Small business owner researching insurance options

Small Business Insurance 101: What Is It and What Does It Cover?

By the Mercury Team

Starting a business is a rewarding yet challenging process that requires hard work, dedication, and perseverance. You’ll complete countless procedures and steps when opening your business, and getting small business insurance is one step you shouldn’t ignore. This article will explain what this type of insurance is and what it covers.

What Is Small Business Insurance?

Small business insurance protects you from the unexpected costs of running a business. With the right policies in place, you can enjoy peace of mind knowing your assets are safeguarded from accidents, property damage, lawsuits, professional errors, and other incidents.

What Does Small Business Insurance Cover?

A small business insurance policy typically includes property and liability coverage, as well as additional business coverages can be included in your policy.

Small Business Property Insurance

Property insurance compensates your business if your property is damaged or lost due to a covered loss, such as fire or theft. Take a look at some specific coverages within this type of insurance:

  • Business personal property (BPP) — BBP provides financial protection for repairing or replacing tangible assets, such as furniture, supplies, tools, and machinery. However, BPP doesn’t cover intangible property, such as trademarks or patents.
  • Business income coverage (BIC) — BIC covers loss of income suffered by your business due to a covered peril that causes a slowdown or suspension of business operations. Depending on the policy, it may cover business income for up to 12, 18, or 24 months with an option for a time period extension.
  • Employee dishonesty — This coverage compensates you for employee actions that may cause direct loss or damage to money, securities, or covered property from your business.
  • Ordinance or law coverage — This coverage helps cover the costs of rebuilding your damaged or destroyed business building following a covered loss. It also covers upgrading the building to meet the most up-to-date codes and standards.
  • Water back-up and sump overflow — This coverage helps cover damages caused by water that backs up into the property via pipes, drains, sewers, and sump pumps. Depending on your policy, coverage limits typically range from $25,000 to $100,000.
  • Spoilage — Optional coverage that helps cover the loss of perishable stock due to a power outage, breakdown, or contamination.

Small Business Liability Insurance

Liability insurance can help financially protect you from medical, repair, and legal expenses if your business is held liable for injuring someone or damaging their property. Here are some of the specific coverages that may come with this type of insurance:

  • Business liability — This coverage provides financial protection against bodily injuries and property damage claims. It also helps cover personal and advertising injuries, which are claims against your business for actions such as copyright infringement, libel, and slander.
  • Medical expenses — If a customer or visitor is injured at your business, this coverage can help pay for the injured party’s medical costs. This type of insurance is subject to coverage limits. For example, your policy may include a limit of $5,000 per person or $10,000 per accident.
  • Hired auto and non-owned auto liability — Hired auto coverage means you’re covered when you or your employees drive rented, leased, or borrowed vehicles for business. Non-owned auto refers to employees using their own vehicles for business purposes. Both coverages help protect your business from bodily injury and property damage claims.
  • Liquor liability — This coverage helps protects you against bodily injury or property damage claims as a result of selling or serving alcoholic beverages.

Featured Coverages

There are also various types of optional coverages you can add to your small business insurance policy. Some of these coverages may include:

  • Cyber and data breach — This coverage can help cover the costs associated with cyberattacks and data breaches. These expenses may include lost income, recovering compromised data, repairing damaged computer systems, and litigation costs.
  • Employment practices liability (EPL) — EPL covers defense costs and damages associated with various employed-related claims, including discrimination, wrongful termination, and workplace harassment.
  • Equipment breakdown tech advantage — This coverage offers additional protection for your business when equipment is damaged due to a mechanical breakdown or electrical failure.
  • Small business broadening endorsement — This coverage provides several additional property and liability coverages specific to small business owners.
  • Restaurant broadening endorsement — This coverage offers numerous additional property and liability coverages specific to restaurant business owners.

What Insurance Is Needed for a Small Business?

At a minimum, you should carry business property and liability insurance, which are included in most small business insurance policies. However, you can tailor your insurance policy to meet specific requirements for your business or industry.For example, adding coverages such as liquor liability and spoilage would be highly recommended if you're a restaurant owner. On the other hand, getting these coverages would make little sense if you own a construction business.

When determining the coverages you need, consider the risks — e.g., natural disasters, lawsuits, equipment breakdown, etc. — that could damage your business. Then, look for an insurance policy that perfectly meets your small business needs.

How Much Does Small Business Insurance Cost?

Small business insurance costs depend on numerous factors, such as the type of business you're insuring, the value of your assets, the add-on coverages you select, and the deductibles and limits you choose for each coverage.

Mercury provides best-in-class coverage at affordable rates. We’ll help you choose a small business insurance policy that suits your industry and budgetary needs. Plus, we offer many discounts to help you save even more on small business insurance.

Contact us today for a fast, free quote!

Mercury Team

The Mercury Marketing Team is made up of professionals in the fields of Content Creation, Public Relations and Social Media. The team works together to deliver professionally written and researched content to provide information for consumers.

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