Running a small business means a lot of responsibilities, and worrying about unexpected risks shouldn’t keep you up at night. Whether it’s a burst pipe in your office, an employee injury, or a client dispute, the right insurance coverage ensures you’re ready to handle the unexpected without it derailing your business.
But let’s be honest—figuring out what coverage you need can be confusing. Do you need general liability? What about workers’ compensation? Is cyber insurance really necessary? And how do you know you’re not paying for coverage you’ll never use?
This checklist is here to cut through the noise and give you the clarity you need. Let’s get started!
Small Business Insurance Checklist: Things to do
Securing the right insurance is crucial for protecting your small business against unforeseen risks and liabilities. By taking the time to assess your needs, understand legal requirements, and explore coverage options, you can make informed decisions that safeguard your operations and assets.
Below is a checklist of essential steps to follow before purchasing insurance for your business.
- Assess Your Risks: Identify potential hazards specific to your industry and operations to determine the necessary coverage.
- Understand Legal Requirements: Research federal and state insurance mandates applicable to your business to ensure compliance.
- Evaluate Coverage Options: Explore various insurance policies, such as general liability, property, and workers' compensation, to find those that align with your business needs.
- Compare Providers: Obtain quotes from multiple insurers to assess coverage offerings and premium costs, enabling an informed decision.
- Review Policy Exclusions: Carefully examine what each policy does not cover to avoid unexpected gaps in protection.
- Consult a Professional: Engage with an insurance advisor to tailor coverage that best suits your business's unique requirements.
By addressing these points, you can secure appropriate insurance coverage that safeguards your business effectively.
Top Small Business Insurance Coverages
1. General Liability Insurance
General Liability Insurance is a policy that covers your business against claims made by third parties (non-employees). These claims often arise from incidents like accidental injuries, damage to someone else’s property, or disputes over your advertising practices.
What Does General Liability Insurance Cover?
1. Bodily Injury Claims
GLI covers medical expenses, legal fees, and compensation when a third party (customer, visitor, or vendor) gets injured on your business premises or due to your business operations.
- Example: A customer slips in your store, resulting in a broken arm. GLI will pay for their medical bills and cover your legal costs if they sue.
2. Property Damage Claims
If your business accidentally damages someone else’s property, this coverage helps with repair and also with the replacement costs and any legal expenses if the matter escalates.
- Example: While delivering products, an employee damages a client’s expensive glass table. GLI covers the cost of repairs or replacement.
3. Advertising Injury Claims
Protects your business if a competitor or individual accuses you of libel, slander, copyright infringement, or other advertising-related disputes.
- Example: A competitor sues, claiming your ad misrepresented their product. GLI pays for legal defense and any settlement costs.
4. Legal Defense Costs
Even if a claim is baseless, GLI covers the cost of hiring lawyers, court fees, and other legal expenses required to defend your business.
5. Settlement or Judgments
If a claim results in a court ruling or settlement, GLI helps cover the financial payout to the injured or affected party.
What General Liability Insurance Does Not Cover
While GLI is extensive, there are some limitations:
- Employee Injuries: For workplace injuries, you’ll need workers’ compensation insurance.
- Professional Errors: Mistakes in services or advice require professional liability insurance.
- Damage to Your Business Property: Covered by commercial property insurance.
- Intentional Acts: Deliberate harm or illegal actions are not covered.
Benefits of General Liability Insurance
- Financial Security: Protects your business from unexpected costs related to lawsuits, medical expenses, or property damage.
- Client and Partner Trust: Demonstrates professionalism and reliability by providing proof of coverage to clients, landlords, or vendors.
- Risk Mitigation: Offers peace of mind, knowing you’re covered even if unforeseen accidents occur.
- Legal Compliance: Meets legal requirements in industries or locations where GLI is mandatory.
- Reputation Protection: Resolves claims quickly and professionally, preventing disputes from harming your business’s reputation.
Real-World Scenarios Where GLI Matters
- Retail Store Example: A customer trips on a loose rug in your shop and injures themselves. GLI covers their medical costs and your legal fees if they sue.
- Contractor Example: While working on a renovation project, an employee accidentally damages the homeowner’s flooring. GLI steps in to pay for the repairs.
- Tech Startup Example: Your social media campaign unintentionally uses an image without permission, leading to a copyright lawsuit. GLI covers the legal expenses and potential settlement.
