If you run a small business or freelance full time, you have three insurance gaps that can wipe out a year of profit overnight: a customer slip-and-fall, a professional mistake, and a cyber incident. The good news is that 90 percent of small businesses can close all three gaps for under $200 a month with the right combination of policies.
The three policies almost every small business needs
- General Liability (GL) covers third-party bodily injury and property damage. 2) Professional Liability (also called Errors and Omissions) covers claims that your work caused a client a financial loss. 3) A Business Owners Policy (BOP) bundles GL with commercial property at a discount of roughly 15 percent versus buying separately.
When you need workers' comp, commercial auto, and cyber
Workers' compensation is mandatory in 49 states the moment you hire your first W-2 employee (Texas is the lone exception). Commercial auto is required if any vehicle is used primarily for business. Cyber insurance is a must if you store customer data, take card payments, or rely on cloud accounts that an attacker could lock you out of.
Typical premiums by business type
Solo consultant: $400 to $900 per year for GL plus E&O. Retail shop: $750 to $1,800 BOP. Contractor: $1,200 to $3,000 GL plus tools coverage. SaaS startup with five employees: $2,000 to $5,000 tech E&O plus cyber. Independent agency quotes (Hiscox, Next, Coalition) are usually faster and cheaper than legacy carriers.
Five mistakes that void coverage
Misclassifying employees as 1099 contractors. Failing to disclose subcontractors. Letting your certificate of insurance lapse on a client engagement. Operating in a state not listed on the policy. Not adding additional insured endorsements when a client requires them.
Quick comparison
| Policy | What it covers | Typical small biz cost |
|---|---|---|
| General Liability | Third party injury and property damage | $400 to $1,200 / yr |
| Professional Liability | Errors, omissions, advice claims | $500 to $1,800 / yr |
| BOP | GL plus property bundled | $750 to $2,500 / yr |
| Workers' Comp | Employee injuries | $0.75 to $2.50 per $100 payroll |
| Cyber | Breach response, ransomware | $700 to $1,500 / yr |
Key takeaways
- General Liability (GL) covers third-party bodily injury and property damage.
- Workers' compensation is mandatory in 49 states the moment you hire your first W-2 employee (Texas is the lone exception).
- Solo consultant: $400 to $900 per year for GL plus E&O.
Final word
Insurance is at its best when you understand the product before you need it. Bookmark this guide, share it with anyone shopping for small business insurance this year, and reach out via our contact page if you have a question we have not answered.
Related reading on InsureLab
Sources & further reading
Frequently asked questions
Do I need business insurance as a freelancer?+
Yes if you sign client contracts, store client data, or visit client offices. A combined GL plus E&O policy typically runs $40 to $80 per month and is usually required by mid-market clients before they will pay you.
Is a BOP cheaper than buying GL and property separately?+
Yes, usually 10 to 20 percent cheaper. BOPs are designed for businesses under $5M in revenue and 100 employees.
Does my homeowners policy cover home-based business?+
It covers up to $2,500 of business property and almost no liability. A standalone BOP or in-home business endorsement is the right fix.
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