How much is small business insurance in 2025?

Insurance isn’t exactly the most exciting part of running your business. It’s another line on the budget, and most days, it feels like money out the door for something you’ll never need.

Until you do.

One customer slips, one project goes sideways, and suddenly that coverage matters more than you thought.

So, how much does it really cost to protect your business? And why should you even care about it?

In this guide, we’ll break down what affects your insurance rates and how to keep costs in check without cutting corners where it counts.

How much does small business insurance cost in 2025?

Most small businesses pay between $500 and $1,000 a year for basic insurance coverage. That covers essentials like general liability protection if someone trips at your office or a client claims damages.

It’s not a massive expense for most businesses, but it matters. The cost of a claim can easily run into tens of thousands, so a few hundred dollars keeps you covered when the unexpected happens.

Small business insurance costs in real life

Here’s what typical business insurance premiums look like:

• General liability (~$42-$80/month) → Covers legal costs if someone gets hurt because of your services or at your workplace. Say a client trips over a loose cable during a meeting at your office and threatens legal action. This policy handles the lawyer fees and settlements.
• Business owner’s policy (BOP) (~$57-$85/month) → Bundles general liability with property coverage, protecting your tools, equipment, or office space. If a break-in wipes out your laptops or a fire damages your workspace, this policy helps replace what you need to keep working.
• Workers’ compensation ($45-$50/month, depending on employee salary) → Includes medical bills and lost wages if an employee gets injured on the job. An employee strains their back lifting equipment? Workers' comp covers their recovery costs and lost wages – without putting your business at risk.
• Professional liability (~$61-$100/month) → Essential for consultants, freelancers, and agencies. Covers claims of mistakes or missed deadlines. If a client claims your project delays caused them financial loss – even if it wasn’t your fault – this policy covers legal defense and any settlements.
• Commercial auto (~$147-$270/month) → Protects your business vehicle and liability if there’s an accident while working. If you or an employee gets into an accident while driving to a client site, this keeps you covered for repairs and any legal claims.

These costs vary, but even the highest premiums are usually far less than what a single claim could cost your business. Instead of seeing insurance as a cost, see it as protection for everything you’ve worked to build.

Does a small business even need to be insured?

In most cases – yes. Even if your business is small, you should make sure you’re protected. But not because it’s some legal formality, let’s break down why it matters.

Protect your finances

An unexpected claim or accident can drain your savings fast. Insurance helps cover legal fees, medical bills, or property damage—expenses that could otherwise force you to close your doors.

Example: A freelance designer spills coffee on a client’s laptop during a meeting. Without general liability insurance, they’d have to cover the $2,000 repair cost out of pocket. With coverage? The policy steps in.

Meet legal and contract requirements

Some coverages, like workers' compensation or general liability, aren’t optional. They’re legally required or often requested by landlords and clients. Being insured helps you stay compliant and open for business.

Example: A marketing consultant lands a contract with a big agency. The deal is on hold until they provide proof of professional liability insurance. No coverage means no contract.

Keep your business running

Disruptions happen, fires, floods, or equipment failures, while you hope they’ll never happen, there’s a chance they could. With the right coverage, you have support to repair, rebuild, and get back on track without starting from scratch.

Example: A small web agency’s office gets hit by a storm. The damage closes the space for weeks. Their business owner’s policy helps cover repairs and lost income, so they can focus on clients instead of scrambling for cash.

What affects small business insurance costs

Insurers don’t pull your premium out of thin air. They weigh several factors, some you can control, some you can’t. Here’s what shapes your price tag:

1. Your industry risk profile

Not all businesses face the same risks, and your sector plays a huge role in setting your rates.

• Higher-risk: construction firms, food service, trades.
• Lower-risk: design studios, marketing consultancies, online retailers.

For example, a freelance designer working from home might pay $300 a year for professional liability. A roofing contractor? Closer to $1,000 – because climbing ladders comes with bigger risks.

How to influence it? Even in high-risk sectors, showing safety certifications or protocols (like site training) can shave down your premiums.

2. Team size

The more people you employ, the greater the chance of accidents, disputes, or claims.

• A solo consultant might spend $400/year on coverage.
• A team of 10 or more? Expect $2,000+ depending on the work they do.

Every new hire affects policies like workers’ compensation and liability, especially if your team interacts with clients or operates machinery.

