How Much Does Small Business Insurance Cost? 2025 Rates

Every business, no matter how small, faces risks. Whether it’s property damage, lawsuits, or employee injuries. Insurance helps protect against these financial shocks. Knowing how much small business insurance costs upfront allows owners to budget wisely, avoid surprises, and choose the right coverage for their specific needs and industry.

How Much Is Small Business Insurance?

On average, small business insurance costs around $65 per month, or about $780 annually. However, actual premiums vary depending on factors like business type, location, number of employees, and coverage needs.

General liability insurance is often the first policy a business owner buys. It protects against third-party claims involving bodily injury, property damage, or advertising injury. The average cost is about $42 per month, or $500 annually.

Many small businesses choose a business owner’s policy (BOP) instead, which bundles general liability with commercial property insurance and often business interruption coverage. This package typically costs about $57 per month, or $684 per year. Buying a BOP is usually more cost-effective than purchasing each policy separately.

Cost Of Business Insurance By Policy Type

Business insurance isn’t a single policy—it’s a mix of coverages tailored to your needs. Here’s a breakdown of what each common policy type costs on average, so you can budget accordingly.

General Liability Insurance

This is the most common and essential policy for small businesses, covering bodily injury, property damage, and legal fees related to third-party claims. On average, general liability insurance costs around $42 per month.

Costs vary depending on your industry risk, claims history, and business size. Retailers or contractors tend to pay more than consultants or home-based businesses due to higher physical risk and customer interaction.

Business Owner’s Policy (BOP)

A BOP combines general liability and commercial property insurance, often with business interruption coverage included. This bundled approach typically costs about $57 per month. It’s ideal for small to mid-sized businesses that want comprehensive protection at a discounted rate.

Your cost depends on the size of your workspace, your equipment value, and whether you’ve experienced previous property or liability claims.

Business Interruption Insurance

Usually included in a BOP, business interruption insurance covers lost income if your business has to close temporarily due to a covered event like a fire or storm. When purchased separately, the cost can range from $40 to $130 monthly, depending on your revenue, location, and how long it would take your business to recover from a major disruption.

Commercial Property Insurance

This policy protects your building, equipment, inventory, and other physical assets. Monthly premiums average around $67. If your business is located in an area prone to natural disasters or has expensive equipment or stock, you’ll likely pay more. The age and condition of your building, along with your security systems, also affect rates.

Commercial Auto Insurance

If you or your employees use vehicles for business purposes, commercial auto insurance is necessary. It covers vehicle damage, liability, and medical costs from accidents. The average cost is about $147 per month. Rates are influenced by your driving history, vehicle types, annual mileage, and how the vehicles are used in daily operations.

Commercial Umbrella Insurance

This policy extends the liability limits of your existing insurance policies, offering an extra layer of protection. Businesses typically pay around $75 per month. The cost depends on how much additional coverage you want, as well as the underlying risks of your primary policies. High-risk industries usually pay more for this added cushion.

Contractor’s Tools And Equipment Insurance

Designed for businesses in construction or trades, this coverage protects mobile tools and equipment from theft, damage, or loss. Premiums usually range from $15 to $30 monthly. Costs depend on the total value of your tools, where they’re stored, and how frequently they’re transported or used on job sites.

Cyber Liability Insurance

As cyber threats grow, this policy has become essential for businesses that store customer data or conduct transactions online. Cyber liability insurance costs around $145 per month on average. Prices are higher for tech companies or businesses with sensitive information. Your cybersecurity practices, revenue, and previous breaches all factor into your premium.

Errors & Omissions (E&O) Insurance

Also known as professional liability insurance, this policy covers mistakes in professional services or advice. It’s especially important for consultants, accountants, and creatives. The average monthly cost is about $61. Premiums depend on your industry, the size of your contracts, and whether you’ve faced lawsuits or client disputes in the past.

Inland Marine Insurance

This specialized policy covers equipment, tools, or materials that are frequently transported or used offsite. It’s not just for shipping, it’s useful for photographers, contractors, and mobile service providers. Monthly premiums generally fall between $25 and $60. Your rate depends on the value of the items, how often they move, and where they’re stored.

