Insurance

Understanding Small Business Insurance: Exploring Different Coverage Types

Navigating the labyrinth of small business insurance.

  • 5 min Read
  • November 14, 2023

Author

Kanika Sinha

Kanika is an enthusiastic content writer who craves to push the boundaries and explore uncharted territories. With her exceptional writing skills and in-depth knowledge of business-to-business dynamics, she creates compelling narratives that help businesses achieve tangible ROI. When not hunched over the keyboard, you can find her sweating it out in the gym, or indulging in a marathon of adorable movies with her young son.

Table of Contents

Entrepreneurs give it all to get their company up and running. But sometimes, it takes just one lawsuit to put them out of business for good. 

Data from The Hartford, an insurance company, reveals that the court costs for a general liability claim can exceed $75,000. And if you face a reputational harm lawsuit, you could face nearly $50,000 in costs, both of which are unviable costs for a small business. 

Schedule a call today

Fortunately, there is a wide range of insurance coverage available to protect against all possible risks your small business may encounter. From lawsuits to cyberattacks to natural disasters, small business insurance can help keep your company secure, ensuring continuity and peace of mind in the face of unexpected challenges.

Here’s a roundup of critical small business insurance policies.

1. General liability insurance


Also known as business liability insurance, this insurance protects your small business from claims that result from normal business operations.

Who needs it? Any business.
What it does:  Protects against financial loss due to injury, property damage, copyright infringement, reputational harm, lawsuits, advertising injuries, and medical expenses.
What’s covered? Legal representation and settlement costs.

2. Product liability insurance


This insurance cover shields your small business from the consequences of your company’s product not working correctly and any injuries or property damage it may cause to someone else.

Who needs it? Businesses engaged in manufacturing, wholesaling, distributing, and retailing products.
What it does: Safeguards against financial loss from a defective product that causes bodily harm or injury.
What’s covered? Medical costs, legal fees, compensatory damages, judgments, and settlements.

3. Errors and omissions insurance


Popularly known as professional liability insurance, this policy pays for costs resulting from mistakes you or your employees make. The types of errors covered include misrepresentation, negligence, breach of good faith and fair dealing, and giving false or inaccurate advice.

Who needs it? Any business that provides professional or advisory services.
What it does: Protects against financial loss due to malpractice, errors, and negligence.
What’s covered? Legal representation and settlement costs.

Talk to us about how Escalon’s essential business services can help choose the right insurance coverage for your small business.

4. Commercial property insurance


This policy protects the physical location of your small business and your business equipment, tools, supplies, computers, and office furniture. Owned and leased business equipment are also covered under this policy.

Who needs it? Businesses that possess substantial property and physical assets.
What it does: This policy shields your business from loss and damage to company property caused by lightning, fire, smoke, wind and hail storms, civil disobedience, and vandalism.
What’s covered? Repair or replacement of the damaged or lost business property.

5. Home-based business insurance


Suppose you’re operating your small business from home. In that case, this insurance policy ensures that your work equipment and inventory are protected in case of unexpected incidents.

Who needs it? Businesses run from the house.
What it does: Provides coverage for a limited amount of business equipment and offers liability protection for injuries involving third parties.
What’s covered? Payout for property damage, injuries related to the business, employee injuries, and lawsuits.

6. Business owner’s policy


This policy bundles the most common types of property and liability insurance your small business needs into a single, all-inclusive package at a competitive cost.

Who needs it? Most small business owners, especially home-based entrepreneurs.
What it does: Protects small businesses against property damage, business interruption, peril, and liability.
What’s covered? Lost income, work-related accidents, and litigation fees.

7. Cyber liability insurance


Also known as cybersecurity insurance, this policy covers your small business for risks associated with using computers and technology.

Who needs it? Businesses that store or process sensitive information. 
What it does: Helps cover the cost of cyberattacks and data breaches.
What’s covered? Litigation fees, customer notification expenses, settlement costs, ransom payments, lost income, regulatory fines, and data recovery and identity recovery costs. 

The final word


Small business insurance is vast, but its significance is undeniable. Your small business’s success depends on its ability to weather unexpected storms. By having the right insurance coverage, you’re not only safeguarding your venture but also ensuring its resilience and continued growth. 

Take the time to assess your business’s unique needs and secure the protection that paves the way for lasting success.

Schedule a call today

Want to know more about startups and what it takes to get started? Since 2006, Escalon has helped thousands of startups get off the ground with our back-office solutions for accounting, bookkeeping, taxes, HR, payroll, insurance, and recruiting — and we can help yours, too. Talk to an expert today. 

This material has been prepared for informational purposes only. Escalon and its affiliates are not providing tax, legal or accounting advice in this article. If you would like to engage with Escalon, please contact us here.

Talk to our team today to learn how Escalon can help take your company to the next level.

  • Expertise you can trust

    Our team is made up of seasoned professionals who bring years of industry experience to the table. You gain a trusted advisor who understands your business inside out.

  • Quality and consistency

    Say goodbye to the hassles of hiring, training and managing in-house finance teams. You will never have to worry about unexpected leave of absence or retraining new employees.

  • Scalability and Flexibility

    Whether you’re a small business or a global powerhouse, our solutions scale with your needs. We eliminate inefficiencies, reduce costs and help you focus on growing your business.

Contact Us Today!

Tap into the latest insights from experts in your industry

Accounting & Finance

Q2 Business Planning: Adjusting Your Financial Strategy for the Rest of the Year

By the time Q2 rolls around, many startups have a clearer picture of their performance and market positioning compared to...

Read More
People Management & HR

5 Key HR Challenges to Address Before Summer to Keep Your Team Engaged

For many startups, the summer months can be a dual-edged sword. On one hand, warmer weather and looming vacations can...

Read More
Taxes

How to Maximize Your Tax Deductions: Essential Tips for Startups in Q2

Tax season often triggers stress and complexity—especially for startups laser-focused on building products, acquiring customers, and scaling operations. Yet savvy...

Read More
Startups

Mid-Year Financial Checkup: How to Assess and Adjust Your Startup’s Budget 

The halfway mark of any given year is more than just a date on the calendar; it’s a valuable checkpoint...

Read More
Consumer Goods

Inventory Accounting 101: Navigating Costing Methods and Their Impact on Financial Health 

For consumer goods companies, managing inventory efficiently is critical—not just for operations but also for financial health and risk management....

Read More
Technology & Security

Compliance Considerations for SaaS: Protecting Data and Staying Secure

As more businesses transition to Software-as-a-Service (SaaS) solutions, data security and regulatory compliance have become top priorities. From handling sensitive...

Read More
Accounting & Finance

How Outsourced Accounting Supports Scalability in Portfolio Companies 

For portfolio companies, whether backed by private equity, venture capital, or family offices, scalability is essential for maximizing value and...

Read More
Consumer Goods

Insights from a Consumer Goods Expert: Building Brands, Inventory Management, and the Power of Outsourcing

Insights from a Consumer Goods Expert: Building Brands, Inventory Management, and the Power of Outsourcing  In a recent conversation with...

Read More
Private Equity

The Key to Private Equity Success: Strong Financial Oversight and Compliance

Private equity deals are becoming larger and more complex, making financial preparation a critical part of the process. Take Novartis’s...

Read More