12 Types of Commercial Insurance & Why You Need Them

You’re a business owner, and you’ve built your business in specific ways to serve a particular set of customers. When it comes to commercial insurance, this means your business will have a different set of risk factors than the business next door.

If you own a car dealership, you’ll have a different set of needs than, say, a restaurant or a yoga studio. An accounting firm is going to need different insurance coverage than a service company like pest control or pizza delivery.

Risks change from business to business, so it’s vital that the insurance coverage you get is customized to protect YOU. The wrong kind of insurance coverage—or none at all—could cost you everything if the worst happens. You also don’t want to pay for what you don’t need.

Without insurance, owners might find themselves having to pay out-of-pocket for property damage, liability claims, legal claims, and more. These costs can easily get out of control and cost you your business and your livelihood.

The insurance world can be confusing and intimidating. With so many options out there, what do you really need to protect your investment?

Fear not!

We’ve laid out the twelve most common types of commercial business insurance and why you need them, we’re ready to help you achieve—and protect—your business dreams.

Whether you’re running an established company or starting your own business, at a minimum, you’re going to need general liability insurance, professional liability insurance and workers’ compensation insurance.

These are just the basics and depending on your industry, risk factors, and the state you live in, you may have other types of small business insurance needs.

For example, if your business requires specific tools and equipment to keep your operation running, you’re going to want to consider those risks.

So, let’s start with the first three basic types of small business insurance.

#1 – General Liability Insurance Coverage

What if you were a plumber and one of your apprentices installs a faulty pipe which then floods your customer’s kitchen? The water damages the floor, walls, and the rooms beneath it. You get sued for damages.

Or you own a coffee shop and a customer slips and falls on a mopped floor. One of your employees forgot to put the Caution: Wet Floor sign up. You get sued for damages.

General liability insurance is one of the most common types of commercial insurance, and covers the most common risks of running a business, such as:

  • Customer Injuries at Your Place of Business (trips, falls, etc.)
  • Accidental Damage to Someone Else’s Property
  • Advertising Errors (libel, slander, copyright infringement)

General liability insurance is a very common requirement for most businesses. If you plan to rent commercial, retail or business properties, apply for loans, fulfill contracts, or sign lease agreements, banks and landlords often require General Liability Insurance.

The type of business you’re running (risks, size, assets, etc.) help determine the coverage you need and its cost.

#2 – Professional Liability Insurance

Do you give professional advice? Do your customers rely on you for guidance? Do they expect you to meet deadlines and complete projects on time?

Professional Liability Insurance, also known as Errors and Omissions Insurance, protects you and your business from things like third-party monetary losses and more.

Say you run a company of financial advisors and one of your employees gives advice to a client that costs them millions. That client then turns around and sues you for negligence.

Ready to pay those hefty legal fees?

Professional Liability Insurance can help pay those legal fees, but it can also protect you from:

  • Accusations of Negligence
  • Late or Undelivered Services
  • Nondisclosure Agreement Breaches
  • Copyright Infringement

#3 – Workers’ Compensation Insurance

If people work for you then you need Workers’ Compensation Insurance. In fact, most states require it.

This insurance protects you and your workers from injuries and illnesses that happens on the job, but can also cover:

  • Lost Wages
  • Medical Expenses
  • Funeral Expenses
  • Disability Benefits

Workers’ compensation claims can add up fast. According to Injury Facts, on-the-job injuries caused by motor vehicle crashes averaged over $81,000 per claim in 2018-2019. Burns averaged over $58,000 and falls and slips averaged over $47,000 per claim.

Do you really want to be on the hook for that kind of money?

Pro Tip: If an employee agrees to accept a company’s workers’ compensation insurance as part of their hiring package, they often waive the right to sue the business for injuries on the job.

Now that we’ve covered the three basic types of commercial business insurance, let’s take a look at other types of insurance coverage that may be right for your business.

#4 – Umbrella Insurance

A commercial umbrella policy covers large unexpected events that can have a devastating impact on your business. While primary liability policies can help protect a company from most situations, there are times when losses may exceed the limits of insurance. Multi-million-dollar lawsuits resulting from your business operations or auto accidents can have a devastating effect on your business. Protecting your company means preparing and planning for the worst-case scenario. A commercial umbrella policy can provide you with peace of mind that your business is protected. 

