Business Insurance Cheat Sheet: What to Ask Before You Buy

Start Here: What Kind of Insurance Do You Actually Need?

Most small businesses should start with general liability insurance. It covers third-party bodily injury, property damage, and personal/advertising injury claims that happen at your business or because of your product or service. If a customer slips at your store or your product damages their property, general liability responds.

If you give professional advice or perform services for clients (consulting, accounting, design, real estate, fitness training), you likely need professional liability insurance, also called errors and omissions or E&O. General liability does not cover financial losses caused by your professional mistakes.

A Business Owner’s Policy (BOP) bundles general liability with commercial property insurance at a lower combined price than buying them separately. Many carriers offer BOPs with extra coverages like business interruption and equipment breakdown. BOPs are the best first-stop for storefronts, offices, and trades.

Workers’ compensation is legally required in most states as soon as you have one employee—sometimes even part-time or family members. It covers medical costs and lost wages if an employee is injured at work. Sole proprietors can usually opt out but should consider it because personal health insurance often excludes work-related injuries.

10 Questions to Ask Every Insurance Agent or Quote

1. What exactly is covered and what is excluded? Ask for a written list of exclusions—do not rely on the policy name. General liability excludes professional errors, employee injuries, and auto accidents.

2. What are my coverage limits? General liability is usually quoted as $1M per occurrence / $2M aggregate. Ask if that aggregate is enough for your risk. A single claim can exhaust a policy.

3. What is my deductible per claim? A $500 deductible vs a $2,500 deductible changes the premium significantly. Choose the highest deductible you can comfortably cover from cash flow.

4. Does this policy include defense costs outside the limit? Some policies deduct legal defense costs from your coverage limit; better policies pay defense costs in addition to the limit.

5. Are my subcontractors or 1099 workers covered? Most policies exclude or limit coverage for subcontractors. You may need to require subcontractors to carry their own insurance and name you as additional insured.

6. Do you offer an audit-free or pay-as-you-go premium? Traditional policies estimate annual payroll or revenue and audit at year-end for a true-up bill. Pay-as-you-go options base premium on actual monthly numbers.

7. What happens if I move or add a location mid-policy? Some policies automatically cover new locations for 30 days; others require immediate notice. Know before you sign.

8. Is my equipment covered off-site or in transit? Standard property coverage often limits or excludes equipment away from your listed premises. Tools, laptops, and event gear need inland marine coverage, a separate and inexpensive add-on.

9. Can I add additional insureds for free? Landlords, clients, and event venues often require being named as additional insured. Most carriers add them for free or a small fee—ask upfront.

10. What discounts do you offer? Bundling with BOP, paying annually instead of monthly, having security systems, and being claim-free can each reduce premium 5–20%. Ask directly.

How to Compare Quotes on Equal Footing

Get at least three quotes. Use the exact same coverage amounts, deductibles, and limits on each quote request so you are comparing apples to apples. The cheapest quote with half the coverage is not actually cheaper.

Look at aggregate limits, not just per-occurrence limits. A $1M/$2M policy costs more than $1M/$1M but closes a huge gap. Many carriers default to $2M aggregate—do not let one agent quote $1M aggregate while another quotes $2M.

Check the financial strength rating of the carrier. A.M. Best rates insurers from A++ to D. Stick with A- or better. A cheap policy from a weak carrier may be slow to pay or go insolvent when you actually need it.

Read the sample policy, not just the quote summary. The quote is marketing. The policy is the contract. Ask for a specimen policy and scan the exclusions section and definitions section. If the agent will not provide one before purchase, treat that as a red flag.

Coverage You Probably Did Not Know You Need

Employment practices liability insurance (EPLI) covers claims from employees about discrimination, harassment, wrongful termination, and retaliation. It is typically not in a BOP. Even small businesses with a few employees face these risks.

Cyber liability covers data breaches, hacking, ransomware, and client data loss. General liability and BOPs exclude cyber events. If you store client emails, payment info, or any personal data digitally, you have exposure. Policies start around $500/year for small businesses.

Commercial auto insurance covers vehicles owned or used primarily for business. Personal auto policies typically exclude business use. If employees drive their own cars for work, ask about hired and non-owned auto liability, an inexpensive add-on to a BOP.

Business interruption insurance replaces lost income if you cannot operate due to a covered loss like fire or storm damage. It is usually part of a BOP but verify the waiting period (typically 48–72 hours before coverage starts) and the indemnity period (how many months of income is covered).