What Is the Average Cost of Small Business Insurance? (2023 Rates) 

Thang Truong
Thang Truong
Updated on:

Small business insurance is a vital investment for companies of all sizes. The average cost of small business insurance, however, can vary depending on the size and type of business, the industry, and the state or region where the company is located.

One recent study found that the average cost of small business insurance was $46 per month. However, this figure varied significantly depending on several factors.

Small businesses should shop around for the best rates when looking for insurance. There are a number of insurers who offer policies specifically for small businesses, and many of them offer discounts for bundling multiple policies together. By comparing rates and coverage, small businesses can find the policy that is right for them at a price they can afford.

How much is the average cost of small business insurance? 

The average cost of small business insurance is $46 per month or $552 per year. This is only for a general liability insurance policy, which is the most essential insurance policy for any small business. 

Small business insurance may need several insurance coverages. Below are the average costs of different insurance coverages: 

Small business insurance coverages Average costs 
General liability insurance $46 per month 
Professional liability insurance$36 per month 
Workers comp insurance$38 per month per employee
Business Owners Policy (BOP) $100 per month
Commercial property insurance $85 per month 
Commercial auto insurance$135 per month 
Cyber liability insurance $67 per month 

These are just the average costs. Your rates will be different. Be sure to shop around with a few companies or work with a top broker like Simply Busines, Smart Financial, or CoverWallet to compare several quotes online to find the cheapest one for your business. 

What affects the cost of small business insurance? 

Different insurers will offer different pricing for their business insurance. But then, most insurance companies will consider the following factors when they determine your quotes:

Your business’ s specific industry 

Insurance companies consider certain occupations inherently hazardous than others. Ideally, the more risk your occupation has, the more you will pay to insure your company.

This is one of the reasons why a mechanic or manufacturing company might pay more than a florist or home-based retail store, even if they are buying the same policy. More so, when you buy worker’s comp insurance, the insurer might be interested in the job functions of all your employees in calculating your premiums. 

For example, companies in the construction industry paid an average of $3,547 per year, while those in health care companies of the same size paid only $672 per year for a general liability insurance policy. 


Insurance premiums might differ depending on where your company operates. For examples, in general, companies in states such as Texas and Florida paid less than those in states such as New York and Massachusetts.

This is especially true for workers’ compensation insurance because state laws determine everything from coverage amounts to how you must obtain the policy.

Commercial auto insurance costs are also affected by location. Like worker’s comp, state governments also have minimum requirements that you must meet in terms of commercial auto insurance. Even then, premiums for commercial auto are usually higher in cities and locations with a high rate of accidents and claims.

Commercial property and liability insurance might also vary by state and zip code. Rural locations, for example, may have higher property rates than metropolitan areas. One factor contributing to this is that fire stations and fire hydrants are more difficult to reach in rural areas. 

Similarly, a store in a city may have to pay extra for liability insurance. The higher cost comes from the fact that there are usually more people in cities than in rural areas. More people on your property means more risk. 

The number of employees and your business’s payroll 

The cost of your company insurance is directly proportional to the number of workers you have. The reason is that increased staff means more chances of injury, incident, or accident.

So, if you have a large company, you should expect to spend more on business insurance than smaller companies with few or no employees. Furthermore, firms with no employees may be excluded from state workers’ compensation laws. That way, they can save some money on business insurance.

For example, for businesses with fewer than 10 employees, the average cost of general liability insurance is just $478 per year, while businesses with more than 100 employees paid an average of $3,096 per year

Your yearly payroll is the main factor determining how much you pay for worker’s comp insurance. At the moment, the average cost of worker’s compensation is between $0.8 and $2.5 for every $100 salary per month.

That means, if your company’s monthly payroll is about $1,000 per month, you could be paying up to $22.5 per month. However, if the monthly salary is about $2,000, you could be paying as much as $45 per month for workers’ comp insurance. 


Insurers also use your revenue to assess risk in terms of business insurance. Small businesses frequently pay less for insurance coverage compared to bigger corporations. This is because small businesses handle fewer risks. 

The higher the revenue, the higher the premiums that a company will likely pay for its business insurance policy. This is because insurance companies see businesses with higher revenue as being more likely to file a claim. As such, they charge these companies more for coverage in order to offset the risk of potential claims.

Previous claims

Someone once said history is a good predictor of the future. The same goes for insurance companies; a business with a long history of many insurance claims is risky to insure. Such a firm is either too dangerous, or the company does not take risk-mitigation measures seriously.


A small business may need several coverages. There are a few different types of small business insurance policies available, and each offers different levels of protection. Some policies may only cover accidents or property damage, while others may also offer liability coverage in case a customer or employee is injured. It is important to understand what is covered by the policy before purchasing it to make sure that it meets the needs of the business.

Each coverage has different costs. The more coverage you have the more you have to pay. Some coverages are legally required such as commercial auto insurance and workers comp insurance. Other coverages may not be legally required such as general liability insurance or professional liability insurance but are still necessary to have. 

The policy’s details: coverage limits and deductibles 

A coverage limit is a term insurers use to describe the maximum amount you will get from your insurer if a covered peril happens. However, the deductible is the amount you will pay out of pocket to cover the peril. Usually, the higher coverage limit means you will pay more for your coverage. However, choosing a low deductible will raise the cost of your commercial insurance coverage.

A commercial vehicle insurance policy with comprehensive coverage, for example, will cost more than one with the state’s minimal liability coverage. Similarly, a general liability policy with a $2 million aggregate maximum will have a higher premium than one with a $1 million limit. 

