What business insurance covers

General liability

This responds to claims by other people for bodily injury or damage to their property arising out of your operations, and it usually covers the cost of defending the claim as well as the claim itself.

It is the cover most often demanded by someone else — a landlord, a client, a venue — and it is the one most people mean when they say a business is insured. It is also the narrowest in an important way: it deals with physical harm and physical damage, not with the quality of your work.

Commercial property

This covers what the business owns — premises where you own them, and the contents, stock, tools and equipment either way. A tenant business still needs it, because the landlord's policy covers the building and nothing of yours, on exactly the same logic as a residential lease.

The part that decides claims is business interruption, which covers lost income while you cannot trade after a covered loss. It is frequently the most valuable coverage in the policy and it is the one owners most often leave out to save money.

Professional liability

Also called errors and omissions. This responds when your advice, design or professional work is alleged to have caused someone a financial loss.

It sits outside general liability entirely, and the gap between them is where a great many uninsured claims land. If what you sell is judgement rather than a physical product, this is likely the cover that matters most, and it is generally not included in a package policy by default.

Workers' compensation

This covers medical costs and lost wages for employees injured at work, and it is the one part of the programme that is generally not a commercial decision.

Most states require it once a business has employees. The thresholds, the exemptions and the treatment of owners, officers and contractors 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 assume from general guidance.

It matters even where you believe you are exempt, because misclassifying a worker as a contractor is one of the more expensive mistakes a small business can make, and it is usually discovered at audit rather than at the point of hiring.

Commercial auto

A personal auto policy is written for personal use and generally excludes business use. That exclusion is the whole issue: the vehicle is insured right up until the moment it is being used for the thing that pays for it.

This catches sole traders hardest, because the vehicle has not changed and neither has the driver. Where employees drive their own cars for work, hired and non-owned auto cover is the piece almost every small business is missing.

Cyber

Standard property and liability forms were not written for data, and they generally respond poorly to a breach or a ransomware event. Cover is usually either excluded or capped at a limit far below what the incident costs.

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

What none of them cover

• Wear, gradual deterioration and lack of maintenance, exactly as on a personal policy
• Flood, which is excluded on standard property forms and covered separately
• The business's 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 policy was not told about, which is why the description of operations on the application matters

How to work out what you need

The useful question is not which policies to buy but which of your exposures would end the business. Work outward from what you do, who comes near it, and what you would still owe if you could not trade tomorrow.

• Do people come to your premises, or do you go to theirs? That drives general liability
• What would it cost to replace your tools, stock and equipment, and could you trade without them?
• Do clients rely on your advice or your professional work? That drives professional liability
• 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' data?