Common Small Business Insurance Questions

Small Business Insurance Basics

What Is Small Business Insurance?

Small business insurance coverage is designed to financially protect your business against the everyday risks you face. For example, if a customer claims they were injured at your location, your coverage can help pay for the damages, so the costs don’t all come out of your pocket. 

Insurance for small businesses isn’t a single coverage type. Most business owners opt for a bundle of coverages to address their unique risks and protect their work.

Do I Really Need Insurance if My Business Is Small?

Yes, every business — no matter how big or small — needs insurance. Liability claims can happen to anyone, even sole proprietors and startups. If a third party accidentally suffers an injury or has their property damaged due to your work, the costs of that claim won’t be limited by the size of your business. 

With the right coverage in place, you can level up your business confidently, knowing one small moment won’t derail your momentum.

What Types of Insurance Do Small Businesses Typically Need?

Small businesses typically need essential coverages like:

These are just a few coverage types that small businesses typically opt for, but your specific coverage needs will depend on how you work. 

What’s the Difference Between a BOP and General Liability Insurance?

A business owners policy (BOP) is a bundled policy, usually combining liability and property coverages, to protect a business from its biggest risks. General liability insurance is a specific liability coverage built to pay for third-party (client, customer, or passerby) injuries and property damage, and it’s often what a BOP is built around.

Think of a BOP as a package of insurance, with general liability insurance serving as one foundational coverage within the bundle.

Does General Liability Cover Employee Injuries?

No, general liability insurance doesn’t cover employee injuries — that’s what workers compensation is for! Workers compensation insurance (legally required in most states) is designed to cover the costs of medical care, rehabilitation, and time away from work if an employee is injured on the job. 

General liability insurance, on the other hand, is for instances when a third party (someone not part of your business) suffers an accidental injury due to your business operations.

Do I Need Cyber Liability Insurance?

If your business runs online, including storing customer information, email marketing, or accepting payments, cyber liability insurance is a smart choice. This coverage is designed to support your business and any affected customers in the event of a data breach. 

No small business is “too small” to be at risk of cyber attacks, which is why we recommend this coverage to any business owner who handles customer data online.

What Does Small Business Insurance Cover?

What your small business insurance covers depends on your specific policy and the coverages you select. Here are some examples of what your policy can cover:

• A customer slips, falls, and breaks their wrist at your business (general liability)
• A client claims that your professional advice caused an injury (professional liability)
• Your equipment tips over in a client’s home and damages their floor (general liability)
• Your business gear is stolen from your locked vehicle on the way to a job (inland marine)
• A client alleges the product you sold to them caused injury (product liability)

Every business is different, so it’s crucial to choose coverages that reflect how you work and what you offer.

What Doesn’t Small Business Insurance Cover?

Small business insurance typically will not cover:

• Intentional harm
• Pre-existing issues
• Normal wear-and-tear on business gear
• Damage to non-business-related property
• Business activities outside of your policy’s scope
• Accidents involving your personal vehicle
• Damages from major natural disasters
• Injuries you, the owner, sustain

These are some common exclusions, but your exact coverage varies based on your policy and coverage types. Always read your full policy details to understand what you are and aren’t covered for.

What Is an Endorsement, and Do I Need One?

An endorsement is a policy edit. It’s a way to change what your coverage includes or excludes. You may need an endorsement to cover specific services that aren’t included in your base policy or to add an additional insured. 

If there’s a gap in your policy that you need to address, then you may need an endorsement! You can add common endorsements (such as adding optional coverage or additional insureds) on your own by logging in to your user dashboard and selecting the changes. 

For everything else, contact our U.S.-based, licensed support team! We can help get you the endorsement you need.

Does My Small Business Insurance Cover Subcontractors I Hire?

Typically, no, your business insurance does not cover subcontractors you hire. That’s because subcontractors are considered a separate business. If you hire outside help for specific jobs, ensure those subcontractors have their own insurance policy in place to avoid liability falling on your business. 

What Is Product Liability Insurance, and Do I Need It if I Only Provide Services?

Product liability insurance covers injury or property damage claims caused by a product your business sells or distributes. If a client is harmed by something tangible connected to your work, this coverage is designed to help pay for those claims.

If you only provide services and never sell, recommend, or use physical products as part of your work, you may not need a standalone product liability policy. However, the line between “service” and “product” gets blurry within certain industries. 

Review your specific business activities or reach out to our licensed support team to talk through whether this coverage fits how you work.

