three small business insurance commercial

As a small business owner, there are three important forms of commercial insurance and business insurance coverage that you should consider: General liability insurance, worker’s compensation insurance, and a business owner’s policy. These 3 commercial insurance and business insurance coverages should provide substantial protection for businesses in most industries, regardless of their size. Keep reading to learn more about commercial insurance and small business insurance coverage to see if any of these three coverages will work for your business.

What is the difference between Small Business Insurance and Commercial Insurance? 

Small business insurance and commercial insurance are two different names for the same thing. In short, these interchangeable names describe a class of insurance that protects a business’s employees, financial assets, intellectual property, and physical property from loss, lawsuit, injury, or damage.  If you’re starting a new business or have an established business that is small in size or scale, it is wise to have small business insurance and commercial insurance coverage that can ensure you’re protected if disaster strikes your operation.

General Liability Insurance

It’s important for small businesses to hold a general liability insurance policy. General liability insurance covers you if a product you provided to a client caused them bodily harm or their property serious damage. A large number of small business owners get hit with lawsuits by employees and/or clients. On average, a lawsuit will cost a small business earning less than $1 million a year $20,000 in litigation fees, on top of any settlements that may arise from the case. General liability insurance will help cover settlements, legal fees, and medical expenses resulting from bodily injuries and property damage for which your business may be responsible. General liability insurance also protects your business from the most common claims that can arise as a result of normal business operations – including claims of property damage, personal injury, libel, slander, and defamation.

General Liability Insurance Cost

The cost of general liability insurance can vary widely based on several factors. The state in which a business operates, the size of the business, the industry, and the amount of coverage all affect monthly premiums. For example, the cost of a general liability insurance coverage for a landscape architecture firm operating in Scottsdale AZ will be very different from a general liability insurance policy covering a hair salon store in Newark, NJ. Other considerations such as the type of labor performed, heavy equipment used, risky tasks or labor, and claims history also help determine the cost of general liability coverage. A licensed insurance advisor will be able to identify general liability insurance discounts that your business may qualify for, along with discounts for bundling general liability insurance with other small business insurance coverages.

What is covered by general liability insurance? 

  • Bodily injury
  • Third-party property damage
  • Advertising injury (libel and slander)
  • Third-party medical expenses
  • Related defense costs
  • Legal fees and settlements

Worker’s Compensation Insurance:

Worker’s compensation is one of the most common insurance coverages in the United States. Required by law in every state, worker’s compensation insurance offers coverage to you and employees if injuries occur performing a work-related task during working hours. The size of your business, the industry, and the number of employees you have will have a big role in determining how much worker’s comp insurance your small business will need. A licensed insurance advisor will be able to guide you on the correct amount of worker’s comp insurance coverage required in your state.  

Worker’s Compensation Insurance Cost

The cost of worker’s compensation insurance coverage can vary based on several factors. Business size, industry, the state in which a business operates, and the amount of coverage all affect the cost of worker’s comp insurance. Other considerations such as the type of labor performed, heavy equipment used, risky tasks, and claims history also affect the cost of worker’s comp insurance. For example, the cost of a worker’s comp insurance policy for a metal fabrication company with 25 warehouse employees will be very different from a worker’s compensation insurance policy for a grocery store with 8 employees. A licensed insurance advisor will be able to identify worker’s comp insurance discounts that your business may qualify for, along with discounts for bundling worker’s compensation insurance with other small business insurance coverages.

What does worker’s comp insurance cover?

  • Medical expenses due to workplace injury or sickness.
  • Lost wages due to workplace injury or sickness.
  • Costs to retrain injured or sick employees returning to work.
  • Related legal fees and settlements.
  • Wages for a temporary worker.

Business Owner’s Policy (BOP):

A BOP insurance policy is small business liability insurance that pairs general liability insurance and business property insurance into one policy. This form of business liability insurance will help cover medical expenses and legal fees resulting from bodily injuries and property damage for which your business may be legally responsible. Business property insurance protects damage to a rented or owned property and the equipment inside it. A Business Owner’s Policy is the ideal form of coverage for many business owners. 