Product Liability Insurance

If you manufacture, distribute, or sell products, this coverage protects against claims that a product caused harm or injury. It typically costs around $90 per month. The riskier or more complex your product, the higher your rate. Businesses in food, supplements, or machinery often pay more than those selling apparel or books.

Workers’ Compensation Insurance

This mandatory policy (in most states) covers medical bills and lost wages for employees injured on the job. The average monthly premium is around $45, but it’s closely tied to your total payroll, industry risk, and prior claim history. High-risk trades like roofing or manufacturing will pay more than office-based businesses.

Factors That Affect The Cost Of Your Small Business Insurance

When you apply for small business insurance, your insurer doesn’t just pull a number out of thin air. They use a detailed process to calculate your premiums, analyzing several risk-related factors that reflect how likely you are to file a claim and how costly that claim could be. Understanding what goes into that calculation can help you make smarter decisions when buying coverage and managing costs.

Here’s a breakdown of the most important factors that influence how much you’ll pay:

Policy Limits

The higher your coverage limits, the more your policy will cost. A $1 million liability policy is going to be more expensive than one capped at $500,000. But if your business faces high liability risks, like working with heavy machinery or customers on your property, it’s often worth paying more for better protection. Some insurers also allow you to choose between per-occurrence limits and aggregate limits, which can affect pricing.

Your Industry

Some industries are simply riskier than others. Construction, food service, and manufacturing businesses typically pay more than consultants, designers, or freelancers. That’s because the potential for injury, property damage, or professional errors varies dramatically depending on the type of work you do.

Location

Where your business is located matters. Insurance rates are usually higher in urban areas due to increased risks like crime, litigation, and property damage. Additionally, certain states have stricter regulations or more frequent natural disasters, which can also raise premiums. Even your specific ZIP code can influence rates.

Classification Codes

Insurance companies use classification codes to group similar businesses together based on the type of work they perform. These codes help standardize risk assessments, but they also directly impact pricing. If your business is misclassified, you could end up paying more or less than you should. It’s worth double-checking that your business activities match your code.

Number Of Employees

The more employees you have, the higher the risk of on-the-job injuries or liability claims. That’s why insurers factor in employee count when calculating premiums, especially for workers’ compensation and liability coverage. Businesses with staff who perform manual labor usually face higher premiums than those with office-based workers.

Business Structure

Whether your business is a sole proprietorship, partnership, LLC, or corporation can also affect your rates. Insurers consider how liability is shared or limited under your legal structure, and whether the business itself or individuals are responsible for claims. In general, corporations and LLCs may face different liability exposures than sole proprietors.

Property And Equipment

If you own expensive equipment, inventory, or commercial real estate, your insurance costs will be higher to account for the increased risk of property damage, theft, or loss. Businesses with physical storefronts also need more coverage than online-only operations. Insurers look at building type, construction materials, safety systems, and more when pricing property-related coverage.

Annual Revenue

Higher revenue usually means more business activity, more customers, and greater exposure to risk. That translates into higher premiums, especially for general liability and product liability policies. Revenue is often used as a benchmark for how large a claim might be if something goes wrong.

Claims History

Your past is a predictor of your future in the eyes of your insurer. If you’ve had frequent or costly claims, your premiums will reflect that risk. On the other hand, a clean claims history can help lower your rates. Some carriers even offer discounts for businesses that remain claim-free for a set number of years.

While some of these factors are out of your control, like your industry or location, others can be managed. Maintaining a safe workplace, accurately reporting your business activities, and avoiding unnecessary claims can go a long way in keeping your insurance costs affordable.

Small Business Insurance Costs By Industry

Insurance isn’t one-size-fits-all. What a yoga instructor pays for coverage will look very different from what a roofing contractor or restaurant owner pays. That’s because insurance companies assess risk based on what your business does day to day. Industries with more public interaction, manual labor, or expensive equipment tend to face higher premiums.

Below are some examples of typical insurance costs for a variety of industries. These figures reflect common coverage packages like general liability or business owner’s policies, but can increase significantly if additional coverages are needed (like workers’ comp or cyber insurance).

Real Small Business Case Studies

Sometimes the best way to understand small business insurance costs is to see how it plays out in the real world. Below are three snapshot stories from different industries that show how coverage, location, and business type influence pricing.