#5 – Business Owner’s Insurance Policy (BOP)

Business Owner’s Insurance Policies (BOP), may be an option for a small to medium business depending on their assets and industry.

Typically, a BOP combines general liability insurance, property insurance, and business interruption insurance. A BOP can lower the cost of insurance for small businesses while providing the coverage they need. It’s a way to customize coverage in the unfortunate even of accidents, lawsuits, weather damage, and more.

Supplemental policies can also be added to a BOP in some cases. It all depends on your type of business and risk factors.

Pro Tip: It’s important to know that BOPs don’t cover employees, therefore workers’ compensation insurance policies are still required, and that other coverage exclusions may apply, depending on your policy needs. We recommend finding an agent near you today to answer any questions you may have.

#6 – Employment Practices Liability Insurance (EPLI)

Do you work with people? Do you have employees, vendors or customers?

We’re going to go out on a limb and assume that you do.

Your basic general liability insurance offers a lot of protection for your business, but it doesn’t typically protect you from employee or vendor claims such as:

  • Hostile Work Environment
  • Wrongful Termination
  • Sexual Harassment
  • Retaliation
  • False Representations

It’s useful to know that any employer can become a target of legal action from existing, previous or potential employees.

Let’s consider the example of harassment creating a hostile work environment. The U.S. Equal Employment Opportunity Commission defines “offensive conduct” as:

  • Offensive Jokes
  • Slurs
  • Epithets
  • Name-Calling
  • Physical Threats
  • Physical Assaults
  • Intimidation
  • Mockery
  • Insults
  • Put-Downs
  • Offensive Objects
  • Offensive Pictures
  • Interference with Work Performance

You, as a business owner, might not be aware such behavior is taking place among your staff, but that doesn’t mean you can’t be held liable for it – even if the claim is baseless, defense cost is covered.

Furthermore, a victim isn’t defined only as the person being harassed but can be anyone affected by the offensive behavior.

And, if you violate an employee’s rights but aren’t even aware you are doing so, you can be held liable as well.

You can probably see how easy it is to go down a rabbit hole here, which makes EPLI a prudent move to insulate yourself and your business from unforeseen risks.

Employment Practices Liability Insurance (EPLI) may be combined with your existing policy or purchased as a stand-alone protection policy.

#7 – Commercial Property Insurance

Commercial Property Insurance, sometimes referred to as Small Business Hazard Insurance, protects your owned or rented business property, buildings and equipment.

This type of insurance usually covers losses from:

  • Damage to Buildings
  • Damage to Inventory
  • Damage to Property
  • Fire
  • Theft
  • Vandalism
  • Tools
  • Equipment
  • Inventory
  • Furniture

For example, if there’s a fire in your building or a car crashes through your front window, Commercial Property Insurance is the type of insurance policy that will protect you and your business.

#8 – Business Interruption Insurance

Business Interruption coverage also known as business income coverage (BI), can help with operating expenses during the period of restoration after covered property loss such as fire, wind, rain, and heavy snowstorm.  Business Interruption covers your lost net profit, based on financial records and continuing expenses such as:

  • Payroll
  • Taxes
  • Operating Expenses
  • Debts
  • Temporary Locations

#9 – Commercial Auto Insurance

Did you know that crashes during work-related activities account for 40% of all crashes, according to the National Safety Council (NSC)?

Does your business rely on vehicles? Do you haul tools and materials to job sites? Make deliveries? Operate a fleet?

Commercial Auto Insurance is a necessity because there’s a very good chance that your personal auto insurance, or that of your employees, won’t cover an accident while operating company owned or operated vehicles.

This goes for your employees, too, and your business may be on the hook if:

  • Employees Drive Rented/Leased/Owned Company Vehicles
  • Own, Lease or Rent Vehicles
  • Employees Drive Personal Vehicles for Business Use

Costs for medical treatment, ambulances, physical therapy and more can add up fast. Consider these statistics from the NSC:

  • Fatal Accidents Cost an Average of $1.4 Million Per Death
  • Non-Fatal Disabling Injuries Average $78,900
  • Non-Disabling Injuries & Property Damage Average $8,900
  • Minor Crashes with Uninsured Motorists Can Cost Up to $10,000

Can your business afford to pay all of those costs out-of-pocket?

Probably not.

