Here's something most new business owners don't realize until it's too late: your personal insurance policies won't protect your business. That homeowners policy? It won't cover inventory stored in your garage. Your car insurance? It can deny claims if you're driving for work. And if a customer gets injured at your business or sues you for a mistake, you could lose everything you've built—plus your personal savings.
The good news? Business insurance doesn't have to be complicated or expensive. Most small businesses pay between $50 and $200 per month for the coverage they need. And unlike personal insurance, you're not just protecting yourself—you're meeting legal requirements, satisfying clients, and building a business that can survive the unexpected. Let's break down exactly what you need to know.
What Business Insurance Is Actually Required by Law
Let's start with what you absolutely must have. The specific requirements vary by state and industry, but there are three types of coverage that most businesses are legally required to carry.
Workers' compensation insurance is the big one. Almost every state requires it as soon as you hire your first employee—and if you don't have it, you could face criminal charges. This coverage pays for medical bills and lost wages if an employee gets injured or sick because of their job. In 2024, the national median cost was $80 per month, though construction companies and other high-risk industries pay significantly more, averaging $254 monthly. A few states have quirks: Florida doesn't require it until you have four employees, Georgia until you have three, and four states (North Dakota, Ohio, Washington, and Wyoming) require you to buy from a state fund rather than a private insurer.
Commercial auto insurance is required in every state except New Hampshire if your business owns vehicles. Your personal car insurance won't cover you when you're driving for work, and if you get into an accident while delivering products or visiting a client, you could be personally liable for all damages. The policy needs to meet your state's minimum liability requirements, just like personal auto insurance.
Professional liability insurance (also called errors and omissions insurance) is required by law for certain professions. Real estate professionals need it in several states, with minimum coverage ranging from $100,000 to $300,000. Lawyers must carry malpractice insurance in Oregon and Idaho, and nearly half of all states require attorneys to disclose whether they have coverage. Even if your profession doesn't legally require it, many clients won't sign contracts without proof of coverage.
The Coverage You're Not Required to Have (But Absolutely Need)
General liability insurance is rarely required by law, but here's the reality: you can't run a business without it. This is the foundation of business insurance, protecting you when customers get injured on your property, when you damage someone else's property, or when someone accuses you of libel or slander. The median cost is just $42 per month—some businesses pay as little as $11 monthly—but a single lawsuit could cost hundreds of thousands of dollars.
Think of it this way: if a customer slips on your wet floor and breaks their arm, general liability covers their medical bills. If you're painting a client's office and accidentally knock over their expensive computer, it covers the replacement. If a competitor claims your advertising copied their slogan, it covers your legal defense. And increasingly, clients and landlords won't work with you unless you can provide a certificate of insurance proving you have this coverage.
Commercial property insurance protects the physical assets of your business—your equipment, inventory, furniture, and the building itself if you own it. If a fire destroys your office or a pipe bursts and ruins your inventory, this coverage pays to replace what you've lost. Many business owners skip this thinking they'll just restart if disaster strikes, but the reality is that most businesses never recover from a major uninsured loss.
A Business Owner's Policy (BOP) is the smart way to get both general liability and property coverage together at a discount. Insurance companies bundle these two essential policies and charge less than if you bought them separately. For most small businesses—especially offices, retail stores, and restaurants—a BOP is the most cost-effective starting point.
The New Essential: Cyber Liability Insurance
Here's a sobering statistic: the average cyber insurance claim reached $264,000 in 2025, up from $205,000 in 2024. Yet 74% of small businesses are underinsured for cyber risks, and 40% have no business insurance at all. If you store customer data, process credit cards, or even just use email, you're at risk.
Cyber liability insurance covers the costs when your business experiences a data breach or cyberattack. That includes notifying affected customers (which laws often require), providing credit monitoring services, recovering lost data, and defending against lawsuits. Premiums range widely from $83 to $625 per month depending on your industry and how much customer data you handle, but the typical micro-business pays around $125 monthly for standard coverage.
The gap between what businesses have saved and what they'd actually need to pay for a cyber incident has grown 30% year-over-year. This isn't just a big-company problem—small businesses are actually more attractive targets because hackers know they have weaker defenses and less insurance.
How to Get Started With Business Insurance
The average small business spends around $65 per month on insurance, or $780 annually, though your actual costs will depend on your industry, location, and coverage needs. Most businesses pay somewhere between $50 and $200 monthly. That's a small price to pay for protecting everything you've built.
Start by checking your state's specific requirements, since insurance laws vary significantly by location. Every state has different rules about when you need workers' comp, what your commercial auto minimums are, and whether your profession requires specific coverage. The Small Business Administration website has state-by-state guides, or you can check with your state's department of insurance.
Next, make a list of your actual risks. Do you have employees? You need workers' comp. Do clients visit your location? General liability is essential. Do you store customer information or process payments? Cyber liability should be on your list. Own expensive equipment or inventory? Add property coverage. Drive for work? Commercial auto is non-negotiable.
For most small businesses, the right starting point is a BOP plus workers' comp if you have employees. As you grow, you can add professional liability, cyber coverage, or other specialized policies based on your specific risks. The key is to start now—before you need it. Waiting until after you're sued or after disaster strikes means you're already too late.
Business insurance isn't just about compliance or checking boxes. It's about building a business that can survive mistakes, accidents, and bad luck. The 40% of business owners with no coverage are gambling with everything they own. Don't be one of them. Get quotes from multiple insurers, understand exactly what you're buying, and protect your business before you need it.
