How much does small business insurance cost in 2025?

How much does small business insurance cost per year?

Small business insurance costs depend on a number of criteria, including the type and amount of coverage you choose. For example, a general liability policy costs far less per year than commercial auto insurance because different variables are involved (such as claim severity and frequency or litigation risk).

According to Insureon, the average cost of small business insurance for the most common types of small business insurance are:

Insurance type	Average annual premium
General liability	$500
Workers’ compensation	$540
Business owner’s policy	$684
Professional liability/E&O	$732
Commercial property	$804
Commercial umbrella	$1,125
Cyber	$1,740
Commercial auto	$1,764

How much does small business insurance cost per month?

Some insurers offer a small discount to businesses that pay their entire premium in advance. But if that’s not financially realistic, paying your insurance premium on a monthly basis is often an option.

Here’s a breakdown of business insurance rates, based on average monthly cost estimates from Insureon, based on policy type:

Insurance type	Average monthly premium
General liability	$42
Workers’ compensation	$45
Business owner’s policy	$57
Professional liability/E&O	$61
Commercial property	$67
Commercial umbrella	$75
Cyber	$145
Commercial auto	$147

Insight: Most states require commercial auto insurance for any business-owned vehicles. Most states also require workers’ compensation insurance for businesses that employ a certain number of workers – the exact number depends on the state – and for sole proprietors in riskier professions such as roofing.

How to estimate your small business insurance costs

Insurers consider numerous factors when setting rates, and each carrier has its own proprietary method for calculating risk, making it nearly impossible for a layperson to determine how much coverage will cost. Fortunately, many insurance companies let you get free business insurance quotes online to help you estimate expenses. To receive a quote, you’ll typically need to provide:

Your physical address
The type of work your business does
The number of employees you have
Your business income
The type and amount of coverage you need.

Once you’ve received quotes from several carriers, you can compare rates and choose which insurer offers the best deal. Keep in mind that online rate calculators only provide estimates; you won’t receive a final price until it’s time to bind your policy with an insurer.

Small business insurance companies

There are any number of commercial insurers that small business owners can choose from. A good place to start your search is Insurance.com's list of the best small business insurance companies, which includes:

Allstate
Chubb
American Family
Philadelphia Insurance
State Farm
CNA Insurance
The Hartford
Nationwide
Travelers
Liberty Mutual
Farmers
AIG
Erie
The Hanover
Auto-Owners

Small business insurance coverage options

Certain insurance policies are essential for every small business owner for legal and liability reasons and to protect against financial risk.

General liability: This covers third-party liability risks such as injury to a client on your property and damage to a customer’s property. It’s often required to qualify for leases and contracts.
Commercial auto insurance: Most states require a minimum amount of liability insurance, which covers third-party bodily injury and property damage if you or an employee are at fault for an accident involving a business vehicle. Optional coverages include collision insurance, which covers accident damage to the company’s vehicles, and comprehensive insurance, which covers non-collision events such as fire, theft, vandalism or acts of nature such as hail.
Workers’ compensation: This is required in most states for any business with one or more employees. Workers’ comp covers medical bills if you or an employee are injured in a work-related mishap or illness. It can also offset lost wages if the employee cannot work for a while.
Commercial property: If you own or rent real estate, equipment or tools, you’ll need commercial property insurance to protect your operations from fire, severe weather and crime. If your property (such as furniture, computers, tools or inventory) were stolen or damaged, it could put your business in a financial bind. The cost of repairing the building itself could be prohibitive without this coverage.
Professional liability: Anyone with a professional license from their state may need professional liability insurance, also known as errors and omissions (E&O) coverage. It covers client lawsuits due to negligence, breach of contract, missed deadlines, and causing personal or financial harm.
Business interruption insurance: Business interruption insurance, or business income coverage, kicks in during times when a business can’t operate due to a natural disaster or some other event. It can cover lost net income (based on financial records), mortgage, rent and lease payments, loan payments, taxes and employee payroll.
Business owners policy (BOP): This combines general liability coverage and commercial property insurance into a bundle that’s typically less expensive than buying the policies separately.

Other small business insurance options

While general liability, property insurance, vehicle insurance and workers’ comp are all important to protecting your business, there are other insurance options you might need to consider. These include:

Cyber insurance, also known as cyber liability insurance, covers the cost of responding to data breaches and cyber hacking.
Commercial umbrella insurance is an affordable way of extending your liability coverage. It kicks in when you max out on an underlying policy, such as general liability.
Inland marine insurance, also known as contractor’s tools and equipment insurance, covers the loss of your business property while it’s being transported or used at an off-site location.
Liquor liability insurance is required by most states for any business that sells or serves alcohol. Liquor liability covers legal fees and medical costs if a business serves alcohol to an intoxicated person who hurts other people or damages property.
Flood insurance provides coverage from flooding and may be required if you live in a flood prone area or a federally designated flood zone.