3. Revenue

Earning more? Congrats – but to insurers, that also means more exposure.

• A web agency billing $100K/year might pay $500 for liability.
• Scaling up to $800K/year? That same policy could jump to $1,500+, simply because there’s more at stake.

More clients → bigger contracts → higher payouts if something goes wrong.

4. Location

Where you operate changes the risk landscape:

• Urban areas with high foot traffic or crime rates? Expect higher liability or property premiums.
• Rural zones tend to be cheaper.

For instance, a café in central London might pay 25% more for property insurance than one in a quieter suburb.

5. Claims history

Fewer claims = lower premiums.

One-off incidents might not have a huge effect, but a pattern of claims – late deliveries, accidents, or disputes – raises red flags for insurers.

Staying claims-free for several years often unlocks loyalty discounts.

6. Coverage limits and extras

Think of coverage limits like a ceiling. The higher you raise it, the more you’ll pay – but the better protected you are.

• Standard liability coverage often starts at $1M per claim.
• Adding extras – like cybersecurity or business interruption (which covers lost income if you’re forced to close temporarily) – increases the price.

Only pay for what you genuinely need, but avoid skimping on core protections. Finding the right balance saves headaches.

7. Deductible size

Choosing a higher deductible (the amount you pay out-of-pocket in a claim) lowers your premium.

For example:

• A $500 deductible might cost $950/year.
• Raise it to $1,000? Your premium drops to $800/year.

If you’ve got savings to cover that higher deductible, this can be a smart way to cut costs.

How to lower your small business insurance bill

The best way to trim your insurance bill is to know where you’ve got room to move. With a few focused changes, you can cut your costs without sacrificing the coverage you need.

Here’s how to do it, step by step:

1. Compare quotes from multiple insurers

Insurance providers don’t price risk the same way. That’s why rates for the same coverage can vary by hundreds, sometimes even more.

Use comparison tools like Simply Business (UK) or Insureon (US) to find the best deal for you. Get at least three quotes for the same limits and deductibles to compare fairly. Even for solo consultants or digital service providers, the spread can be significant.

2. Bundle your policies

Combining general liability, commercial property, and business interruption into a Business Owner’s Policy (BOP) can unlock discounts and simplify renewals.

Ask your insurer if a BOP applies to your setup, especially if you run your business from a physical space or own equipment. Bundling often trims 10–20% off your total premium.

3. Boost safety and digital security

Fewer incidents mean lower risk – and lower risk earns better rates over time. Many insurers offer discounts for businesses that take safety seriously.

What to do:

• Install a basic security system or alarm
• Provide safety or compliance training
• Use antivirus tools and enable two-factor authentication

These small investments show insurers you’re proactive.

4. Reassess your coverage every year

Your business isn’t static. Maybe you’ve hired staff, closed a location, or upgraded your equipment. If your policy doesn’t reflect those changes, you could be paying too much, or leaving gaps in protection.

Set a calendar reminder to review your policies each year. Many business owners forget to update coverage, and that’s where overspending (or risk exposure) creeps in.

Cut costs, not corners

Trimming your insurance bill makes sense. Every business needs to watch expenses, but there’s a fine line between lowering premiums and leaving yourself exposed when things go sideways.

Underinsurance happens more often than you’d think. In fact, 75% of small businesses don’t carry enough coverage for the risks they face. It’s may seem like a good way to save some cash, but cutting too deep could mean paying tens of thousands out of pocket when disaster strikes.

Here’s what that might look like:

• You reduce your general liability coverage to save a little, but one bad injury claim leaves you responsible for the excess.
• You skip business interruption coverage, and then a fire shuts your doors for two months with no income to cover rent or payroll.
• You think cyber insurance is optional, until a data breach hits your systems, and legal and recovery costs pile up fast.

Studies show that 4 in 10 small businesses might face a liability claim and after major disasters, nearly 40% never reopen.

Saving is smart, but only when you stay protected. Balance matters. Lower costs where you can, but make sure you’re covered where it counts.

Make insurance part of your growth plan

Insurance isn’t just about protection, but keeping your business steady through the unexpected. With the right coverage in place, you create space to focus on what matters most: running and growing your business.

Take time to review your coverage regularly and adjust it as your business evolves. A little effort now can save a lot of stress later.