Small Business Insurance Cost: What You Need to Know in 2025

Your business insurance is the superhero that swoops in to save the day when your company needs help. It protects everything you've built from surprise disasters that could otherwise wipe out your savings overnight. 

Every dollar counts, and figuring out exactly how much small business insurance costs without overpaying is tricky, especially when considering the actual cost of different kinds of insurance coverage available. 

We'll cover the average costs across different policy types, show you industry-specific pricing, explain what influences your rates, and share practical strategies to lower your premiums without sacrificing coverage. 

Let's make sense of insurance pricing so you can get back to what matters—running your unstoppable business.

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How much does small business insurance cost?

Small business insurance costs aren't one-size-fits-all. It depends on what you do, where you operate, and how big your company is. Here's what you can expect to pay.

Average cost of small business insurance (monthly & annual estimates)

The average cost of insurance for small business typically ranges between $500 and $3,500 annually for core coverage, with monthly premiums breaking down to roughly $40–$300. 

The median cost gives you a rough idea of what you can expect to pay for various types of insurance. Small business insurance rates vary widely based on industry, size, and specific risks. 

How much does business insurance cost per month?

The monthly premium for business insurance typically ranges from $125 to $500 for most small operations. Solo entrepreneurs and home-based businesses might pay under $100 monthly, while businesses with multiple employees, physical locations, or higher risk factors can expect higher business insurance premiums.

Business insurance estimate by industry and business type

Your industry directly impacts your small business insurance price. Know exactly what your business needs before selecting insurance policies, because different factors like size, location, and specific operations determine coverage and costs.

Typically, high-risk industries pay significantly more than low-risk ones. For example:

Lower cost industries ($300–$700 annually for basic coverage)

• Consulting services
• Web design
• Bookkeeping
• Home-based retail

Medium cost industries ($700–$2,000 annually)

• Retail stores
• Restaurants
• Real estate
• IT services

Higher cost industries ($2,000–$5,000+ annually)

• Construction
• Manufacturing
• Healthcare
• Professional services (legal, accounting)

Small business insurance costs by coverage type

Understanding the breakdown of business insurance coverage costs by type helps you allocate your insurance budget effectively.

General liability insurance

Protects your business against third-party claims of bodily injury, property damage, and advertising injury. It’s the foundation of most business insurance programs.

Businesses in high-risk industries need to carry general liability insurance because of potential legal and financial risks.

How much does general liability insurance cost for a small business?

Most small businesses pay $40-$100 per month ($480-$1,200 annually) for general liability insurance coverage. Retail shops, restaurants, and businesses with regular customer traffic typically pay toward the higher end due to increased slip-and-fall risks.

Some factors that affect your general liability premium include:

• Annual revenue (higher revenue = higher premiums)
• Years in business (newer businesses often pay more)
• Claims history (previous claims increase rates)
• Industry risk classification
• Number of employees (more employees = higher risk)

For example, a consultant with no storefront location might pay just $400 annually, while a busy restaurant could pay $1,500 or more for the same coverage limits.

How much does $100,000 liability insurance cost?

A basic general liability policy with a $100,000 limit typically costs $200–$400 annually for low-risk businesses. However, most experts recommend higher coverage limits since a single claim can easily exceed $100,000.

For perspective, the average slip-and-fall claim costs about $20,000 in medical expenses, but can exceed $100,000 when you include legal fees and potential settlements if litigation occurs.

Professional liability insurance

Professional liability (also called errors and omissions or E&O) covers claims related to mistakes, negligence, or failure to deliver promised services. 

Omissions insurance is particularly important for industries like IT consulting and real estate. It’s essential for any business that provides professional advice or services.

• IT consultants: $60–$120 monthly
• Real estate agents: $40–$80 monthly
• Accountants: $80–$150 monthly
• Architects/engineers: $120–$250 monthly
• Medical professionals: $200–$600+ monthly

Higher premiums reflect industries where mistakes can cause significant financial damage to clients. 

For example, an architect's error could result in costly structural issues, while a typographical error from a virtual assistant might have minimal financial impact.

Businesses that provide professional services online, bundling cyber liability insurance with other types of insurance can be a cost-effective solution.

