials, computers, machinery, office furnishings, and inventory.

• Business interruption: Business income or business interruption insurance covers income losses resulting from a disaster, such as taxes, employee payroll, loan payments, net income, and mortgage, rent, or lease payments.

• Workers’ compensation: Every state except Texas requires workers’ compensation. It covers medical care and partial lost wages for employee injuries.

• Professional liability: Also called errors and omissions insurance, professional liability insurance protects against liability claims stemming from advice, recommendations, or work that results in third-party injuries.

• Commercial auto: Business auto insurance covers company-owned vehicles, typically with liability, collision, comprehensive, uninsured motorist, and medical payments coverage. It can cover vehicle damage and bodily injury.

• Cyber liability: Cyber insurance can cover data breaches, network breaches, and cyberattacks like ransomware that originate locally, internationally, or via terrorism.^[3]

What business insurance doesn’t cover

Standard business insurance policies commonly exclude certain business risks. In some cases, your business may have the option to purchase add-on coverage for certain exclusions.

Commercial insurance doesn’t automatically cover the following risks and scenarios:

• Earthquake and flood damage: General commercial property coverage doesn’t cover damage from earthquakes or floods. You’ll need a separate flood insurance policy and earthquake insurance policy.^[4]

• Undocumented income: General policies don’t cover income that you haven’t listed on your business’ financial records.

• Employee theft or fraud: Your business will need a separate crime insurance add-on to cover employee theft or fraud. You may also want an employment practices liability insurance endorsement to cover claims of wrongful termination, breach of employment contract, and wrongful discipline.^[5]

• Pandemics and government shutdowns: Many policies exclude “virus and bacteria” coverage but offer coverage for communicable disease contamination.

• Professional mistakes: Errors and omissions insurance, or professional liability insurance, covers lawsuits accusing your business of not performing a job properly. 

• Pollution: If desired, you’ll need separate coverage to insure against injuries or damages to someone else that result from pollution caused by your business operations.

New business owners often overlook optional business insurance coverages in an attempt to keep operational costs low. It’s important that you understand which insurance products you need and maintain the same coverage when switching insurance companies.

Do small businesses really need business insurance?

Yes. Most small businesses need to maintain specific business insurance policies to comply with state or federal laws. For example, the federal government requires that all businesses with employees have workers’ compensation, unemployment, and disability insurance.

• 

  Commercial auto requirements

  Most states require dedicated commercial insurance policies for business vehicles.

• 

  Landlord requirements

  Similar to mortgage lenders contractually requiring homeowners insurance, landlords may require business owners to take out additional insurance on rented properties.

• 

  Contractual liability insurance

  If you provide products or services to a government client, you may have to secure liability coverage.

• 

  Personal asset protection

  Commercial property insurance also includes personal asset protection, which covers your business’ damaged or stolen personal property.

Ask yourself these questions to help determine your business risk exposure:

• Do you rent your building or work out of your home?

• What’s the total value of your equipment, and is it under warranty?

• Are you storing customer data on your own or on third-party servers that are vulnerable to a data breach?

• Does your business have a high rate of foot traffic?

• Are you in an area under threat of natural disasters or increased crime? 

• Do you hire employees with benefits or work with independent contractors?

• Do you subcontract work for your clients or customers?

Can you bundle coverages in a business owners policy?

Yes. You can bundle coverage under a single business owners policy. A business owners policy is a common business insurance policy that typically covers liability risks, property damage, and income interruptions. Most insurance companies offer similar liability and property coverages, but some may also include additional coverage options. Coverage limits will also vary between companies.

Bundling business insurance coverages has its perks. Insurers only sell these business owners insurance packages to small- and medium-sized businesses. Combining commercial insurance products into a business owners policy may also lower your premiums compared to paying for each coverage separately.

Keep in mind that the coverages aren’t comprehensive. Business owners policies work best for low-risk businesses, which is why many small businesses purchase additional coverage or endorsements.

How much does business insurance cost?

The average cost of a business owners policy ranges from $118 to $141 per month, according to data from Progressive and The Hartford.^[6] But business insurance premiums will vary based on your unique policy. Multiple factors influence premiums, including coverage limits, claims history, your industry and size, payroll, and deductibles.

All business owners should budget for first-year cash flow and conduct ongoing analysis comparing it to the actual cash flow. Tracking the difference between these two amounts will help you strategically plan your finances, control costs, and yield a better revenue projection. Remember, business insurance needs can increase even when cash flow decreases, so it’s important to ensure you’ve got the budget available for this expense.

Below, you can compare sample monthly costs for business owners policies for companies in several different industries, according to data from The Hartford.^[7]

Industry	Average Monthly Cost
Accountants	$85
Barbershops	$110
Beauty salons	$113
Business consulting	$86
Engineering	$107
Manufacturers	$115
Photographers	$72
Restaurants	$413
Retail stores	$152

How to choose the right business insurance

Choosing the right business insurance isn’t difficult, but it requires careful consideration to secure the right coverage that meets your budgetary needs.

Assess both the common business risks in your industry and the liabilities unique to your company. Compare quotes from multiple business liability insurers to find the best value. Review your policy yearly, increase or decrease coverage limits if necessary, and consider shopping around to see if a better value is available.

These steps can help you identify the right insurance company for your business’ coverage needs:

1. Inventory assets and exposures. Understand the accidents, natural disasters, and lawsuits that could harm your business.

2. Gather declaration pages for existing policies. Identify the specific terms, coverage limits, and exclusions of your existing policies and compare them to your current coverage needs.

3. Compare at least three companies or use a marketplace. Use an online marketplace or secure at least three business insurance quotes independently. 

4. Check financial strength ratings. Before selecting a policy, research the insurance company’s history to ensure it can meet your claims and customer service needs. 

5. Re-shop annually or at major business changes. Insurance needs evolve alongside your business operations. Shop for a better value whenever you need to make policy changes.

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