You don’t know what you don’t know – until something happens. Common small business insurance myths can leave business owners exposed when they need protection most. Let’s clear them up so you can make confident decisions that will protect you and your small business.
Best Policies to Consider When Insuring Your Small Business
Myth: “I rent my space, so the landlord’s policy covers me.”
Fact: Your landlord’s insurance only covers the building structure itself, not the contents inside – like your business property, equipment, or inventory.
Existing policies could help protect you from this misconception. Business Personal Property (BPP) policies protect what’s inside your workspace, such as your furniture, tools, equipment, and inventory, from losses due to fire, theft, or other covered events.
A Business Owner’s Policy (BOP) bundles property protection with general liability insurance, giving you comprehensive coverage for both your physical assets and the risks that come with running your small business.
Insurance Tips When Using a Personal Vehicle for Your Small Business
Myth: “My personal auto insurance will cover me when I use my car for business.”
Fact: Personal auto policies are designed for personal use only. If you’re using your car to make deliveries, transport clients, or run business-related errands, your current insurance may not cover you in the event of an accident. This means you could end up with a denied claim, leading to personal out-of-pocket expenses.
Review your current auto policy and discuss any business-related use with your insurance company to ensure you are covered. If you are not, a commercial auto policy may be the right fit, as it is designed specifically for business use and covers vehicles, drivers, and liability related to work activities.
Protecting Your Business Assets in a Home-Based Business
Myth: “My homeowner’s insurance will cover my home-based small business.”
Facts: Homeowner’s insurance is designed to protect your home and personal belongings, not your business and activities associated.
Most homeowners’ policies have very limited coverage for business property, and they typically exclude business liability altogether.
That means if your business laptop is stolen, your inventory is damaged in a fire, or a client slips and falls while visiting your home office, your homeowner’s insurance likely won’t pay.
Review your homeowner’s policy in detail, and make sure to discuss current coverage and limits with your insurance provider. You may also want to consider adding a homeowner’s policy endorsement, such as Business Personal Property or a bundled coverage option like a Business Owner’s Policy.
When to Insure Your Small Business
Myth: “I don’t need insurance until I officially file my business entity.”
Fact: Whether you’ve filed your entity or not, you’re still on the hook for any damages or liabilities that happen while your business is up and running. Without coverage in place, just one incident can cause a major financial setback.
A Business Owner’s Policy addresses risks specific to your business. Even if you’re just starting out, having coverage in place protects your assets and gives you room to grow.
Does My State Require Workers’ Comp for Contractors?
Myth: “I don’t need workers’ compensation insurance because my employees are 1099 contractors.”
Fact: If your workers act like employees—meaning you control when, where, and how they do their job—state agencies or insurers may classify them as employees, even if you issue them a 1099 tax form.
If someone is injured on the job and you don’t have workers’ comp, you could face medical bills, legal fees, and state penalties. Check your state’s definition for “employee” vs. “independent contractor.” When in doubt, seek expert guidance to make sure you’re compliant.
Insurance myths can create a false sense of security until the unexpected happens. The truth is, insurance isn’t just about compliance or checking a box. It’s about protecting your hard work, your people, and your future.
The right coverage gives you peace of mind to focus on what you do best: running and growing your business.