What’s the Difference Between Occurrence and Claims-Made Policies?

An occurrence policy allows you to file a claim for an incident at any time in the future as long as the incident happened while the policy was active. On the other hand, with a claims-made policy, both the incident and the filing of the claim must take place during the policy period. 

Say a customer claims your business caused them an injury, years after the fact. With an occurrence policy, even if your coverage has already ended, you’d still be able to file a claim because the incident happened when your policy was active.

What Are Policy Limits?

Policy limits (also known as coverage limits or limits of liability) are the maximum dollar amounts your policy can pay for coverage. There are two types of limits to know:

• Per-occurrence limit: How much your policy can pay for a single claim
• Aggregate limit: How much your policy can pay in total for the entire policy period

You may see this written as “$1M per occurrence / $2M aggregate.” In this example, the policy limits are $1 million per claim and $2 million for the policy period. 

Cost

How Much Does Small Business Insurance Cost?

With Insurance Canopy, the average starting cost of small business insurance ranges from $20 to $125 per month, or $240 to $1,500 per year. For many of the industries we cover, policies are priced at transparent, flat rates, so you never have to guess about your actual costs!

What Factors Affect My Small Business Insurance Premium?

Any factor that affects your risk level can also affect your insurance costs, including:

• Your industry
• Where you operate
• Your annual revenue
• How many employees you have
• Coverage types and limits
• Optional coverage add-ons
• Claims history

Premiums typically vary based on these risk factors, but Insurance Canopy offers pre-priced, ready-to-buy small business insurance for many industry professionals. This means less guesswork on costs and more time to grow your business.

For specialized businesses with more unique risks, our in-house team creates a custom quote for you, so you can feel confident your premium is calculated specifically to address your needs!

Can I Get Covered With a Limited Budget?

Yes, Insurance Canopy offers affordable insurance across a wide range of industries, so you can get covered without breaking the bank. Some starting policy costs include:

• Beauty and bodywork: $10/month
• Photography and videography: $12/month
• Sports and fitness: $15/month
• Entertainers: $19/month
• Educators: $21/month
• Cleaning: $39/month

These reflect base policy pricing without optional add-ons. Compared to the potential five- or six-figure costs of a liability claim, business insurance comes with a small monthly price tag, providing protection that fits your budget.

Why Does My Industry Affect My Premium So Much?

Your industry tells insurers a lot about your risk level, and some professions require more physical contact, specialized advice, or more “risk” in general. Insurers look at your industry’s claims history as a whole — not just yours individually — to calculate how likely a payout might be. 

Understanding the costs associated with these risks gets complicated quickly, which is why we offer pre-priced, flat-rate policies for many industries! That way, you see exactly what your premium will cost upfront without the hassle.

Are There Ways to Lower My Premium?

Insurance Canopy premiums are priced for value, but here are some additional ways to save:

• Pay annually versus monthly to save on installment fees
• Bundle your essential coverage to lower your overall premium
• Only select the extra coverages your business needs

The most effective way to manage your premium is to stay proactive about your policy. Understand what you’re paying for, reassess your needs at renewal, and avoid carrying coverage that doesn’t fit your business.

What Does “Deductible” Mean?

A deductible is a payment you make before your insurance kicks in to cover the rest. For example, you pay $100 before your inland marine insurance covers the replacement costs of your stolen fitness gear. Think of it as a small fee to unlock access to your coverage bucket.

Not all coverages require a deductible. Inland marine coverage commonly requires one, while liability coverage typically does not.

Is Small Business Insurance Tax Deductible?

In most cases, yes, small business insurance premiums are considered an ordinary and necessary business expense, which means they’re typically tax-deductible! 

Tax rules vary depending on your business structure, how you file, and your specific situation, so always talk to a tax professional to confirm what’s deductible on your tax return. 

Requirements & Situations

Is Small Business Insurance Required by Law?

Legal requirements on small business insurance vary based on a few factors, including your state, industry, and whether you have employees. 

• If you have employees, nearly all states require you to carry workers compensation insurance
• In certain states, professional liability insurance may be required to maintain professional licenses
• Many states require liquor liability insurance if your business serves or sells alcohol
• Commercial auto insurance is typically required if you use your vehicle for business
• General liability insurance is generally not legally mandated, but it’s a common requirement to lease or rent a commercial space

Because every business is different, it’s crucial to check your state laws on insurance to ensure you’re compliant. If you need a helping hand navigating coverage specific to your business and local rules, reach out! Our U.S.-based, licensed team can walk you through it.