Boutique Bakery – Austin, TX

Maria owns a small bakery in Austin. Her business includes a storefront, a few employees, and a commercial kitchen. To protect against customer slip-and-fall claims, fire damage, and equipment loss, she purchased a business owner’s policy (BOP) that includes general liability and property insurance.

Annual Cost: $1,200

Coverage Includes: General liability, commercial property, business interruption

Freelance Graphic Designer – New York, NY

Jared works remotely from his apartment, designing logos and branding for small startups. Since he doesn’t interact with clients in person or own business property, his primary concern is being sued for a mistake in his work. He chose a basic professional liability (errors & omissions) policy to cover legal fees and settlements.

Annual Cost: $500
Coverage Includes: Professional liability (E&O)

Mobile Auto Detailer – Phoenix, AZ

Kevin runs a mobile car detailing service with two vans and a part-time helper. Because he travels to customers, he needs commercial auto insurance, general liability, and equipment coverage. He also added a small commercial property rider to cover theft of tools kept in his garage.

Annual Cost: $2,400
Coverage Includes: Commercial auto, general liability, contractor’s tools and equipment, property rider

Small business insurance isn’t a fixed cost. It adapts to your business model, risk level, and the protections you need most. Whether you’re working from home or running a brick-and-mortar store, Insuranceopedia can find you coverage that fits your budget and your risk.

How To Lower Your Business Insurance Costs

Paying for small business insurance is necessary, but overpaying isn’t. Fortunately, there are smart ways to keep your premiums manageable without cutting corners on the protection your business needs. Here are practical strategies to help reduce your insurance costs:

Bundle Policies Into A BOP

If you need both general liability and property coverage, a business owner’s policy (BOP) can save you money. It combines multiple coverages into a single, discounted policy. BOPs often include business interruption insurance, too, at a lower rate than if purchased separately.

Increase Your Deductibles

Choosing a higher deductible means you’ll pay more out-of-pocket if you file a claim, but your monthly premium will be lower. This strategy works best if your business has a low claim history and solid financial reserves to handle smaller incidents.

Improve Workplace Safety

Fewer claims mean lower premiums over time. Installing safety equipment, providing employee training, and maintaining clean, hazard-free workspaces can reduce your risk profile. For businesses with employees, implementing a workplace safety program can also lower workers’ compensation costs.

Shop Around And Compare Quotes

Don’t accept the first quote you get. Prices and coverage vary widely between carriers. Use online marketplaces like Insuranceopedia to compare offers and get a clearer picture of what’s reasonable for your industry and location.

Ask About Industry Or Association Discounts

Some insurers offer lower rates for businesses that belong to specific trade associations or professional organizations. Check if your memberships can unlock any special pricing or group coverage plans.

Review And Adjust Your Coverage Annually

Each year, take time to reassess your needs. You might be overinsured in one area or underinsured in another. Adjusting coverage to reflect your current operations can help eliminate unnecessary costs.

Maintain A Clean Claims History

Filing fewer claims can pay off. Insurers reward businesses with a history of low or no claims by offering lower premiums and discounts over time. Sometimes it’s worth paying for minor damages out of pocket to preserve your record.

Limit Unnecessary Coverage Add-Ons

It’s easy to get sold on extra coverage you may never use. Be selective. Understand what’s truly essential for your business and avoid paying for add-ons that don’t serve your specific risk profile.

Cutting insurance costs doesn’t mean cutting corners. With a little planning, some comparison shopping, and smart risk management, you can protect your business while keeping your premiums in check.

State-By-State Business Insurance Costs

Insurance premiums differ from state to state due to:

• Litigation risk: Some states have higher rates of lawsuits or larger average settlements.
• Climate and natural disasters: Floods, hurricanes, and wildfires drive up property risk.
• Local regulations and state-mandated minimums: Worker compensation rules and commercial mandates vary.
• Market competition: States with more licensed insurers tend to offer lower rates due to pricing competition.

Estimated Monthly Small Business Insurance Costs By State

Based on industry data showing average statewide premiums generally range between $50 and $200/month for core coverage, here’s a state-by-state estimate: