Starting a Business

The 10-item checklist

1. 1

   Decide on entity structure before buying coverage

   Sole proprietorship, LLC, S-corp, C-corp — entity structure affects which policies cover what. Sole proprietorships generally have no liability shield (personal assets exposed); LLCs and corporations create a separation. Many small policies are written against the entity, but personal lines (personal auto, personal umbrella) typically exclude business use regardless of entity. Talk to an attorney or accountant about structure first, then buy coverage.

2. 2

   Get general liability (GL) coverage before opening

   GL covers bodily injury and property damage you cause to third parties — slips on premises, products that injure, advertising injury. Required by most commercial leases and many client contracts. Often the first coverage purchased; available standalone or as part of a Business Owner's Policy (BOP).

3. 3

   Consider a Business Owner's Policy (BOP) instead of separate policies

   BOPs bundle general liability, commercial property (building and contents), and business interruption into a single policy at a discounted combined rate. Designed for small to mid-size businesses with lower risk profiles. Not appropriate for every business — high-hazard operations (manufacturing, construction, large fleets) typically need separate commercial package policies.

4. 4

   Address workers' compensation if you have or will have employees

   Workers' comp is required by law in nearly every state once you have employees (employee-count thresholds vary by state — some require it on day one with any employee, others kick in at 3-5 employees). In ND, OH, WA, WY, workers' comp must be purchased from the state fund (monopolistic states). Sole proprietors and many LLC members can often opt out of covering themselves but must cover other employees.

5. 5

   Buy professional liability (E&O) if you provide advice or services

   Consultants, software developers, financial advisors, real estate agents, accountants, designers, and most professional service businesses face exposure to claims that their advice or work caused financial harm to a client. General liability does NOT cover this — E&O is separate. Some clients now require certificates of E&O before signing contracts.

6. 6

   Plan for cyber liability if you handle customer data

   Any business that processes payment cards, stores personally identifiable information, handles protected health information, or accepts online orders has cyber exposure. First-party cyber covers your costs to recover from a breach (notification, credit monitoring, forensics, business interruption from a ransomware attack); third-party cyber covers liability to customers. They're typically separate coverages or sub-limits.

7. 7

   Don't use personal auto for business — get commercial auto or hired/non-owned

   Personal auto policies generally exclude regular business use (deliveries, rideshare-for-business, client visits, transporting goods or coworkers). A claim during business use can be denied. If you or employees regularly drive for the business, get commercial auto coverage for owned vehicles and hired and non-owned auto (HNOA) coverage for employee-owned vehicles used for work.

8. 8

   Address business interruption / loss of income coverage

   Property coverage protects the building and contents; business interruption protects the revenue stream while you rebuild after a covered loss. Confirm the months of revenue covered match how long a real rebuild would take — for some businesses (custom equipment, specialized location) that's 12-24+ months.

9. 9

   Coordinate with personal lines (umbrella, life, disability)

   Personal umbrella policies typically exclude business activities, so umbrella above the business may need to be commercial umbrella. Personal disability insurance is portable; group disability from a previous job typically isn't. If the business depends on the founder, key person life insurance may be worth considering (especially with a co-founder or co-owner). Buy-sell agreements between co-owners typically need life insurance funding.

10. 10

    Get certificates of insurance and review client contract requirements

    Clients increasingly require Certificates of Insurance (COIs) showing specific coverage limits and naming them as additional insured before signing contracts. Read client contract insurance requirements carefully — they often require limits and endorsements beyond standard small-business policies (e.g., $2M general liability with primary and non-contributory language, waiver of subrogation, etc.). Negotiate or buy coverage to match.

Related

FAQ

Do I need workers' compensation if I'm a sole proprietor with no employees?

Generally no. Workers' compensation is for employees, and most states do not require sole proprietors to carry coverage on themselves. Some states (and some industries) require sole proprietors to carry it if they have any subcontractors who aren't themselves insured. Even when not required, some sole proprietors carry it because their own health insurance excludes work-related injuries — without workers' comp, an on-the-job injury can fall into a coverage gap.

Does my homeowners insurance cover business activities at my home?

Most homeowners policies provide very limited coverage for home-based business activities — typically a small sub-limit ($2,500 or so) for business equipment and minimal liability. Customers visiting your home for business purposes are typically excluded from homeowners liability. Home-based businesses should consider a business endorsement to the homeowners policy or a separate business policy (in-home business policy or BOP) for adequate coverage.

What's the difference between a BOP and buying GL + property separately?

A BOP bundles general liability, commercial property, and business interruption into a single policy at a discounted combined rate. It's designed for small to mid-size businesses with lower risk profiles (offices, retail, light commercial). For most small businesses, a BOP is cheaper than buying GL and property separately. Higher-risk operations (manufacturing, construction, certain professions) typically can't qualify for a BOP and need a commercial package policy with similar coverages priced individually.

When do I need professional liability (E&O) vs general liability?

General liability covers bodily injury and property damage you cause — someone slips in your office, your product injures someone, you damage a client's office while working there. Professional liability (E&O) covers claims that your professional advice, design, recommendation, or service caused financial harm — even when there's no bodily injury. Consultants, designers, technologists, financial professionals, real estate agents, and most service businesses need both. Service-only businesses often have minimal GL exposure and substantial E&O exposure.

How much business insurance does the bank or my lease require?

Most commercial leases require tenants to carry general liability with limits often starting at $1M per occurrence / $2M aggregate, name the landlord as additional insured, and waive subrogation against the landlord. SBA loans and bank financing for business equipment or commercial real estate typically require property coverage at or above replacement cost on the financed assets. Always read the actual insurance requirements in your lease or loan documents and confirm your coverage meets them in writing before signing.