Business insurance is one of those costs that feels optional right up until it isn’t. The useful question isn’t which provider is best — it’s which cover you’re legally required to hold, which your clients will demand, and which protects the thing that would actually destroy your business.
Here’s how to work that out for a small business in the US or UK, including the policy detail that catches freelancers years after they’ve stopped trading.
Start with what’s legally required
This differs sharply by country, and getting it wrong is expensive.
United Kingdom. If you employ anyone — including part-time staff and, in many cases, casual workers — you must hold Employers’ Liability insurance with a minimum of £5 million cover. Trading without it can attract fines of up to £2,500 for each day you’re uninsured. You must also display or make the certificate available to employees.
Some regulated professions must also hold Professional Indemnity cover as a condition of practising — solicitors, accountants, architects and financial advisers among them.
United States. Workers’ compensation is mandated at state level for businesses with employees, with thresholds and rules varying by state. Commercial auto cover is required for business-owned vehicles. Some states and professions require additional cover.
Check your own jurisdiction before comparing anything else — the legally required policies aren’t optional, and penalties usually exceed the premium.
Then what your clients will demand
The second tier isn’t legal but is effectively compulsory in practice.
Public liability (UK) or general liability (US) covers injury to third parties and damage to their property. Most commercial landlords require proof before signing a lease, and a growing number of business clients require it before awarding contracts. Common cover levels run from £1 million to £5 million in the UK.
Professional indemnity (UK) or professional liability / errors and omissions (US) covers claims that your advice or work caused a client financial loss. Increasingly a standard clause in freelance and agency contracts.
If you’ve ever lost work because you couldn’t produce a certificate, this is why.
The policy detail that catches freelancers
This is the most important thing in this article and it’s rarely explained.
Professional indemnity and professional liability policies are usually written on a claims-made basis. That means the policy must be active when the claim is made — not when you did the work.
So if you complete a project in 2026, cancel your policy in 2027, and a client sues in 2028 over that 2026 work, you are not covered. The policy that was in force when you did the job is irrelevant.
The fix is run-off cover — a continuation policy bought when you stop trading or change insurer, typically running six years to match the usual limitation period for contract claims.
General and public liability policies are usually written on an occurrence basis instead, covering incidents that happened during the policy period regardless of when the claim arrives. The distinction matters enormously, and it’s the single most common gap for consultants and freelancers who wind down a business.
The main types of cover
| Cover | What it protects against | Who needs it most |
|---|---|---|
| Public / general liability | Third-party injury and property damage | Anyone with premises or client visits |
| Employers’ liability / workers’ comp | Employee injury and illness | Legally required with staff |
| Professional indemnity / E&O | Claims your work caused financial loss | Consultants, agencies, freelancers |
| Commercial property | Stock, equipment, premises | Anyone with physical assets |
| Business interruption | Lost income while you can’t trade | Anyone dependent on premises |
| Cyber | Breaches, ransomware, notification costs | Anyone holding customer data |
| Product liability | Harm caused by what you sell | Retailers, manufacturers, food |
Business interruption deserves more attention than it gets. Property cover replaces the damaged equipment; it doesn’t replace the six weeks of income you lost while the premises were unusable. For many businesses that lost income is the larger figure.
Typical costs
Premiums vary enormously by industry, revenue, headcount and claims history. As a rough guide for a small, low-risk business:
| Cover | Indicative monthly cost |
|---|---|
| General / public liability | $40 – $100 |
| Professional liability | $50 – $120 |
| Commercial property | $60 – $150 |
| Cyber | $70 – $250 |
Construction, trucking, healthcare and anything involving heights, vehicles or bodily contact costs substantially more. Treat these as starting points, not quotes.
US tip: a Business Owner’s Policy bundles general liability with commercial property and often costs less than buying them separately. Ask specifically — it isn’t always offered by default.
The exclusions that cause refused claims
Underinsurance. Many commercial property policies contain an average clause: insure your stock for half its value and the insurer can reduce a partial claim by the same proportion. Value your assets properly and review annually.
Cyber excluded from general policies. A standard property or liability policy usually won’t cover a data breach or ransomware. Cyber is a separate product.
Flood and specific perils are commonly excluded or separately rated.
Undeclared activities. If you’ve added a service line, started selling online, or begun working at heights, tell your insurer. Claims arising from undisclosed activities get refused.
Home-based business. Home contents and homeowner policies typically exclude business equipment and business liability. Working from your kitchen table doesn’t remove the need for cover.
How to buy it sensibly
List what would actually end your business. A lawsuit? Losing your premises for a month? A ransomware attack on customer data? Insure those first and stop worrying about the rest.
Get quotes on identical terms. Fix the cover levels and excess before you compare, or you’re comparing different products. The same discipline applies as in our guide to comparing insurance quotes properly.
Use a broker if anything is unusual. Non-standard trades, high-value equipment or unusual liability profiles are where brokers earn their fee.
Check the claims record, not just the price. A policy that’s cheaper from an insurer with poor claims handling isn’t a saving.
Review annually. Businesses grow, add staff, add services. Cover set three years ago is probably wrong now.
Providers and regulation
Well-known small business insurers include State Farm, Progressive, The Hartford, Next Insurance and Hiscox in the US, with Hiscox, AXA, Simply Business and others active in the UK. Strengths differ by industry, so compare on your specific trade rather than on brand.
Verify any UK provider or broker on the FCA Register before paying. US buyers can check licensing and complaint records through their state insurance department and the National Association of Insurance Commissioners.
Frequently asked questions
Do sole traders and freelancers need business insurance?
Not legally in most cases without employees — but clients increasingly require professional indemnity, and personal home insurance won’t cover business equipment or claims.
What’s the difference between claims-made and occurrence cover?
Occurrence covers incidents during the policy period whenever the claim arrives. Claims-made requires an active policy at the moment of the claim, which is why run-off cover exists.
Is cyber insurance necessary for a small business?
If you hold customer data or take online payments, it’s worth pricing. Small businesses are targeted precisely because their defences are assumed to be weaker.
Can I claim insurance as a business expense?
Business insurance premiums are generally deductible as a business expense in both the US and UK. Confirm with your accountant for your circumstances.
The bottom line
Cover the legally required policies first — Employers’ Liability in the UK, workers’ compensation in the US. Then public or general liability, because clients and landlords will ask for it.
Add professional indemnity if you advise or create for clients, and understand that it’s claims-made: if you stop trading, buy run-off cover or you’re exposed for years afterwards.
Then insure the one event that would genuinely end the business, and don’t buy the rest. If a claim’s excess would strain your finances, that’s a separate signal — see our guide to building a financial buffer, and our comparison of when insurance beats self-funding.
Sources
- Health and Safety Executive — Employers’ Liability compulsory insurance, the £5 million minimum and daily penalties
- FCA Register — verify any UK broker or insurer before paying
- National Association of Insurance Commissioners — US insurer licensing and complaint records
- Association of British Insurers — UK commercial cover guidance
Premium ranges are indicative and vary enormously by industry, revenue, headcount and claims history. Policy wordings on claims-made cover and average clauses come from insurers’ own documents — read yours.
Last reviewed: 15 August 2026. Legal requirements and cover levels change — we review this article when they do.
General information only, not personalised insurance advice. Legal requirements, cover levels and pricing vary by country, state and industry and change over time. Speak to a licensed broker or adviser about your own business.