Factors that impact small business insurance costs

No matter what kind of small business insurance you’re buying, your carrier will take several factors into account when assessing risk and calculating your premium, including:

Location: If you’re in an area that’s prone to natural disasters, crime or other risks, you’ll likely have to pay more in premiums.
The type of work you do: Some professions are just more expensive to insure than others. For example, a consultant with a home office can expect to pay far less in liability premiums than a retail store.
Your business income: This gives insurers a guideline on your level of business risk. Businesses with larger incomes tend to have greater risks.
How much property you own, rent or lease: This can range from real estate holdings to the equipment in your office.
Your workforce: Every employee at your business increases your risk level for workplace-related accidents, injuries and damage to someone else’s property.
Your business experience and credit history: The more established and creditworthy your business is, the less risk your business is likely to have, dramatically impacting your premiums.
Your claims history: A business with a series of expensive claims can expect to pay more in premiums than one without.
Your deductible and coverage amounts: Higher coverage levels and lower deductibles can increase the financial security of your business, yet will also increase your premiums. It’s important to set your coverage limits and deductible at a level that gives you the financial security you need to survive a mishap and keep your premiums affordable.

Why do you need commercial insurance for your small business?

Small business owners need insurance for a variety of reasons. In some cases, it may be required by law; in other cases, coverage may be optional. Either way, experts say it makes financial sense to buy commercial insurance to protect your property and assets from financial losses associated with an expensive claim or costly lawsuit.

“Commercial liability insurance provides coverage for indemnity to third parties as well as defense costs, if there is an ‘occurrence’ as defined in the policy,” Goldberg says. “When such claims involve the business being sued, if the allegations are covered by the policy, the business may also receive legal representation provided under the insurance policy.”

You’ll likely need some types of coverage to comply with the laws in your state. Most states, for instance, require commercial auto insurance for business-owned vehicles. Most states also require workers’ compensation insurance for businesses with employees – the exact number depends on the state – and for sole proprietors in riskier professions such as roofing. You might also need professional liability insurance, known as errors and omissions (E&O) insurance, if you have a professional license in your state.

Commercial lenders typically require certain types of coverage, such as general liability and property insurance, to obtain a mortgage or business loan. Landlords often require insurance as well.

“If the business owns or rents a building, it will need commercial property insurance coverage to cover the structure and contents,” Goldberg says. “One coverage that is part of commercial property coverage is business interruption insurance, which provides coverage if the business is shut down due to a covered cause of loss. This could include money to operate from an alternative location, wages for workers that are unable to work, lost profits, etc.”

If you live in a disaster-prone area, you may need additional policies, such as flood insurance. Your insurance company representative, agent or broker can help tailor coverage to meet your business’s unique needs.

How to reduce your small business insurance costs

You need enough insurance coverage to cover the cost of a lawsuit, a personal injury, damage or loss to your business property and other risks. But there are some things you can do to help reduce your small business insurance rates:

Adopting a comprehensive safety plan can help you reduce your chances of an accident and an insurance claim, which helps keep a lid on premiums. Employee safety and procedural training can be an effective way of reducing your chance of an expensive accident or lawsuit and an insurance claim.
Working with your insurance company to identify and reduce risks. For example, Goldberg says, a carrier can recommend building changes (installing a sprinkler system, improving the roof) to prevent losses to your building. Many insurance companies offer a reduced premium on commercial property insurance for buildings that have sprinklers.
Bundling your policies can also help you save money. Many small business owners buy a business owner’s policy (BOP), which combines their general liability and property coverage and is usually less expensive than purchasing these policies separately. Ask your insurance company about similar packages that will get you a discount, such as combining general and professional liability.
Adjusting your coverage limits. Choosing a higher deductible will increase the amount you pay on individual claims but will lower your premium. Opting for lower coverage limits can also reduce your premium. Don’t set your deductible so high or your coverage limits so low that your business couldn’t afford an expensive mishap.
Paying your premium annually might earn you a discount from your insurance company.

What our expert says

Q: What’s the best way to shop for small business insurance?

Eric Goldberg Department vice president and counsel, commercial lines, at the American Property Casualty Insurance Association.

"When shopping for coverage, it is important to shop around to make sure you are getting the best coverage at the best price. Additionally, working with an agent can help make sure you are getting the right amount and right types of coverage."

FAQ: Small business insurance costs

Does my industry and company size influence business insurance costs?

Absolutely. These are two key factors an insurance company will examine when setting your coverage rates. They give the insurance company a clear idea of the types of risks you face.

What happens if I underinsure my business to save on cost?

While it might be tempting to save money on premiums by underinsuring your business, not buying the right amount of coverage could wind up costing you plenty in the long run. Just one incident involving a personal injury or damage to property could shut down your business.

How does my claims history impact my insurance premiums?

Any claims history your business has will have a direct impact on how much you have to pay in premiums. The more claims you have, and the more expensive they are, the higher the premiums will be in the future.

Can I bundle different types of business insurance to save money?

Bundling different policies is an effective and easy way to reduce your insurance costs. It’s why so many small business owners combined their general liability and commercial property insurance into a business owner’s policy.