Business Owner’s Policy Cost

The cost of a business owner’s policy can fluctuate based on several factors. Business size, industry, and amount of coverage all affect the cost of BOP insurance. For example, the cost of a business owner’s policy for a technology company operating in Seatle will be very different from a business owner’s policy for a gym in New York. Other considerations such as annual sales, payroll, company assets, and claims history also help determine the cost of a business owner’s policy. A licensed insurance advisor will be able to identify discounts that you may qualify for, along with discounts for bundling a business owner’s policy with other forms of small business insurance.

What is covered under a Business Owner’s Policy?

  • Bodily injury
  • Third-party property damage
  • Personal injury
  • Advertising injury (libel & slander)
  • Third-party medical expenses
  • Legal expenses
  • Business income losses

Is small business insurance really necessary? 

As a small business, the financial stability of the operation can stand in a delicate balance. Because of this, small business insurance and commercial insurance are strongly encouraged. If your business experiences a setback, lawsuit, or loss, you can indirectly experience the same loss. Putting a small business insurance policy and commercial insurance policy in place will prevent an unexpected accident or lawsuit from folding the business

Now is an excellent time to consider small business insurance and commercial insurance that can protect you from accidents and litigious claims. General liability insurance, worker’s copmensation insurance, and a business owner’s policy can provide crucial support and protection that can keep a business afloat when unexpected events occur. CoverHound offers several resources for small business owners to plan for, prevent, and insure against costly accidents and litigation.

Three Insurance is an offshoot of Berkshire Hathaway, a leading provider of commercial insurance. It uses a simple, three-page business insurance policy to eliminate gaps in insurance and provide small business owners what they need for less money – often saving 20% on premium. Unlike other carriers that force you to get multiple policies to cover different things, Three has liability, business interruption, business property, workers’ compensation, and cyber insurance in one, easy-to-understand policy. 

Company Overview

Three by Berkshire Hathaway is an offshoot of the family of Berkshire Hathaway companies and products. The company seeks to simplify insurance by incorporating multiple policies into one simple policy. Where most other insurance carriers will only offer one type of combination policy, a business owners policy, Three covers the biggest insurance needs in a comprehensive policy that even includes workers’ compensation. 

Geographic Representation

Three Insurance does not list what states it operates in. If we follow Berkshire Hathaway’s licensing model, then we can expect Three to operate in all 50 states and the District of Columbia. 

Lines of Coverage

Three is known for its all-in-one policy. With Three’s business policy, a small business owner can get coverage for:

  • Business Liability: Pays third-party claims where you are responsible for damage or injuries. 
  • Commercial Property: Protects your business contents from theft, fire, vandalism, and more. 
  • Workers’ Compensation: Pays medical bills and lost wages for employees hurt at work. 
  • Commercial Auto: Protection for liability and property damage in at-fault accidents in work vehicles.
  • Cyber: Pays claims from damages related to hacks and data breaches.

Top Industries Served

Insurance companies have preferences for the types of businesses they will work with. These preferences come from a deep understanding of the industry risks and are generally rewarded with better rates. 

Three lists the following industries that they prefer to work with: 

  • Professional financial services
  • Tradesmen
  • Creative and technology
  • Residential construction
  • Transportation

Premium Costs

While Three Insurance does not advertise rates, it does claim that policyholders can save up to 20% when getting a combination policy. When an insurance company is able to have one underwriting process for multiple aspects of a company, the result is usually fewer costs and lower premiums for the policyholder.

Underwriting Process

The Three Insurance process starts with obtaining basic information about your location and your industry to ensure that you are eligible. Once this is determined, it will ask you for an email to send your quote to. The process of getting a quote is just a few minutes. Once you receive the quote, you can bind the coverage quickly online or with a phone call. 

AM Best Ratings

AM Best ratings help consumers identify financially solvent companies. When a company has a good AM Best rating, it is said to be able to meet its financial obligations, even catastrophic claims. Three, like most Berkshire Hathaway companies, has the highest rating possible, an A++. 

Complaint Index

The complaint index is a ratio compiled by the National Association of Insurance Commissioners (NAIC) that gives insights into how many complaints a company has in relation to its size. The average ratio is 1.0. Anything under 1.0 means that the company had fewer complaints than expected and anything over 1.0 means the company had more complaints than expected. 

Three Insurance was not in the database with the NAIC. Its parent company, Berkshire Hathaway had zero complaints in 2020. 


