Business insurance basics: GL, E&O, and what you can skip

Business insurance is unglamorous right up until the moment it's the only thing standing between a bad Tuesday and losing everything you've built. The good news for tiny businesses: the core coverage is cheaper than most owners expect — often under $1,000 a year — and the decision tree is short. You need two or three policies done right, not eleven done vaguely.

General liability: the foundation

General liability (GL) covers bodily injury and property damage you cause to OTHER people — a client trips over your equipment bag, you spill coffee into their server closet, your contractor's ladder cracks a storefront window. It also covers some advertising injuries like accidental defamation. Typical cost for a low-risk solo business: $400–900/year for $1 million per occurrence. Nearly every business should carry it, and many are forced to: commercial landlords, event venues, and larger clients routinely require a certificate of insurance before you can even work with them.

Professional liability (E&O): for advice and deliverables

GL covers physical harm; it does nothing when your WORK is what caused the damage. Professional liability — also called errors & omissions — covers claims that your professional service or advice cost the client money: the developer whose bug takes a client's store offline, the consultant whose recommendation backfires, the bookkeeper whose error triggers penalties. If clients rely on your expertise or deliverables, this is your most important policy. Typical cost: $500–1,500/year for common freelance professions; more for financial, legal, and medical-adjacent fields.

The rest of the menu — when each applies

• Business owner's policy (BOP): bundles GL plus commercial property (your gear, inventory, workspace) at a discount — often $500–1,200/year total. The default move for anyone with equipment or a physical location.
• Workers' compensation: legally required in most states the moment you have employees — sometimes even one part-timer. Not optional, and going bare carries state fines per employee per day.
• Cyber liability: covers breach response, client notification, and ransomware costs. Increasingly demanded by contracts if you hold client data; small policies run $500–1,500/year.
• Commercial auto: required if a vehicle is used substantially for business — personal auto policies routinely deny business-use claims.
• Errors people make in reverse — coverage you likely DON'T need yet: key person insurance, employment practices liability with no employees, and big product liability for a service business. Buy for your actual risks.

Buying it without getting fleeced

1. List your real risks first: what could you physically damage, and what could your work screw up? Those two answers pick your policies.
2. Get quotes from at least three sources: a digital-first insurer (Next, Hiscox, Thimble), a marketplace, and an independent agent who can compare carriers — prices for identical coverage vary 30–50%.
3. Match limits to your contracts: clients requiring insurance usually specify $1M per occurrence / $2M aggregate. Buying less makes the policy useless for winning that work.
4. Read the exclusions page, not the marketing page — that's the actual product. Ask specifically what's NOT covered for your profession.
5. Revisit annually and after every change: first employee (workers' comp, immediately), new studio space, revenue doubling, or a contract with bigger requirements.
6. Deduct it: business insurance premiums are an ordinary business expense.

The bottom line

For most tiny businesses the answer is two or three policies: general liability for the physical world, E&O if anyone relies on your work or advice, and workers' comp the day you hire. Expect $500–2,000 a year, deductible, and priced mostly by profession and revenue. It's not really protection against lawsuits — it's protection against legal defense costs, which arrive even when you did nothing wrong. Insure the risks that could end the business; skip the ones that can't.

Typical annual premiums at a glance

Prices in the table assume a clean claims history and a low-risk profession — a photographer or consultant, not a roofer. If your quotes come back multiples higher, that is information: either your profession's risk pool genuinely runs hot, or one carrier's appetite does not fit your business and an independent agent should shop it across markets. Either way, quote before you assume, because the owners who skip coverage on cost grounds have usually never actually priced it.