Co-op’s commercial auto insurance policies complements your business or farm insurance to protect:

  • Farm Vehicles (light, medium, and heavy-duty trucks)
  • Horse/Cattle Trailers
  • Business Vehicles
  • Private Passenger Vehicles Owned by the Business

#10 – Cyber Liability Insurance

Sixty percent of small businesses that are victims of cyberattacks go out of business within six months.

How confident are you that you’re protected from a cyberattack? Can you recover from a data breach that reveals your customers’ private information, or a ransomware attack that stops your business in its tracks?

As industries increase their focus on going digital, more opportunities arise for criminals to exploit loopholes and vulnerabilities between data systems, platforms and services.

Remote work has accelerated this trend as businesses have less control over their IT security than ever before. If you think your business is safe, think again:

That’s just the tip of the iceberg.

Most small to medium businesses—66%—are concerned about cyber risks … yet only 14% say their ability to defend against cybercrime is “highly effective.” Thus, many businesses are easy targets … and criminals know it.

This is why Cyber Liability Insurance is so important for your business these days. It can protect you in the following ways:

  • Legal Fees
  • Expenses
  • State Requirements
  • Data Monitoring for Impacted Customers, Businesses & Individuals
  • Provide Credit Monitoring for Affected Individuals
  • Costs Incurred from Stolen Data
  • Repair of Computer Systems
  • Notify Impacted individuals

#11 – Product Liability Insurance

If you’re in the business of making or selling virtually any type of product, you could be held liable if a customer gets hurt, sick, or has their property damaged as a result of a faulty product.

Product Liability Insurance can provide protection against:

  • Medical Costs
  • Legal Fees
  • Settlement Fees

#12 – Home-Based Business Insurance

You don’t need business insurance if you operate your business out of your home, right?


Coverage for a home-based business on a standard home insurance policy is only $2,500.

And just because you work at home doesn’t mean your existing homeowners insurance policy protects your business—it protects your home.

If you’re a web designer, operate a home daycare, make jewelry, or run some other type of business and you suffer from a house fire, you’re not going to have enough coverage to account for your losses.

Your livelihood could go up in smoke.

Working out of your garage?

Standard coverage for these “other structures” you might use for your business such as garages are typically only covered up to $500.

That’s not enough, is it?

You’re much better off with a home-based business insurance policy that meets your needs and offers adequate coverage for your risks such as:

  • Property Damage
  • Lawsuits
  • Employee Injuries
  • Data Loss
  • Damaged Equipment

Pro Tip: Finally, you need to know that if you’re running a business out of your home and your insurer isn’t aware of it, you could nullify your homeowner’s personal liability coverage.

Ask us if you need home business insurance today.

We’ll help you figure out your risks if you store inventory, have customers or employees visiting your home, lose income due to a damaged home, and much more.

Why Co-Op Insurance is the Right Company for You

How do we know so much about commercial insurance? We’ve been in business for over 50 years and are experts at providing protection for:

  • Restaurants
  • Hotels, Motels, Inns, and Bed & Breakfasts
  • Offices
  • Rental Properties
  • Apartment Houses
  • Condominium Association
  • Retail Stores
  • Small Contractors
  • Farms & Mini-Farms
  • And Much More

ValChoice is THE gold standard in rating insurance companies, and we’re proud to have earned a 90+ out of 100 rating for auto insurance coverage in New Hampshire. That’s just the beginning.

Our customers rave about us because we’re dedicated to protecting you and your business and have the record to prove it. We offer:

  • Fast, Fair Claims Service
  • Competitive Rates
  • Discounts
  • Credits
  • Payment Plans for Virtually Any Budget
  • Agent Support

Ready to protect your dreams and achieve your business goals? Find an agent near you today.


Environment New Hampshire. Extreme Weather Map | Fact Sheet.

Forbes. Home-Based Business Insurance Explained.

Fortune.com. There’s a huge surge in hackers holding data for ransom, and experts want everyone to take these steps.

Fundera. 30 Surprising Small Business Cyber Security Statistics (2021).

Kiplinger. 10 Biggest Product Recalls of All Time.

National Safety Council (NSC) Injury Facts. Workers’ Compensation Costs.

Nerd Wallet. Cybersecurity Insurance: What It Is, Which Businesses Need It.

U.S. Equal Employment Opportunity Commission. Harassment.

*Disclaimer: We offer content for informational purposes; Co-operative Insurance Companies may not provide all the products listed here. Please contact your local agent to find out more about how we can help with your insurance needs.

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