It’s the reassurance you need to focus on growing your business and being carefree about the financial impact of unexpected incidents.
2. Professional Liability Insurance
Professional Liability Insurance, aka (as) Errors and Omissions (E&O) Insurance, is designed to protect your business against any claims of negligence, mistakes, or failure to deliver promised services. Unlike General Liability Insurance, which focuses on physical injuries or property damage, E&O Insurance covers the financial and reputational risks tied to the professional services or advice you provide.
What Does Professional Liability Insurance Cover?
1. Claims of Negligence
Protects your business if any clients of yours alleges that your mistake or oversight caused them financial harm.
- Example: An accountant miscalculates a client’s tax filing, resulting in penalties from the IRS. E&O Insurance covers the cost of resolving the claim.
2. Errors or Omissions in Services
Covers situations where a client claims you failed to deliver the agreed-upon service or did so inadequately.
- Example: A web developer fails to deliver a fully functional website on time, causing the client to lose revenue. The policy helps cover legal costs and any settlements.
3. Breach of Contract
This coverage provides you support, if a client alleges that your business did not fulfill its contractual obligations.
- Example: A marketing agency delivers a campaign that doesn’t meet the agreed-upon scope, leading to a lawsuit from the client.
4. Misrepresentation or Advice Errors
Covers claims related to inaccurate advice or professional guidance that causes harm.
- Example: A financial consultant gives investment advice that results in significant client losses. E&O Insurance covers the legal defense and potential settlement.
5. Legal Defense Costs
Even if a claim is unfounded, the policy covers the cost of hiring lawyers, court fees, and other legal expenses to defend your business.
What Professional Liability Insurance Does Not Cover
While E&O Insurance offers broad protection, it doesn’t cover everything:
- Employee Injuries: Workplace injuries require workers’ compensation insurance.
- Physical Damage: For property damage or bodily injury claims, General Liability Insurance is required.
- Intentional Misconduct: Deliberate acts of negligence or fraud are not covered.
- Patent or Intellectual Property Claims: May require separate coverage, depending on the policy.
Benefits of Professional Liability Insurance
- Financial Protection: Shields your business from the high costs of lawsuits, settlements, and legal defense tied to professional errors.
- Reputation Management: Resolves claims professionally, helping maintain trust and credibility with clients.
- Client Confidence: Many clients require proof of E&O Insurance before entering into contracts, ensuring you meet their expectations.
- Customized Coverage: Policies can be adapted to your industry-specific risks, offering tailored protection.
- Peace of Mind: Allows you to focus on providing quality services without worrying about the potential financial impact of mistakes or disputes.
Real-World Scenarios Where E&O Insurance Matters
- Consulting Firm Example: A consultant provides inaccurate data analysis, leading to financial losses for a client. E&O Insurance covers the legal fees and settlement.
- Design Agency Example: A graphic designer delivers a logo with an unintentional resemblance to another brand, resulting in a lawsuit. The policy pays for legal defense and damages.
- IT Firm Example: A software developer fails to meet a deadline for a critical system upgrade, causing operational downtime for the client. E&O Insurance covers the claim and associated costs.
Professional Liability Insurance ensures you can handle client disputes and legal challenges with confidence. By securing this coverage, you protect your business from financial harm, preserve your reputation, and demonstrate your commitment to professionalism.
3. Commercial Property Insurance
Commercial Property Insurance is a vital policy that protects your business’s physical assets from damage or loss due to unexpected events. Whether you own or lease your workspace, this coverage ensures that your property, equipment, and inventory are safeguarded against risks like fire, theft, vandalism, or certain natural disasters.
What Does Commercial Property Insurance Cover?
1. Building and Physical Structures
Provides coverage for damage to your building or rented workspace caused by covered events like fire, storms, or vandalism.
- Example: A fire damages the walls and roof of your office building. The policy covers repair costs to restore the structure.
2. Equipment and Machinery
Covers the cost of repairing or might be for replacing tools, machinery, and other equipment damaged due to covered risks.
- Example: A power surge damages the manufacturing machines in your factory. The policy helps replace or repair them.
3. Inventory and Stock
Protects your stored goods, raw materials, and finished products from events like theft, fire, or flooding (if included in your policy).
- Example: A retail store’s inventory is destroyed in a fire. The policy reimburses the cost of the lost stock.