Does My Landlord or Client Require Me to Have Insurance?

It’s common for a landlord, client, or business partner to require insurance before working with you. Ask for their specific insurance requirements to be sure:

• What coverage type (i.e., general liability insurance)
• What coverage limits (i.e., $2 million aggregate limit)
• If they need additional insured status

Once you confirm your coverage meets their requirements, download your digital certificate of insurance (COI) and send it to them so they can verify it, too. Insurance requirements are a good sign — it shows that the other party cares about doing business the right way.

What Is a Certificate of Insurance and Why Do Clients Ask for It?

A certificate of insurance (COI) is proof that your business has active coverage. Clients may ask to see your COI to double-check that you’re covered for liability claims. Essentially, it’s a way for them to verify if you’re “safe” to do business with!

Do I Need Insurance if I Work From Home?

If you run a business from home, yes, you need business insurance to cover your operations there. Homeowners’ and renters’ insurance policies typically do not cover business activities in your living space.

This means if a client is accidentally injured at your home studio or if your business inventory is damaged, you need separate business insurance coverage to cover the costs of those claims. 

A home-based business is still a business! Securing the right coverage lets you confidently work from home, with distinct protection in place for your business operations.

Do I Need Insurance if I’m a Sole Proprietor or Independent Contractor?

Sole proprietors and independent contractors need business insurance. Claims can happen to any business, even those that consist of one person! And if you’re the only one earning income, a claim or lawsuit can feel like an even bigger hit to your business.

Beyond protecting your business from costly claims, you’ll find that you typically need insurance to get jobs in the first place. Many venues, event organizers, and clients require you to carry insurance before accepting you for contract work.

I Have an LLC — Do I Still Need Small Business Insurance?

If you formed an LLC (limited liability company) for your business, you still need small business insurance. While an LLC separates your business assets from your personal ones, it doesn’t prevent others from suing you if something goes wrong at your business. 

With the right business insurance in place, you can be covered for liability claims, including defense costs, settlement fees, and damages awarded. Without insurance, those costs would come out of your LLC’s bank account. 

Your LLC and business insurance work together to protect you, the business owner, and all the hard work you’ve put into your venture.

What if I Operate in Multiple States?

Insurance Canopy coverage extends nationwide, so you’re protected wherever your business takes you, up to your policy limits. Just be sure your primary business address stays current in your user dashboard and ensure your business is compliant with local rules and regulations. 

Does My Coverage Follow Me to Different Job Sites or Client Locations?

Yes, your Insurance Canopy coverage follows you wherever you work in the U.S., from your main space to events and client locations! Double-check that your primary business address is up-to-date in your online account, and you’re good to go.

Getting Covered

How Do I Know Which Coverage Is Right for My Business?

Start by finding your industry or profession on our Small Business Insurance by Industry list. Our dedicated pages break down the coverages that might be a good fit for your business. Select a base policy, then add any optional coverage add-ons to protect how you work!

Here’s a quick list of questions to help determine your coverage needs:

• What insurance am I required to have?
• What exposures do I want to protect my business from?
• Are there specific services or products that change my risk level?
• What kinds of claims would hurt my business?

From there, match your highest risk areas to the coverages that apply. 

Insurance Canopy aims to explain small business insurance terms in simple, jargon-free language, but if you need help, our friendly, licensed support agents are happy to answer your questions: contact us!

What Information Do I Need to Get a Quote?

Gather the following information for a quicker, easier quote process:

• Your name or business name
• Your address and contact info
• Your business activities (what you offer)
• Your estimated annual revenue
• Number of employees, if any
• Desired coverage types and limits

Getting an instant quote with Insurance Canopy only takes about 10 minutes online. And if you need to pause your application, you can always jump back in later — we’ll save your progress. 

Can I Change or Add Coverage After I Buy a Policy?

Change or add coverage after purchase right through your user dashboard. We know running a business means staying flexible, and that applies to managing your policy, too!

Log in to:

• Add additional insureds

• Add optional coverages

• Upgrade your liability limits (if available for the coverage type)

You can access your policy online 24/7 to make coverage changes whenever you need. Your Insurance Canopy coverage keeps up with your growing business.

What’s the Difference Between an Online Policy and an Insurance Agent?

Insurance Canopy specializes in online policies, which are pre-packaged coverage options that are ready to buy online. However, we also offer insurance solutions outside of these options through our in-house team of insurance agents — they’re licensed experts who can build a custom quote for you!