Starting a Business Insurance Checklist
Starting a business exposes you to new risks that personal insurance doesn’t cover. Use this checklist to ensure you have the right business insurance protection from day one.
Before Opening for Business
Assess Your Risks
- Identify potential liability risks (customer injuries, product defects)
- List business property and equipment that needs coverage
- Determine if you’ll have employees
- Consider professional liability risks (errors, advice, services)
- Evaluate cyber risks if handling customer data
Required Insurance (Often by Law)
- Workers’ compensation (required in most states if you have employees)
- Commercial auto insurance (required if using vehicles for business)
- Professional liability (required for some licensed professions)
- Check state and local requirements for your industry
Choose a Business Structure
- Understand how LLC, corporation, or sole proprietorship affects liability
- Note: Business insurance is still essential even with an LLC
- Personal assets may still be at risk without proper coverage
Essential Business Insurance Policies
General Liability Insurance
- Protects against third-party bodily injury claims
- Covers property damage caused by your business
- Includes personal injury (slander, libel, false advertising)
- Typical limits: $1 million per occurrence / $2 million aggregate
- Often required for commercial leases and contracts
Business Owner’s Policy (BOP)
- Bundles general liability + commercial property insurance
- Usually 15-20% cheaper than buying separately
- Good option for small businesses with physical location
- May include business interruption coverage
Commercial Property Insurance
- Covers building (if you own it)
- Covers business personal property (equipment, inventory, furniture)
- Includes damage from fire, theft, vandalism, weather
- Consider replacement cost vs. actual cash value coverage
Professional Liability (E&O Insurance)
- Essential if you provide professional services or advice
- Covers claims of negligence, errors, or omissions
- Required for: lawyers, accountants, consultants, healthcare providers
- Recommended for: tech companies, marketing agencies, contractors
Employee-Related Insurance
Workers’ Compensation
- Required in almost every state if you have employees
- Covers medical costs and lost wages for work injuries
- Protects you from employee lawsuits for workplace injuries
- Rates vary by industry and state
Employment Practices Liability (EPLI)
- Covers claims of wrongful termination, discrimination, harassment
- Increasingly important as employment lawsuits rise
- Consider if you have or plan to hire employees
Health Insurance for Employees
- Required for businesses with 50+ full-time employees (ACA)
- Optional for smaller businesses, but helps with recruitment
- Consider SHOP marketplace for small business health plans
- May qualify for small business health care tax credit
Specialized Coverage to Consider
Cyber Liability Insurance
- Essential if you handle customer data, credit cards, or health info
- Covers data breach response costs and liability
- Includes ransomware and cyber extortion coverage
- Increasingly important for all businesses, even small ones
Business Interruption Insurance
- Replaces lost income if you can’t operate (fire, natural disaster)
- Often included in BOP or can be added as endorsement
- Calculate how long you could survive without income
- Review coverage triggers and waiting periods
Product Liability Insurance
- Essential if you manufacture, distribute, or sell products
- Covers claims of injury or damage caused by your products
- May be included in general liability or require separate policy
- Retailers may require it from suppliers
Commercial Auto Insurance
- Required if you own business vehicles
- Covers vehicles used for business purposes
- Personal auto policies typically exclude business use
- Consider hired and non-owned auto coverage for employee vehicles
Protecting Yourself as the Owner
Personal Insurance Updates
- Review personal health insurance needs (may lose employer coverage)
- Get disability insurance (your income is now at greater risk)
- Update life insurance to cover business debts and succession
- Consider key person insurance for critical employees
Separation of Personal and Business
- Keep business insurance separate from personal policies
- Don’t rely on homeowners policy for home-based business
- Understand what personal assets are at risk
Industry-Specific Considerations
Contractors and Construction
- Contractor’s license bond
- Builder’s risk insurance
- Tools and equipment coverage
- Completed operations coverage
Retail Businesses
- Product liability coverage
- Shoplifting and theft protection
- Signage and glass coverage
Professional Services
- Professional liability (E&O) is essential
- Consider higher liability limits
- May need tail coverage if changing carriers
Food Service and Restaurants
- Liquor liability (if serving alcohol)
- Food contamination coverage
- Equipment breakdown insurance
Common Mistakes to Avoid
- Don’t assume personal insurance covers business activities
- Don’t skip workers’ comp (personal liability if uninsured)
- Don’t underestimate liability limits needed
- Don’t forget about cyber risks (even small businesses are targets)
- Don’t wait until you’re sued to get coverage
Related Insurance Types
- Business Insurance - Essential business coverage
- Health Insurance - Coverage for you and employees
- Life Insurance - Protect your family from business debts
- Disability Insurance - Protect your income
Related Guides
- Insurance for Small Business Owners - Complete small business coverage guide
- Small Business Insurance Types - Essential coverage explained
- Small Business Insurance Mistakes - Common pitfalls to avoid
Frequently Asked Questions
Common questions about insurance when starting a business answered below.
Frequently Asked Questions
What insurance is required to start a business?
Required insurance varies by state and industry. Most states require workers’ compensation if you have employees. Commercial auto insurance is required for business vehicles. Some professions (lawyers, doctors, contractors) require professional liability. Check your state’s requirements and any industry-specific mandates.
What is general liability insurance and do I need it?
General liability insurance protects against third-party claims of bodily injury, property damage, and personal injury (like slander). It’s essential for most businesses and often required for commercial leases and client contracts. Typical coverage is $1 million per occurrence and costs $300-600/year for small businesses.
What's the difference between general liability and professional liability insurance?
General liability covers physical incidents—someone slipping in your office or your employee damaging client property. Professional liability (E&O) covers claims that your work was negligent, contained errors, or caused financial harm. Service-based businesses typically need both; retail businesses may only need general liability.
Does my LLC protect me from needing business insurance?
No. An LLC protects personal assets from business debts and some lawsuits, but it doesn’t prevent lawsuits or cover damages. You can still be sued personally for negligence, and an LLC won’t pay for legal defense or settlements. Business insurance is essential regardless of business structure.
What is a Business Owner's Policy (BOP)?
A BOP bundles general liability and commercial property insurance into one policy, typically 15-20% cheaper than buying separately. It’s designed for small to mid-sized businesses and often includes business interruption coverage. Most small businesses with a physical location should consider a BOP.
When do I need workers' compensation insurance?
Most states require workers’ comp as soon as you hire your first employee—even part-time workers. Some states exempt very small businesses or certain industries. Workers’ comp covers medical costs and lost wages for work injuries and protects you from employee lawsuits. Operating without required coverage can result in fines and personal liability.
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This checklist is for educational purposes. Consult with a licensed insurance professional for advice specific to your situation.
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