4. Furniture, Fixtures, and Office Supplies
Covers furniture, lighting, computers, and other office essentials.
- Example: Vandalism damages desks and computers in your office. The policy pays for replacements.
5. Signage and Outdoor Property
Provides coverage for outdoor signs, landscaping, and other exterior property.
- Example: A storm damages your business sign. The policy covers repair or replacement costs.
What Commercial Property Insurance Does Not Cover
While this insurance offers broad protection, it doesn’t cover everything:
- Employee Injuries: For workplace injuries, you’ll need workers’ compensation insurance.
- General Liability Claims: Third-party bodily injuries or property damage require General Liability Insurance.
- Flood and Earthquake Damage: These often require separate policies unless specifically included.
- Wear and Tear: The damage caused by normal wear, tear, or neglect is not covered.
Benefits of Commercial Property Insurance
- Asset Protection: Safeguards your critical business assets, ensuring minimal disruption after an incident.
- Financial Stability: Reduces the financial burden of unexpected repairs or replacements, helping you recover quickly.
- Business Continuity: Many policies include business interruption coverage to protect income during recovery periods.
- Client and Partner Confidence: Demonstrates that your business is well-prepared for unexpected risks, building trust with stakeholders.
- Tailored to Your Needs: Policies can be customized to fit the value and specific risks of your business property.
Real-World Scenarios Where Commercial Property Insurance Matters
- Retail Store Example: A break-in results in stolen inventory and damaged shelving. The policy covers the cost of repairs and replacing the inventory.
- Restaurant Example: A kitchen fire destroys equipment and halts operations for two weeks. The insurance covers equipment replacement, repairs, and lost income.
- Office Example: A burst pipe floods the office, damaging furniture, carpets, and computers. The policy helps cover restoration and replacement costs.
Don’t have commercial property insurance yet? It’s a great time to search your options with insurance providers like TWFG Khan Insurance. Get a personalized quote and tailored coverage to keep your business protected while you focus on growing it.
4. Workers’ Compensation Insurance
Workers’ Compensation Insurance is a very important coverage that protects employers and employees in the event of work-related injuries or illnesses. It ensures that injured employees receive medical care, wage replacement, and support during recovery while protecting businesses from lawsuits. This insurance is legally required and demonstrates a commitment to a safe and supportive work environment.
What Does Workers’ Compensation Insurance Cover?
1. Medical Costs
Covers all the needed medical expenses related to workplace injuries or illnesses, such as surgeries, medications, physical therapy, and hospital stays.
- Example: An employee injures their back while lifting heavy equipment. The insurance pays for their treatment and rehabilitation.
2. Wage Replacement
Provides partial wage replacement, typically 60-70% of the employee’s average earnings, for the time they are not able to work due to the injury or illness.
- Example: A construction worker injured on-site receives wage replacement while recovering at home.
3. Disability Benefits
Offers compensation for temporary or permanent disabilities from any workplace incidents, helping employees adapt to new circumstances.
- Example: An electrician who loses the use of their hand receives long-term disability benefits to support their future.
4. Death Benefits
Provides a huge financial support to the family of an employee who dies due to workplace injury or illness. This includes funeral expenses and ongoing assistance for dependents.
- Example: The family of a worker who dies in a construction accident receives benefits to help manage their loss.
5. Employer Liability Coverage
Protects businesses from lawsuits filed by employees claiming unsafe working conditions or negligence. Covers legal fees, court costs, and settlements.
- Example: An employee sues over unsafe working conditions, and the policy covers the legal defense and potential settlement.
What Workers’ Compensation Insurance Does Not Cover
- Injuries Outside Work: This does not apply to injuries that occur during non-work-related activities.
- Intentional Injuries: Excludes injuries caused by deliberate actions of the employee.
- General Illnesses: Covers only work-related conditions, not general health issues like the flu or colds.
- Independent Contractors: This does not cover contractors unless explicitly included in the policy.
- Violations of Policy: Injuries caused by employees who violated safety protocols or engaged in illegal activities may not be covered.
Benefits of Workers’ Compensation Insurance
- Legal Compliance: Ensures your business meets state and federal requirements, avoiding penalties or fines.
- Financial Protection: Mitigates the financial impact of workplace injuries by covering medical costs, lost wages, and legal fees.
