Business insurance is not one policy

Start from the exposure, not the product

The useful question is not which policies to buy. It is which of your exposures would end the business, and then which cover responds to each of them.

Working that way tends to produce a shorter list than a product-led conversation, and a more honest one. It also makes it obvious when a quote is missing something rather than simply being cheaper.

• Do people come to your premises, or do you go to theirs?
• What would it cost to replace your tools, stock and equipment today?
• Could you trade at all while that was being replaced, and for how long?
• Do clients rely on your advice or your professional work?
• Do you have employees, or people you treat as contractors?
• Does anyone drive for the business, in any vehicle, including their own?
• What would happen if you lost access to your data, or your customers' did?

General liability is the one other people ask for

It responds to third-party bodily injury and damage to other people's property arising out of your operations, and it generally covers the cost of defending the claim as well as the claim itself.

It is what a landlord, a venue or a general contractor almost always means when they ask whether you are insured. It is also narrower than its reputation: it deals with physical harm, not with whether your work was any good.

Property, and the part of it that matters most

Commercial property covers what the business owns — the building where you own it, and the contents, stock, tools and equipment either way. A tenant business still needs it: the landlord's policy covers the building and nothing of yours.

The section that decides whether a business survives a serious loss is business interruption, which covers lost income and continuing expenses while you cannot trade. It is frequently the most valuable cover in the policy and the first one cut to reduce a premium.

It generally requires direct physical damage from a covered peril, and it usually runs for a defined period of restoration rather than until trade recovers. Both are worth reading before you need them.

Professional liability, and why it is missed

Professional liability — also called errors and omissions — responds when your advice, design or professional work is alleged to have caused a client a financial loss. Nobody is injured and nothing is damaged, which is exactly why general liability declines it.

It is missed because the business feels insured. It holds a policy, it can produce a certificate, and the exposure that is actually most likely to generate a claim is the one nothing in the file covers.

It is also usually written on a claims-made basis, which behaves differently from everything else on this page and is covered below.

Occurrence and claims-made

General liability is normally written on an occurrence basis: if the incident happened while the policy was in force, it generally responds even if the claim arrives long after that policy ended.

Professional liability is normally written on a claims-made basis: what matters is that a policy is in force when the claim is made. Stop paying for it and cover for past work generally stops with it.

Two consequences follow, and both are easy to lose by accident. The retroactive date sets the point before which work is not covered at all, and it needs carrying forward when you change insurer. Tail cover, or extended reporting, is what keeps the window open when you retire, sell, or change what you do.

Employees, and the question that is not commercial

Workers' compensation covers medical costs and lost wages for employees injured at work, and it is generally not a matter of choice in the way the rest of the programme is.

Most states require it once a business has employees. The thresholds, the exemptions and how owners, officers and contractors are treated differ from state to state, so the requirement that applies to you is a question for your own state's authority rather than something to infer from general guidance.

It also interacts with how you classify people. Treating a worker as a contractor when they would be regarded as an employee is one of the more expensive small business mistakes, and it usually surfaces at an audit rather than at the point of hiring.

Vehicles

A personal auto policy is written for personal use and generally excludes business use. The vehicle is insured right up to the point it is being used for the thing that pays for it.

This catches sole traders hardest, because nothing visible has changed — same vehicle, same driver, same road. The exclusion sits in the wording rather than in anything the owner would notice.

Where employees drive their own cars for work, hired and non-owned auto cover is the piece most small businesses are missing entirely. It is usually inexpensive relative to what it protects.

Cyber

Standard property and liability forms were not written for data. A breach or a ransomware event is generally either excluded or capped at a limit well below what the incident costs.

The expensive part is rarely the technology. It is notification, forensic work, regulatory exposure, and the days of downtime, which is why cyber is written as its own cover rather than added to property.

A business does not need to be large to be exposed. It needs to hold data someone wants or to depend on systems it cannot trade without, which describes almost every business now.

Certificates, additional insureds and contracts

A certificate of insurance evidences that cover exists. It confers no rights of its own and does not alter the policy — it describes cover rather than creating it.

Being added to a policy as an additional insured is a materially different thing, because it extends certain cover to that party. Contracts frequently ask for both, and the two requests are worth separating before agreeing to either.

Read insurance requirements before signing rather than after. Contracts routinely specify covers or limits a business does not hold, and that is a much easier conversation to have in advance.

What is generally not covered

The exclusions are as consistent across commercial policies as they are on personal ones, and knowing them is most of the value of reading a policy.

• Wear, gradual deterioration and lack of maintenance
• Flood, which is excluded on standard property forms and arranged separately
• Your own faulty workmanship, as distinct from damage it causes to something else
• Employment disputes — discrimination, harassment and wrongful dismissal claims sit under employment practices liability
• Anything the insurer was never told about, which is why the description of operations matters

Working from home, and the first employee

A homeowners policy is written for residential use. Business property is usually covered only to a small stated limit and business liability generally not at all, so a visiting client's injury sits outside it.

Where the business is more than a desk and a laptop, the fix is often an endorsement rather than a separate policy. Nothing in a standard application asks the question clearly enough for most people to realise it applies to them.

Hiring the first person is the point at which the programme changes shape rather than simply growing. It generally brings workers' compensation into scope, it can bring employment practices exposure with it, and it changes who is driving for the business.

At renewal

Commercial policies renew on the description of the business they were written for, and small businesses change considerably faster than their paperwork does.

The things worth re-checking each year are the ones that drift quietly: what the business now does, revenue, headcount, who drives, what the equipment and stock would cost to replace today, and whether the premises or occupancy have changed.

Tell your insurer when something changes rather than saving it for renewal. Cover generally follows what the policy was told, and a claim arising from an activity the insurer never knew about is the hardest kind to argue.