You can begin to tell a lot about a company based on the online reviews that it receives. Not only do quality companies get good reviews, but they are also responsive to consumers. Three Insurance is accredited with the Better Business Bureau and maintains an A+ rating. It has 14 reviews with an average star rating of 3.86. The BBB cites five complaints closed in the past 12 months. 

Concluding Thoughts

Three Insurance is innovating how business insurance is packaged and sold. It makes it easy for business owners to get the policies they need because, with Three, they only need one policy. It helps reduce costs and simplifies the claims process. 

Learn more about Three Insurance 

Methodology employs its own independent research to come up with the details for reviews. We do this so that you can have as many insights as possible about a company so that you can make the best decision for your commercial insurance. We take into consideration the company’s history and where they serve. We want to highlight the appetite that a company has as this suggests where business owners can get the most competitive rates. Where possible, we include premium data. From there, we take into account formal complaints, and financial strength ratings along with public reviews painting a broad picture of the company’s reputation.

Insurers often combine a number of insurance coverages into a package that is sold as a single contract. The most common policy for small businesses is the Businessowners Policy (BOP).

The BOP combines coverage for all major property and liability insurance risks as well as many additional coverages into one package policy suitable for most small businesses. The term “BOP” specifically refers to insurance policy language developed (and revised as needed) by experts at ISO. ISO provides sample insurance policy language, research and a variety of other products to insurance companies.

The BOP includes business income insurance, sometimes called business interruption insurance. This compensates a business owner for income lost following a disaster. Disasters typically disrupt operations and may force a business to vacate its premises. Business income insurance also covers the extra expense that may be incurred if a business must operate out of a temporary location.

To cover specific risks associated with a business, a variety of additional coverages may be added to the basic BOP. For example, if a business has an outdoor sign, the BOP doesn’t cover it unless coverage is specifically added for an additional premium. If a business relies on electronic commerce, the owner can add coverage for lost income and extra expenses in the event the ability of the business to conduct e-commerce is slowed down or stopped due to a computer virus or hacker.

Only small- to medium-sized businesses that meet certain criteria are eligible for a BOP. Factors insurers consider include the size of the premises, the required limits of liability, the type of business and the extent of offsite activity. Premiums for BOP policies are based on those factors plus business location, financial stability, building construction, security features and fire hazards.

Major Coverages

Most small businesses need to purchase at least the following four types of insurance.

1. Property Insurance

Property insurance compensates a business if the property used in the business is lost or damaged as the result of various types of common perils, such as fire or theft. Property insurance covers not just a building or structure but also what insurers refer to as personal property, meaning office furnishings, inventory, raw materials, machinery, computers and other items vital to a business’s operations. Depending on the type of policy, property insurance may include coverage for equipment breakdown, removal of debris after a fire or other destructive event, some types of water damage and other losses.

2. Liability Insurance

Any enterprise can be sued. Customers may claim that the business caused them harm as the result of, for example, a defective product, an error in a service or disregard for another person’s property. Or a claimant may allege that the business created a hazardous environment. Liability insurance pays damages for which the business is found liable, up to the policy limits, as well as attorneys’ fees and other legal defense expenses. It also pays the medical bills of any people injured by, or on the premises of, the business.

3. Business Auto Insurance

A business auto policy provides coverage for autos owned by a business. The insurance pays any costs to third parties resulting from bodily injury or property damage for which the business is legally liable, up to the policy limits.

4. Workers Compensation Insurance

In all states but Texas an employer must have workers compensation insurance when there are more than a certain number of employees, varying from three to five, depending on the state. Workers comp insurance, as this coverage is generally called, pays for medical care and replaces a portion of lost wages for an employee who is injured in the course of employment, regardless of who was at fault for the injury. When a worker dies as a result of injuries sustained while working, the insurance provides compensation to the employee’s family. An extremely small business, such as one operated by one or two people out of a home, may not need workers compensation insurance. But it often needs more property and liability insurance than is provided in a typical homeowners policy. 

Other Types of Business Coverages 

1. Errors and Omissions Insurance/Professional Liability

Some businesses involve services such as giving advice, making recommendations, designing things, providing physical care or representing the needs of others, which can lead to being sued by customers, clients or patients claiming that the business’s failure to perform a job properly has injured them. Errors and omissions or professional liability insurance covers these situations. The policy will pay any judgment for which the insured is legally liable, up to the policy limit. It also provides legal defense costs, even when there has been no wrongdoing.