Workers' compensation insurance

Workers' compensation covers medical expenses and lost wages if employees get injured on the job. It's legally required in most states once you have employees.

• Office-based businesses: $0.25–$0.50 per $100 of payroll
• Retail: $1–$2 per $100 of payroll
• Construction: $5–$15 per $100 of payroll

A small office with five employees earning $50,000 each might pay $625–$1,250 annually, while a construction company with the same payroll could pay $12,500–$37,500.

Some states, like California and Washington, have significantly higher workers' comp rates than states like Ohio or Utah. For businesses with employees in multiple states, this can make insurance planning a bit of a headache.

Many states also offer discounts for implementing safety programs, which can reduce workers' comp premiums by 5–15%.

Commercial property insurance

Commercial property insurance covers your building, inventory, equipment, and furnishings against fire, theft, and other disasters. It's essential for any business with physical assets.

Property insurance rates depend on:

• Building value and age
• Construction type (frame, masonry, etc.)
• Fire protection systems and distance to fire station
• Location (flood zones, crime rates, natural disaster risks)
• Contents value and type
• Security measures (alarms, sprinklers, surveillance)

Commercial property insurance costs for small businesses depend on building value, location, and security measures.

Monthly costs typically range from $60–$150 ($720–$1,800 annually) for businesses with moderate property values.

Property in coastal areas prone to hurricanes or regions with earthquake risk face substantially higher premiums. For example, property insurance in parts of Florida can cost 2-3 times more than similar coverage in the Midwest due to hurricane risk.

Business owner's policy (BOP)

A BOP bundles general liability and property coverage, and often at a lower rate, too. It's an efficient way to manage small business insurance costs if you're looking for an all-in-one solution.

The BOP provides essential financial protection against operational disruptions and common risks, ensuring that businesses can maintain their operating costs and protect against lawsuits and property losses.

How much does a $1 million dollar business insurance policy cost?

A business owner's policy with $1 million in liability coverage typically costs $80–$200 monthly ($960–$2,400 annually) for small to medium-sized businesses. This represents savings of 10–20% compared to buying separate business insurance policies.

Many BOPs also include business interruption insurance, which covers lost income if your business must temporarily close due to a covered event. This coverage can be invaluable for cash-flow-dependent small businesses.

Factors that affect small business insurance prices

Let's dive into what drives your small business insurance rates, so you can find ways to reduce them.

Understanding the cost factors that influence insurance premiums can help businesses find ways to reduce their insurance costs.

Business size & revenue

Larger businesses with higher revenues face higher premiums because:

• More employees mean more workers' comp exposure.
• Higher sales volume increases liability exposure.
• More customers create more opportunities for claims.
• More valuable equipment and inventory increases property insurance needs.

Each additional employee typically increases your insurance costs by 5–10%. Similarly, businesses with annual revenue over $1 million often see premium increases of 15–25% compared to those under $500,000.

Industry risk level

Insurance companies classify businesses by risk level, with higher-risk industries facing higher insurance costs. A construction company pays more than a consulting firm because the likelihood of injury, property damage, and lawsuits is much higher.

Insurance companies use classification codes (like NAICS or SIC codes) to categorize businesses. Sometimes, small adjustments to your business description can shift your classification and reduce premiums without misrepresenting your operations.

Coverage limits & deductibles

Higher policy limits increase premiums, while higher deductibles lower them:

• Doubling your coverage limit typically increases premiums by 25–50%.
• Increasing your deductible from $500 to $2,500 might reduce premiums by 10–20%.

Find your comfort zone by balancing affordable premiums against your ability to pay the deductible if a claim occurs. For businesses with stable cash flow, higher deductibles often make financial sense.

Location & state regulations

Your business location always affects your small business insurance cost. Generally:

• States with stricter regulations and higher claim rates have higher premiums.
• Urban areas have higher rates than rural locations.
• Natural disaster risks (earthquakes, hurricanes, floods) increase property insurance costs.
• Local building codes affect reconstruction costs for property insurance.

For example, identical businesses might pay 30–40% more for insurance in California than in Idaho due to regulatory differences and litigation environments.

Claims history & credit score

Like personal insurance, business insurance costs increase if you've filed claims in the past. Most insurers also consider business credit scores when setting rates, with higher scores resulting in lower premiums.

