Last reviewed: 3 October 2026
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Small business insurance basics: the six common kinds, as SBA describes them
The short answer: the U.S. Small Business Administration says you may be legally required to carry some business insurance, lists six common kinds (general liability, product liability, professional liability, commercial property, home-based business and a business owner's policy), and says required coverage varies by state.[1]
The short version
- SBA says some business insurance may be required by law, and the rest is a choice. A general rule it gives is to insure against things you could not pay for on your own.[1]
- It lists six common kinds of business insurance, each with a plain description of who it is for.[1]
- It says laws requiring insurance vary by state, so check your state's website.[1]
What your business structure does and does not cover
SBA says some protection comes from the business structure you choose. A limited liability company (LLC) or corporation can protect your personal property from lawsuits. It says that protection has limits, and business insurance can fill gaps, so that both business and personal assets are protected.[1]
Insurance that may be required
SBA says you may be legally required to buy certain types of business insurance. Its page lists workers' compensation, unemployment and disability insurance as coverage for businesses with employees, and says some states require additional insurance. We did not read a federal or state source on who must carry which of these or how each is provided, so treat that list as a pointer and confirm each with your state.[1] The page does not say which state programs satisfy each item. SBA's direction is: "Visit your state's website to find out the requirements for your business."[1]
Six common kinds, as SBA describes them
| Type | Who SBA says it is for | What SBA says it does |
|---|---|---|
| General liability | Any business | Protects against financial loss from bodily injury, property damage, medical expenses, libel, slander, defending lawsuits, and settlement bonds or judgments.[1] |
| Product liability | Businesses that make, wholesale, distribute or retail a product | Protects against financial loss from a defective product that causes injury or bodily harm.[1] |
| Professional liability | Businesses that provide services to customers | Protects against financial loss from malpractice, errors and negligence.[1] |
| Commercial property | Businesses with a significant amount of property and physical assets | Protects against loss and damage to company property from events including fire, smoke, wind and hailstorms, civil disobedience and vandalism.[1] |
| Home-based business | Businesses run out of the owner's home | Coverage added to homeowner's insurance as a rider can protect a small amount of business equipment and give liability coverage for third-party injuries.[1] |
| Business owner's policy (BOP) | SBA says most small business owners, but especially home-based ones | An insurance package that combines the typical coverage options into one bundle. SBA says it simplifies buying and can save money.[1] |
Terms differ between insurers. A policy's own wording and exclusions decide what is covered, not these short descriptions.
Buying steps SBA lists
SBA's page lists four steps. These are the first three.
- Assess your risks. Think about which accidents, natural disasters or lawsuits could damage your business. SBA gives the example of a business in a commercial area at risk from seasonal events, where commercial property insurance helps protect against loss.[1]
- Find a reputable licensed agent. SBA says commercial insurance agents can help find policies for your needs, that they receive commissions from insurance companies when they sell policies, and that you should find a licensed agent interested in your needs as well as their own.[1]
- Shop around. SBA says prices and benefits can vary significantly, so compare rates, terms and benefits from several agents.[1]
How to verify this yourself
Read the SBA page named in the references. Then look up your state's own business-insurance requirements on its official website, as SBA advises.[1] To check that an agent is licensed, use your state insurance department's license lookup. Our license-check guide walks through it.
What this page does not cover
We read one federal source. We did not read any state requirement, so we do not say what your state requires, including for workers' compensation. We do not cover cyber, commercial auto, umbrella or other specialty coverage that SBA does not list in its six. We do not give coverage amounts or prices. This is general information, not legal or insurance advice, and it does not say what your business needs. For your own business, ask a licensed agent, your state insurance department or an SBA counselor.
Your next step
Write down your business's biggest risks, then check your state's website for required coverage. Ask at least two licensed agents for quotes in writing. Our guides on captive vs. independent agents and agent commission disclosure explain how agents are paid.
Related checks
Our standard explains how we check an agent's license and disciplinary history. Check an agent reports our findings at category level, as a method and not a verdict. Neither reviews any insurer, plan or product. To confirm the person selling you coverage is licensed, see how to check an agent's license. More plain-language guides are in the agent guides.
When we will update this page
We re-read the sources when they change. If something here is out of date, tell us. Corrections are dated on the page.
References
- [1] U.S. Small Business Administration, "Launch your business", section "Get business insurance" (sba.gov/business-guide/launch-your-business/get-business-insurance), read 3 October 2026
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