2. Employment Practices Liability Insurance

Employment practices liability insurance covers (up to the policy limits) damages for which an employer is legally liable such as violating an employee’s civil or other legal rights. In addition to paying a judgment for which the insured is liable, it also provides legal defense costs, which can be substantial even when there has been no wrongdoing.

3. Directors and Officers Liability Insurance

Directors and officers liability insurance protects directors and officers of corporations or not-for-profit organizations if there is a lawsuit claiming they managed the business or organization without proper regard for the rights of others. The policy will pay any judgment for which the insured is legally liable, up to the policy limit. It also provides for legal defense costs, even where there has been no wrongdoing.

4. Key Employee Insurance

Life or disability income insurance can compensate a business when certain key employees die or become disabled. These coverages cushion some of the adverse financial impact that results from losing a key employee’s participation.

5. Umbrella Policies

As the name implies, an umbrella liability policy provides coverage over and above a business’s other liability coverages. It is designed to protect against unusually high losses. It provides protection when the policy limits of one of the underlying policies have been used up. For a typical business, the umbrella policy would provide protection beyond the general liability and auto liability policies. If a company has employment practices liability insurance, directors and officers liability, or other types of liability insurance, the umbrella could provide protection beyond those policy limits as well.

Business insurance can protect your business against a wide variety of risks. There are several types of business insurance, each suitable for a different type and size of business.

  • Small business owners typically need three types of insurance: general liability, business property and business interruption.
  • Additional coverages, such as commercial auto or workers’ compensation, may be required by law.
  • Business owners should work with an insurance agent to assess the level of coverage they need.

Why does my business need insurance?

As a small business owner, you likely understand the sacrifices and investment needed to be successful. You may also understand the importance of mitigating financial risk and the role your insurance plays in that effort.

Business insurance protects your business against financial risks and can make the difference between profitability and failure. In addition, you might be required to have business insurance by state law.

Related: How much does business insurance cost?

What risks does business insurance protect against?

Insurance protects your business financially, covering events such as:

  • Loss of business property due to theft, storm damage, fire or other catastrophe.
  • Events for which your business is held liable and potentially sued.
  • Loss of income if your business suffers a covered loss (for example, a fire at your retail storefront prevents your business from operating).
  • Employee injuries and illnesses.
  • Data breaches.

What costs does business insurance typically cover?

Adequate business insurance should help pay for expenses such as:

  • Costs to replace business property that is damaged by a fire or other catastrophe, stolen or vandalized.
  • Costs related to lawsuits, including attorney and court fees, and settlement and award costs.
  • Medical costs if your employees are injured or become ill while on the job.
  • Repair and medical costs related to accidents involving vehicles owned, leased or rented by your business.
  • Costs related to cyber incidents, such as the recovery of business data.
  • Costs required to continue business operations (for example, payroll, equipment rental, property lease) if your business suffers a catastrophic event such as a theft, fire or significant storm damage.

What types of insurance do businesses need?

There’s really no “one-size-fits-all” policy, as small businesses’ insurance needs vary based on numerous factors. But virtually any small business needs three essential coverages.

General liability insurance (GL)

GL comes into play if your business actions cause harm to a third party. These “harms” may include a bodily injury or death, property damage, reputational harm or advertising injury such as copyright infringement. The financial consequences for your business can range from just a few hundred dollars to lawsuits worth millions. With GL, your insurer will help cover your liabilities.

Often, GL can be part of the table stakes for growing your business. You may, for instance, need to show proof of GL as part of a job bid or to fulfill the obligations of a contract. If you rent an office, warehouse or other space, the landlord may require you to have the coverage.

Business property insurance

Business property insurance is financial protection in the event of theft, damage or other loss to your business-owned property. This property can include:

  • Tools.
  • Electronics.
  • Furniture.
  • Signage and landscaping.
  • Inventory stored on your business’ premises.
  • Documents.
  • Any buildings or other real estate owned by your business.

This coverage typically excludes motor vehicles (company vehicles should be covered by your commercial auto insurance, which is discussed later in this article). It may also exclude losses due to earthquakes and floods. So if your business operates in an area prone to these events, you should consider purchasing commercial flood or earthquake insurance.

