Better Businesses Have Better Coverage

So you’ve launched your business, built a steady flow of clients, and may even have a few employees on payroll. But as your business grows, so do your risks — and not every policy offers the protection you might think it does. Small business owners often believe they’re too early in their journey to need full coverage, but unfortunately, that’s when many discover coverage gaps the hard way.

Before you scale any further, it’s time to ask a question too many small business owners avoid:

Are you actually protected if something goes wrong?

From lawsuits to stolen laptops, business interruptions to unexpected employee claims, the right insurance coverage isn’t just about checking a box. It’s about safeguarding your hard work and ensuring you don’t lose everything you’ve built overnight.

Whether you’re a service provider, tradesperson, or operate a hybrid team of remote and in-person staff, here’s what every small business with up to 10 employees should know about protecting themselves from costly insurance blind spots.

The Most Common Gaps in Small Business Insurance

A safe and secure foundation is crucial for success when scaling your business. Without the right insurance policies in place, you could be on the hook for:

  • Client lawsuits over contract disputes or perceived mistakes
  • Injuries that happen in your workspace (even a co-working space)
  • Damaged or stolen equipment you rely on to operate
  • Cyberattacks that compromise client data
  • Employee claims over workplace conditions or discrimination

A single claim could cost tens of thousands of dollars, and most small businesses aren’t ready for that hit. Here are the most common reasons small businesses end up underinsured or unprotected:

1. Assuming General Liability Covers Everything

Many small businesses think a general liability policy is enough. While it’s essential, it only covers specific types of claims such as third-party bodily injury related to a slip and fall or from a product or service you provide, damage to a rented property, and personal/advertising injury. It doesn’t protect you from service-related mistakes or employment disputes.

2. Hiring Without Workers’ Compensation

Workers’ compensation insurance is legally required in most states the moment you hire an employee. Even a part-time assistant or independent contractor may trigger legal requirements depending on your location. Without it, you could face penalties and legal exposure — not to mention having no coverage if your employee actually does get injured on the job. 

3. Overlooking Professional Liability Coverage (AKA: Errors & Omissions Insurance)

If your business offers professional services such as advice, designs, consulting, or anything that can be perceived as a service, any errors or mistakes made in the scope of your work can expose you to negligence claims. These can be costly even if they’re unfounded. Professional liability (or errors & omissions) insurance helps protect your business in these situations.

4. Skipping Cyber Liability Coverage for Digital Operations

Cyber insurance isn’t just for large companies. Any small business that stores client data is at risk of a cyber attack or data hack. Client data can often include client contact information, date of birth, social security numbers, and information on client digital payments like credit card information. Without cyber liability coverage, you may be responsible for data breach notifications, credit monitoring, or regulatory fines as well as any downtime your business experiences as a result of a data breach. 

5. Outgrowing Your Initial Policy Limits

Many small business owners start with a minimal policy and never revisit it. But as you add staff, sign new contracts, or expand operations, your liability and coverage needs grow. Your policy limits need to evolve with your business.

The Ten Essential Policies Every Small Business Should Consider

If you’re operating a small business with up to 10 employees, consider this your foundational insurance checklist:

1. General Liability Insurance

Covers third-party claims of bodily injury, property damage, and advertising injury. Often required by landlords, vendors, or clients before contracts can be signed.

Who needs it: Everyone, regardless of industry or size.

Examples:

  • A delivery person trips over a cord in your office and sues you.
  • You accidentally damage a client’s property during a site visit.
  • Someone sues you for a social media post they claim is defamatory.
  • Customers get food poisoning and are hospitalized as a result of dining in your restaurant.
  • Customers who purchase a product that you sell and/or manufacture are injured from the use of that product.
  • You’re a contractor or tradesperson, and there is a malfunction from something you’ve built or repaired.

Price range: $600–$3,000/year, depending on your risk level.

2. Professional Liability Insurance (Errors & Omissions)

Protects your business against claims of negligence, mistakes, or failure to deliver services as promised. Especially important for consultants, creative professionals, and service providers.

Who needs it: Service providers, consultants, creatives, and freelancers.

Examples:

  • A client says your strategy led to revenue loss.
  • You miss a deadline that causes delays and penalties.
  • An error in your work results in a lawsuit.

Price range: $900–$5,000/year, depending on your profession.

3. Workers’ Compensation Insurance

Covers employee injuries and illnesses that occur in the workplace. Legally required in most states. Helps cover medical expenses, lost wages, and rehabilitation.

Who needs it: Any business with one or more employee(s).

Examples:

  • Your assistant trips and injures their knee at the office.
  • A part-time delivery driver is injured while working.

Price range: Varies based on payroll and industry, but for most low-risk businesses ranges between $1,000 to $3,000 .

