How much small business insurance do you need?

Types of insurance small businesses often need

There are many types of policies that small businesses can get. However, getting the right policies is key to making sure your business is adequately protected. 

“One of the biggest mistakes small businesses make is simply not knowing enough about insurance — why it’s needed, what is necessary to have, different types of policies, etc.,” Peterson says. 

Here are the most common options for small business owners:

General liability insurance

General liability (GL) insurance financially protects businesses from bodily injury, property damage and personal injury claims. A GL policy covers medical bills, legal fees and repair costs if, for example, a customer slips in your store or you accidentally damage a client’s property. As for how much liability insurance you need, our research found that a typical small business GL policy covers $1 million for each incident and $2 million in total across all claims in a year. 

Commercial auto insurance

Commercial auto insurance protects vehicles used for business purposes: cars, trucks and vans owned or leased by the business. While most states require minimum coverage, those levels often fall short of adequate protection. “Those minimums may be inadequate to appropriately protect a business, its customers and employees,” says Brian White, vice president of product strategy at AmTrust Financial, a property and casualty insurer. “Consulting with your agency is the best way to ensure a business has the right coverage, limits and protection for its needs,” he says.

Workers’ compensation insurance

Workers’ comp covers employees’ medical bills and lost wages if they get hurt at work and can’t do their jobs. It also covers funeral expenses in the event an employee is killed on the job.

Commercial property liability insurance

Your company’s physical assets — buildings, equipment, inventory and furniture — fall under commercial property liability insurance. It acts as a buffer against financial loss due to risks like fire, theft and vandalism. Our analysis of coverage options suggests that policies often start at $10,000 to $25,000, but you can increase the protection if needed.

Professional liability insurance

If you provide professional services or advice, don’t overlook the importance of professional liability insurance. Also known as errors and omissions (E&O) coverage, it protects against claims of negligence, mistakes or missed deadlines that result in financial losses for clients. Policy limits usually begin around $250,000 and can go up to $2 million or more. However, we found that $1 million is the standard for most small businesses.

Business Owner’s Policy

A Business Owner’s Policy, also known as a BOP, combines essential coverages — general liability, property insurance and business interruption coverage — into one package. When comparing options, we found policy limits in the $1 million to $2 million range, making it a convenient option for small businesses needing protection against common risks.

How to figure out how much small business insurance you need

Figuring out the right amount of small business coverage requires a basic understanding of policy limits. Most policies include an aggregate limit (the maximum your insurer will pay during a policy period) and a per-occurrence limit (the cap for individual claims).

Many small business owners who get general liability through small business insurance broker Insureon choose a $1 million occurrence limit and a $2 million aggregate limit.

From there, your coverage needs depend on factors such as your business’s size, industry and location. For example, a consulting firm may prioritize coverage for professional errors, while a construction company faces different risks and requires stronger liability protection. 

Indeed, identifying hazards that could disrupt your business is the key to calculating how much insurance your small business needs. 

“The first step,” AmTrust’s White says, “is to have a clear understanding of the risks your business faces.” Partnering with an agent can help — the agent can assess everything from your physical assets to legal liabilities and guide you toward the ideal coverage amounts.

To narrow down your needs, do the following:

• Evaluate the value of your assets: Consider the replacement value of buildings, equipment and inventory to make sure your property coverage aligns with your business’s true worth.
• Review industry standards: Research typical coverage levels for businesses like yours to establish a solid baseline.
• Factor in legal and client requirements: Verify that your policy meets any regulations or contracts that require specific coverage, such as workers’ compensation or professional liability insurance.

When will you need additional coverage for your small business?

Securing the right coverage isn’t always about meeting minimum requirements but preparing for the unexpected. Some situations may call for additional protection, even if it’s not mandatory. Evidence points to these often-overlooked factors that could increase your coverage needs:

• Client contracts: High-value clients may require exact coverage limits as part of their agreements.
• Equipment value: High-end or specialized equipment can be expensive to repair or replace.
• Location risk: Operating in a flood zone or high-crime area raises your exposure to potential losses.
• Growth plans: Expanding into a new state or region often comes with new coverage requirements.

Key factors that determine how much insurance a small business needs

Your company’s size and revenue are common factors that determine the appropriate amount of coverage. But small business insurance is about more than checking off boxes — it’s about protecting what matters most. 

Of course, some choices aren’t yours to make. State laws and industry requirements often dictate specific policies. For instance, Florida requires licensed contractors to carry $300,000 in general liability coverage, while Colorado requires real estate agents to have errors and omissions insurance.

How much does small business insurance cost?

Our research has found that small business insurance policies are more affordable than many people expect. According to Insureon, general liability insurance costs an average of just $42 per month. Bundling general liability and property insurance into a BOP can save money, with average premiums of $57 per month.

Hiscox’s Peterson reminds business owners to think of insurance as protection against costs, not just a monthly fee. “The cost of a good lawyer — even for two hours — can easily surpass an annual insurance premium,” she says.

Common insurance mistakes to avoid

According to our findings, one of the biggest mistakes small business owners make is not taking the time to understand their insurance coverage. Peterson warns that assuming you're fully protected or failing to review policies regularly can expose your business to risks or unnecessary expenses.

Another common mistake Peterson sees small business owners make is not updating their policies. “Regular policy reviews ensure you're not paying for unnecessary coverage or, worse, leaving critical gaps in your protection,” she says.

What our expert says

Q: Is my business properly covered with minimum insurance levels?

Brian White Vice President of Product Strategy at specialty insurer AmTrust Financial

"Those minimums may be inadequate to appropriately protect a business, its customers and employees. Consulting with your agency is the best way to ensure a business has the right coverage, limits and protection for its needs."