The coverage may also be referred to as “commercial property insurance.”

Business interruption coverage

If storm damage, theft, vandalism or some other catastrophe forces you to shut down operations, your business interruption coverage can help reimburse your lost business income. It can also cover the cost of your rent, any loan payments and payroll needs or help reimburse relocation expenses if your business must move to a temporary location.

Business owners policy (BOP)

A BOP is a packaging of these three essential coverages. It’s offered by many insurers who sell small business insurance and is usually marketed to small- to medium-sized businesses.

Choosing a BOP package often means you’ll pay less for these coverages — it’s a package deal. And since it’s one policy to buy and own instead of three, you enjoy a little more convenience, a benefit that most small business owners can, no doubt, appreciate.

Other types of business insurance to consider

GL, business property and business interruption coverages form the foundation of a small business’ insurance needs. Depending on the type and size of the business, you may need to consider additional coverages, such as the following:

Commercial auto insurance

This covers company vehicles, whether they’re owned, leased or rented. Commercial auto insurance is similar in many ways to personal auto insurance, but a commercial policy is tailored to the needs of a business.

Commercial umbrella insurance

Umbrella insurance provides additional liability coverage if a claim exceeds a business policy’s GL limits.

Cybersecurity insurance

This covers costs related to cyberattacks, such as recovery and replacement of lost and stolen data, customer notification and legal counsel. This coverage is often called “data breach insurance.”

Employment practices liability insurance (EPLI)

EPLI provides coverage if your business is sued by current or former employees for discrimination, wrongful termination, harassment or other issues.

Inland marine insurance

This insurance provides financial protection for business property that’s transported by truck, train or other overland transport.

Product liability insurance

Liability insurance provides financial protection if your business’ product injures a customer or other third party.

Workers compensation insurance

Also known as worker’s comp, this covers medical expenses, lost wages and rehabilitation expenses if an employee is injured or becomes ill on the job.

How to choose the right policies for your business

Getting the right insurance for your business means first understanding your legal requirements, then assessing your business’ financial risks based on how you operate.

Coverage should match your company’s unique needs. A bakery operating out of a single location with only walk-in business, for example, will likely have very different insurance needs than a landscaping company with a warehouse, trucks, trailers and other equipment that has clients across three counties.

So consider your company’s liabilities and the value of your assets when choosing coverage.

How to get business insurance

The best way to get insurance for your business is to contact a local independent insurance agent.

A small business faces complex risks, and business insurance is a complex product. There’s nobody better than a licensed insurance agent to sort through all that and make sure your business has the coverage it needs. As they typically represent multiple companies, an independent agent can shop around on your behalf to ensure you get that coverage at a price that works for your budget.

Working with an agent means you save time and effort, and can be confident you’re properly covered. So if life as a business owner does sometimes keep you up at night, it won’t be because of your insurance.

The AP Buyline roundup: Protect your business with insurance

As a small business owner, you work hard to grow your business. So you owe it to yourself to protect your business with insurance. Small business insurance needs vary by business type and other factors. But your basic coverage needs include general liability, property damage and business interruption. A licensed and local independent agent can help you get the insurance you need.

Frequently asked questions (FAQs)

What type of insurance is best for a small business?

When it comes to business insurance, there’s no “one-size-fits-all” policy. Most businesses do, however, need general liability, property damage, and business interruption coverages. Some businesses may also be required by law to have commercial auto and worker’s compensation coverages. Beyond that, a business’ insurance needs should be dictated by its unique assets and liabilities.

What are the main types of business insurance?

There are three main types of small business insurance:

  • General liability coverage protects a business’ finances if it’s held responsible for property damage or bodily harm.
  • Property damage coverage protects a business if its property is stolen, damaged or destroyed by fire, severe weather and other catastrophes.
  • Business interruption coverage reimburses the business for lost income if it’s forced to suspend operations due to a covered loss (such as a fire or major equipment theft).

Many insurers offer these coverages in a package called a business owners policy (BOP).

What is commercial insurance?

Commercial insurance is coverage designed for the needs of businesses rather than individuals.

Can I bundle different types of business insurance?

Many insurers offer something called a business owners policy (BOP), which packages general liability, property damage and business interruption coverages. Buying a BOP often saves the business owner money compared to buying these coverages separately.

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