A single claim can increase premiums by 10–40% for several years. This is why many businesses choose to pay small claims out of pocket rather than filing with their insurer. Implementing a risk management plan can help you maintain a clean claims history, which is appealing for insurers.

How to get the best small business insurance rates

Don't overpay for business insurance coverage. These strategies can help you save without sacrificing protection.

Bundle policies for lower rates (e.g., BOP packages).

Combining multiple policies with one insurer typically saves 10–15% on small business insurance prices, helping you save money. Business owner's policies already bundle coverage, but you can often add workers' comp, commercial auto, or cyber liability for additional discounts.

Some insurers offer industry-specific bundles designed for particular business types like restaurants, contractors, or professional services firms, which can provide both cost savings and more tailored coverage.

Choose the right coverage level — avoid overpaying.

Review your business insurance annually to ensure they match your current needs:

• Adjust property coverage as equipment ages or as you acquire new assets.
• Scale liability coverage with your revenue growth.
• Consider higher deductibles if your cash flow is stable.
• Eliminate coverage for risks you no longer face.

Paying for excessive coverage wastes money that could be invested back into your business. 

For example, maintaining high-value inventory coverage during slow seasons when stock levels are lower unnecessarily increases your insurance costs.

Comparing quotes from different providers

How much business insurance costs depends on your insurance company, even for identical coverage. Get quotes from at least three insurers to find the best rates.

Online insurance marketplaces make comparison shopping easier by letting you review multiple quotes at once. However, be careful to compare policies with similar coverage limits, deductibles, and exclusions.

Working with an insurance broker for the best deals

Independent insurance brokers can save you time and money on your business insurance estimate by comparing rates across multiple small business insurance companies. They can also help by:

• Identifying industry-specific discounts.
• Advising on appropriate coverage levels.
• Helping bundle policies effectively.
• Explaining complex coverage options in plain language.

Good brokers earn their keep by finding coverage that costs less than you'd pay going direct. Unlike captive agents who represent a single insurer, independent brokers can shop across multiple companies to find the best combination of coverage and price.

Protecting your business without breaking the bank

While managing small business insurance costs is important, don't forget that managing your team effectively is just as important for your bottom line. 

Homebase helps you hire, schedule, track time, pay your team, and stay compliant—all in one simple app.

Try Homebase free today and see why 100,000+ small businesses count on us.

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Small business insurance cost FAQs

How much does a small business spend on insurance?

The average small business spends 1-3% of revenue on insurance. A business with $500,000 in annual revenue typically spends $5,000–$15,000 on comprehensive coverage. 

However, how much insurance costs for a small business varies widely based on industry, location, size, and claims history.

Sole proprietors and micro-businesses often spend closer to 1% of revenue, while higher-risk operations like construction companies might spend 5% or more.

How much does insurance cost for a small LLC?

Typically, these businesses pay $500–$1,000 annually for basic general liability coverage. Multi-member LLCs with employees should budget $2,000–$5,000 for comprehensive protection including liability, property, and workers' comp.

LLCs in professional service industries often need to add professional liability coverage, increasing their total insurance costs by $1,000–$3,000 annually. 

LLCs that operate vehicles should also consider commercial auto insurance to meet state regulations and protect against vehicle-related risks.

How much does a $1 million dollar business insurance policy cost?

A $1 million general liability policy costs approximately $500–$1,500 annually for most small businesses. Professional liability at the same limit typically costs $1,000–$3,000 depending on your industry.

Most commercial leases and client contracts require at least $1 million in liability coverage, making this a common minimum threshold for many businesses.

A general liability insurance policy is often the first and least expensive type of insurance a small business owner should acquire.

How much does $100,000 liability insurance cost?

Basic $100,000 liability coverage costs $200–$400 annually for low-risk businesses. However, since many small claims exceed $100,000, most financial advisors recommend limits of at least $500,000 to $1 million.

The cost difference between $100,000 and $1 million in coverage is often much smaller than you might expect — typically only 30–50% more for 10 times the protection.

How much does liability insurance cost for small businesses with no employees?

Solo entrepreneurs typically pay $300–$600 annually for general liability coverage. Without employee-related risks, these businesses avoid workers' compensation requirements in most states, substantially reducing their overall insurance costs.