The average insurance cost for small businesses in different industries 

Small businesses of similar sizes in different industries will pay different amounts for the same policy. For example, for a $1M/$3M general liability insurance policy, a construction company may pay up to $2,627 per year while a dental office only pays $728 per year. Below are some estimated average costs of a general liability insurance policy: 

Different industries Average costs of a $1M/$3M general liability insurance policy 
Accounting firms $512 per year 
Dental office $728 per year 
Bakery business $1,317 per year 
Landscaping contracting business $1,457 per year 
Handyman business $1,692 per year 
Restaurants $2,038 per year
Construction business $2,627 per year 

How much is the average cost of a $1M business liability insurance policy? 

The average cost of a $1M business liability insurance policy is $72 per month or $864 per year. Most small businesses pay between $20 to $300 per month for their business liability insurance. This is a wide range because small business insurance cost varies depending on several factors that we discussed above. 

How to calculate small business insurance costs? 

There isn’t an online calculator to calculate the cost of small business insurance. However, you can estimate your small business insurance costs by figuring out the coverages you need to protect your business, and then use our other articles on these coverages to estimate the total cost for your business insurance needs. 

Below is a simple guideline to figure out the coverages you’ll need: 

  • If your business interacts with your customers or clients at your workplace or your customers’ house, you will need to have general liability insurance. This is the most essential business insurance coverage that most small businesses would need. General liability insurance cost is around $300 to $5,000 a year. 
  • If you hire part-time or full-time employees, you will need workers comp insurance. This is legally required by all 50 states and DC, except Texas. 
  • You will need commercial auto insurance if you drive a vehicle for business purposes. It is also legally required in all 50 states and DC. 
  • If your business provides advice and services to clients, you will need to have professional liability insurance, or also called E&O insurance or malpractice insurance 
  • If your business receive, handle, and store customers’ sensitive information such as personal information like date of birth, social security number, address, etc. or financial data such as credit card details, you will need to have cyber liability insurance
  • If your business operates in a physical location, an office or a warehouse, whether you rent or own the location, you will need to have commercial property insurance. It is required by your landlord or your mortgage lender. 

After your estimate the cost of each coverage you will need, you can add them up together to calculate how much you would need to pay for your small business insurance needs. 

How to find cheap small business insurance? 

Small business owners want to save as much money as they can on insurance without sacrificing coverage. How do you that?

Compare several quotes

One of the best ways to save money on insurance is to compare prices from at least two or three companies. You might be surprised at how much rates can vary for the same amount of insurance coverage from different companies.

Getting several quotes online from top digital brokers such as Simply Business, Smart Financial, CoverWallet, or InsurePro is a great way to find the cheapest quote for your business. 

  • Simply Business: Best for finding low-cost coverage
  • CoverWallet: Best for comparing several quotes from top-rated carriers
  • Smart Financial: Best if you prefer working with experienced agents
  • InsurePro: Best for short-term temporary coverage

Ask for discounts and special offers 

Remember to ask about discounts. If you buy more than one type of insurance, if you have a membership in a professional organization, or paying in full will often earn you a discount. It doesn’t even have to be business insurance. You can bundle home or auto insurance to get a discount if the company offers those types of policies. 

Consider increasing your deductible or decreasing coverage limits 

Increasing deductibles will reduce your premiums. However, you need to make sure you can cover the costs if you need to file a claim.

You want to buy enough coverage in case of a claim but buying too much is just a waste of money. Choose an amount that offers protection without over-insuring.  

Only get the coverages that your business needs 

There are several insurance coverages a small business might need, it depends on several factors. Make sure you only get the coverages your business needs. If you are unsure of the right coverages, you may want to consult with an experienced agent or broker. 

Make sure you promote safety in your workspace

Post a safety plan, encourage safe behaviors and don’t leave things lying on the floor for someone to trip over. 

Regardless of your business’s industry, always follow the best practices, encourage documentation, and conduct regular safety training programs for your employees to promote safety and regulation compliance.

Where to buy small business insurance? 

You have several options to purchase small business insurance for your business. To make things easier, the options are divided into three broad categories as follows:

Digital brokers

Digital brokers work like insuretech companies. However, they have more experience. These companies do not have their policies; instead, they assist businesses in connecting with their insurers so that they can purchase the policies of their choice. If you have never purchased a policy before, this is probably a good place to start. 

Examples you can use include:

  • Simply Business 
  • Smart Financial 
  • CoverWallet
  • Tivly 
  • InsurePro

Here is a sample quote for a marketing consulting firm with 2 full-time employees obtained from Simply Business. 


  • Fast online quotes, in most cases
  • Companies that have issues finding policies may find something here.


  • They only offer policies from their partners
  • You have to file a claim directly with the carrier.

Traditional insurance companies

As the name suggests, companies in this category are those that come to mind when people think of insurance. The majority of them have the experience and financial stability to provide you with superior coverage options. They cover the majority of businesses, including those in the riskiest industries like construction.

Examples of companies in this category include:

  • Chubb 
  • Hiscox
  • Liberty Mutual
  • The Hartford

The following picture is a sample quote for an IT consulting firm with 2 full-time employees obtained from Chubb insurance.


  • You get reliable coverage for almost any industry.
  • Most of them have extensive experience to give you the best coverage.
  • They have other policies that you can buy and bundle for discounts   


  • The policies from these companies might be expensive
  • These companies don’t usually ofer quotes online. You are more likely to work with their agents 

Learn more at how and where to get and compare general liability insurance quotes

Insuretech companies

These businesses are new to the industry. These are tech companies that aim to make insurance affordable and straightforward. They assist businesses in locating the most appropriate and cost-effective quotes for their operations online. They do this using the latest technology tools like artificial intelligence. 


  • Fast quotes that take less than 10 minutes 
  • All operations are done online via the internet 
  • Easy to use platforms.  


  • These companies do not offer policies for risky industries like construction or handyman or trucking businesses. 

Examples include:

  • NEXT 
  • