There are several factors that you should take into account when determining what varieties of insurance coverage you need: how large or small your small business is, how it's organized (partnership, sole proprietorship, corporation, LLC), the number of employees, how you get paid (commissions, salary, fees), whether your small business is service or product oriented, your exposure to liability and location.

Things that you should consider:

Heaven forbid, but do you have more than enough insurance to protect your spouse and children? If you have a small service business, your small business is worth Zero when you die. For example, the spouse of a deceased doctor or lawyer can only sell the tools of the trade, not the clients (the true bread and butter of any small service business). Get a crystal ball and see into the future to know when you are going to die then you could sell your small business before you kick the bucket. But that's not very likely, so you and every small service business owner should make sure that you protect your family with at least seven times your gross income. So, if you make $100,000 per year then you should have over $700,000 in insurance.

If your goal is to have a member of your family take over your small business at your demise, are they capable (and licensed) to do so?

Do you have disability insurance, in case you're incapable of running your enterprise because of illness or injury? Disability insurance will generally pay about 60% of your income for a stated period of time. The benefit may be taxable or non-taxable (depending on whether or not you deducted the premium as a business expense.)

Even more important is your answer to this question: Do you have "business overhead insurance"? While you're out of commission, who will cover the costs of running your small business like utilities, insurance and salaries? Disability Insurance will not cover your small business overhead expenses, unless it is an add-on.

Got business partners? Do you have a buy/sell agreement? Should your partner die, you will be protecting your interest in the business. Here's a great example of this: your partner dies and his wife wants to claim her share of the business. Do you really want your deceased partner's relatives to take over their share of the business? Wouldn't you simply rather buy out your partner's share of the company? Well, with this additional insurance, you wouldn't have to worry about your partner's family interfering with your small business.

Do you have "disability buy-out coverage"? If your partner was to become severly disabled, you would be presented with several problems without this particular type of insurance. Do you want to keep paying him (or her) for work he cannot do, possibly for years? You wouldn't have to worry about this situation if you have this type of insurance because your partner would be forced, based upon a previously signed and equitable agreement, to sell his portion of the company to you.

Of course, it's entirely possible that none of these problems may ever come up but it's your small business after all. Now, all you have to do is speak to a professional to determine what varieties of insurance coverage you need to protect your small business.