The Ultimate Guide to Small Business Insurance Coverage

11/14/2025

A small business owner meets with an insurance advisor in a bright office, discussing coverage options and strategies to protect and grow the business.

Not sure which insurance your small business really needs? This guide walks you through the most important coverages, how they work, and how to build a policy that helps protect everything you’ve worked hard for.

Running a small business comes with its fair share of risks, and insurance is one of the best ways to help protect what you’ve built. But with so many kinds of business insurance, how do you know which coverages make sense for your business?

In this guide, we’ll walk through what small business insurance is, which coverages you might need, and how to find protection that fits your business.

What Is Small Business Insurance?

Small business insurance refers to a set of business insurance policies designed to help protect your company from financial loss due to events like fire, theft, auto accidents, or liability claims. The right coverage can help your business swiftly recover and continue operating when disruptions occur.

Since every business is unique, there’s no single policy that works for everyone. Coverage needs vary based on your work or the services provided, where your business is located, and day-to-day operations. That’s why it’s important to work with an insurance agent who can tailor a mix of coverages to address the risks most relevant to you.

What Insurance Does a Small Business Need?

The types of small business insurance coverages you need depend on a variety of factors. In some cases, you may need specific policies to comply with state laws, secure a license, or meet contractual requirements.

While coverage needs vary, most small businesses need these foundational policies:

Commercial property: Helps cover damage to your building or business personal property caused by events like fire, theft, vandalism, and certain weather-related events.
Business interruption: Provides coverage for lost income and certain operating expenses if your business is temporarily shut down due to a covered event, such as wind or hail damage.
General liability: Helps protect against lawsuits and third-party claims of bodily injury or property damage caused by your business operations.

These three types of coverage can be bundled into a Business Owner’s Policy (BOP), a convenient and cost-effective package. A BOP can also be customized with additional coverage based on your specific needs.

Other Kinds of Business Insurance to Consider

Beyond the basics, your business may need additional coverage depending on the risks you face. For example, a solo consultant working from home may only need a few core policies, but a contractor with a small team, multiple vehicles, and expensive equipment faces higher risks and likely needs a broader mix of coverage to stay protected.

Whether you have staff, operate vehicles, or handle sensitive data, the right combination of small business insurance can help safeguard everything from your inventory to your employees.

Here are several types of small business insurance to keep in mind:

Workers’ Compensation Insurance

What it does: Helps cover medical costs and lost wages if an employee is injured due to their job. In some cases, it may also cover rehabilitation, legal expenses, and death benefits.
Why it matters: Required in most states, this coverage helps protect both your employees and your bottom line. It supports workers during recovery and helps reduce the financial impact of workplace injuries.
Who it’s for: Any business with one or more employees.

Commercial Auto Insurance

What it does: Helps cover accidents, damage, and liability claims involving vehicles used for business purposes. This includes company-owned trucks, vans, or service vehicles, and can be extended to leased or hired vehicles.
Why it matters: Required in most states for business-use vehicles, this coverage helps protect your business from costly claims related to collisions, theft, or vandalism.
Who it’s for: Businesses that own or operate vehicles, such as delivery services, contractors, and landscapers.

Cyber Liability Insurance

What it does: Helps your business respond to and recover from data breaches, cyberattacks, and other digital threats. It can cover both immediate response costs and longer-term recovery efforts.
Why it matters: Cyber incidents are becoming increasingly common and expensive. This coverage helps manage notification costs, credit monitoring, legal fees, and cyber extortion demands.
Who it’s for: Businesses that store customer data, process payments, or rely on digital systems, such as those in the retail, wholesale, and hospitality industries.

Employment Practices Liability Insurance (EPLI)

What it does: Helps cover claims related to hiring, firing, promotions, and workplace conduct, including allegations of discrimination, harassment, or wrongful termination.
Why it matters: HR-related claims can be complex and costly. EPLI helps protect your business from legal expenses and settlements tied to employment practices.
Who it’s for: Any business with employees, especially those in industries with frequent hiring or high turnover.

Crime Insurance

What it does: Helps recover financial losses caused by theft, fraud, forgery, or employee dishonesty.
Why it matters: Even with strong internal controls, financial crimes can happen. This coverage adds a layer of protection against both internal and external threats.
Who it’s for: Businesses that handle financial transactions, such as retailers, restaurants, and professional services firms.

Umbrella Insurance

What it does: Extends the limits of your existing business liability insurance policies, such as general liability or commercial auto, to help cover large claims that exceed underlying coverage.
Why it matters: Umbrella insurance offers financial protection against catastrophic losses, helping your business stay secure even in worst-case scenarios.
Who it’s for: Businesses with higher exposure, valuable assets, or elevated liability risks like contractors, manufacturers, or companies with frequent public interaction.

How Much Does Small Business Insurance Cost?

Insurance costs vary from business to business because they’re shaped by several key factors. Understanding what influences your insurance rates can help you plan and budget more effectively:

Location: Businesses in areas with higher exposures, such as severe weather, may have higher premiums.
Number of employees: More employees typically mean higher risk and higher premiums.
Claims history: A clean record can help lower your rates, while frequent or large claims may increase them.
Limits and deductibles: Higher coverage limits and lower deductibles usually mean higher premiums.
Training and safety protocols: Strong safety practices can help reduce risk and may lead to lower insurance rates.
Industry experience: Businesses with a longer track record may be seen as more stable and less risky.

How Can Small Businesses Get the Insurance They Need

Once you’ve reviewed your legal requirements, assessed your risks, and set a budget, it’s time to choose a provider that can deliver what your business needs. A trusted insurance company will offer financial stability, expert guidance, and customizable coverage options that support your long-term goals. Look for strong customer service and risk control resources to help you manage exposures as your business evolves.

At Westfield, we work with independent agents who understand the types of coverages small businesses need. Contact an agent today for a personalized quote and take the next step toward protecting your business.