4. Commercial Property Insurance (Building Owner Coverage)

Just like you would purchase a homeowners policy if you own a home, you need to purchase commercial property coverage to protect your commercial property. 

5. Commercial Property Insurance (Business Personal Property)

Protects physical assets your business owns — including equipment, computers, or inventory — from events such as fire, theft, or vandalism.

6. Business Owner’s Policy (BOP)

A cost-effective package that typically bundles general liability and commercial property insurance. Ideal for small businesses looking to build a strong foundation of coverage.

Who needs it: Small businesses that want bundled protection. If you rent office space, have inventory or equipment, or want bundled coverage, a BOP can be the most affordable and efficient way to go. BOP policies are not available for all business types. For example, if a BOP policy is not offered for your class of business, ArcLight Insurance recommends purchasing the General Liability and Commercial Property policies separately as standalone policies. 

Price range: Varies based on package customizations.

7. Cyber Liability Insurance

Protects against the financial impact of data breaches, cyberattacks, and client data exposure. Increasingly essential for any business that operates online or stores customer information.

If a company has a server (local or remote) or a website with an online database of customer information, they may consider getting this coverage. This protects companies in the event that their client database is breached and their customer data is lost or stolen. 

Who needs it: Any business that handles sensitive data, takes online payments, or stores customer data on company computers/laptops and/or company owned servers.

Examples:

  • Your customer records are compromised after a phishing scam.
  • You get locked out of your systems by ransomware.
  • A contractor you hired exposes data via a third-party tool.

The two most important limits of coverage under a cyber plan are the Breach Notification and System Damage/Business Interruptions coverages. If a breach happens, the insurance company will pay for items like Privacy Liability, Media Liability, Regulatory Proceedings, Threats & Extortion, PCI Fines and Penalties along with Breach Notification and System Damage/Business Interruptions. 

Arguably the two most damaging items to businesses are the Breach Notification, which reflects the cost a business incurs to notify all past and present clients and vendors about the breach, and Business Interruption. If your business’ website is down as a result of a cyberattack, that may also create financial hardship for your business if not protected.

Cost range: $1,000–$5,000/year depending on your business size and data risk.

8. Employment Practices Liability Insurance (EPLI)

Covers claims related to discrimination, wrongful termination, or harassment in the workplace. Valuable coverage if you manage a team or are planning to hire.

9. Commercial Auto Insurance 

Your business may own company vehicles used for company purposes. If you purchase a car and the company’s name is on the vehicle registration, you will need a commercial auto policy since company-owned vehicles cannot be insured using personal auto insurance. 

Company vehicles are not just big trucks and vans — personal vehicles such as sedans and SUVs can be company vehicles as long as the company is named on the registration of the car. In those instances, a commercial auto policy would be needed, and these policies can cost the same or slightly less — yes, you read that right — than a traditional auto policy. 

10. Inland Marine Insurance

If your business tools travel with you and are often stored in your vehicle overnight, this is an optional coverage worth considering. This coverage can save you thousands of dollars in the case of theft or damage while driving or being stored in your vehicle. 

Businesses and freelancers that greatly benefit from having an Inland Marine Insurance policy include:

  • Photographers who bring their equipment on shoots
  • Production teams, especially those who travel with equipment to set up on-site
  • Musicians who travel with their instruments
  • Contractors who store their tools and equipment in their vehicle
  • Vendors who bring their products to events or markets
  • Any business that relies on equipment or materials that travel to various locations

Make Sure You’re Properly Protected in 5 Simple Steps

✅ Review Your Risks and Operations
Start by identifying where your business may be vulnerable. Are you storing client data? Hiring employees? Transporting tools or equipment? These factors can influence which coverages you need.

✅ Understand What Your Policies Exclude
Exclusions can leave dangerous gaps. Work with a licensed insurance advisor to walk through what’s not covered in your current policy.

✅ Work With a Trusted Advisor
A knowledgeable insurance partner can help tailor your coverage and explain what’s relevant for your industry, size, and growth stage.

✅ Consider Policy Limits Carefully
Low-cost policies may also come with low limits. Make sure your coverage amounts reflect your actual business value and liability exposure.

✅ Reassess Annually
Just like a home or auto policy, your business insurance should be reviewed every year — or sooner if you’ve experienced growth, added services, or brought on staff.

Use ArcLight Insurance and Secure the Right Coverage for Your Business 

Insurance isn’t one-size-fits-all. A business with ten employees needs a different plan than a solo entrepreneur — and both need more than a generic policy pulled off the shelf.

At ArcLight Insurance, we help small business owners build policies that are aligned with their real-world risks. Our advisors take the time to learn how you operate and guide you toward the right solutions — not just the default ones.

Let’s protect what you’re building, so you can shine with confidence.

Schedule a free coverage review today to get started.