- Employee Support: Demonstrates your commitment to your workforce’s safety and well-being, improving morale and retention.
- Risk Mitigation: Protects your business from costly lawsuits and reputational damage by handling claims effectively.
- Business Continuity: Reduces workplace disruptions by ensuring injured employees are cared for and disputes are minimized.
Real-World Scenarios Where Workers’ Compensation Insurance Matters
- Manufacturing Example: An employee injures their hand while operating machinery. The policy covers medical treatment, physical therapy, and wage replacement during recovery.
- Office Example: A staff member develops carpal tunnel syndrome from repetitive typing. Workers’ comp pays for treatment and ergonomic equipment to prevent further issues.
- Construction Example: A worker falls from scaffolding and suffers a temporary disability. The policy provides wage replacement and pays for rehabilitation.
Also, read the guide on Understanding Workers' Compensation Insurance Laws and Requirements.
Other Insurance Coverages
In addition to standard policies, businesses may need specialized insurance coverage to address unique risks. These policies provide targeted protection for specific scenarios that could significantly impact your operations.
- Employment Practices Liability Insurance (EPLI):some text
- Employment Practices Liability Insurance claims related to wrongful employment practices, including discrimination, harassment, wrongful termination, or retaliation.
- Provides financial protection for legal defense costs, settlements, and judgments in employment-related lawsuits.
- Why It Matters: Employment disputes can be costly and damage your business’s reputation. EPLI ensures you’re prepared to handle these situations while safeguarding your workplace environment.
- Commercial Auto Insurance:some text
- Commercial Auto Insurance protects vehicles used for business purposes, covering accidents, theft, property damage, and liability.
- Includes coverage for company-owned vehicles, as well as rented or employee-owned vehicles used for business tasks.
- Why It Matters: A single accident involving a company vehicle can lead to significant financial and legal consequences. Commercial auto insurance ensures your business remains protected on the road.
- Cyber Liability Insurance:some text
- Cyber Liability Insurance covers financial losses and other legal expenses resulting from cyberattacks, data breaches, and IT infrastructure failures.
- Covers costs related to notifying customers, restoring compromised systems, and managing public relations.
- Why It Matters: In today’s digital world, cyber threats are a massively growing concern for businesses of all sizes. Cyber liability insurance helps mitigate the financial impact of these incidents and maintain customer trust.
- Inland Marine Insurance:some text
- Inland Marine Insurance protects movable or transportable property, including tools, equipment, and inventory in transit or stored offsite.
- Covers damages caused by theft, accidents, or natural disasters during transportation.
- Why It Matters: Businesses that rely on transporting goods or equipment face unique risks. Inland marine insurance ensures your assets are covered, even when they’re on the move.
By incorporating these specialized insurance policies, you can address specific vulnerabilities in your operations and ensure that your business remains resilient to unexpected challenges.
If you want to learn more about small business insurance cost, Small Business Insurance Cost Guide.
When it comes to getting insurance, TWFG Khan Insurance is your trusted partner. We don’t just provide policies—we deliver support, helping you protect your business and confidently seize new opportunities.
Why Choose TWFG Khan Insurance for Your Insurance Needs?
At TWFG Khan Insurance, we understand the unique risks and challenges your business faces. Whether you operate in the maritime, oil & gas, or construction industry, having the right liability coverage—and proof of it—is essential for protecting your operations and building trust with your clients.
Here’s why partnering with us is the right choice:
- Tailored insurance solutions: We provide customized liability policies designed to address the specific risks of your industry, ensuring your business has the coverage it needs.
- Expert guidance: Our team has years of experience working with businesses in high-risk industries. We help you navigate insurance requirements, making sure you understand your coverage and how to use it effectively.
- Quick and easy access to COIs: When you choose TWFG Khan Insurance, we make it simple to obtain your Certificate of Liability Insurance (COI). You can request a COI anytime, and we’ll ensure it’s processed quickly so you’re always prepared to meet client or partner requirements.
- Direct access to top-rated carriers: We work with leading insurance providers to secure competitive rates and reliable coverage for your business. You can trust us to find the best options to protect your operations.
- 24/7 claims support: If something goes wrong, we’re here to help. Our team provides round-the-clock claims support so you can resolve issues and get back to running your business.
Get a quote with us today to learn how TWFG Khan Insurance can protect your business and make obtaining insurance effortless.
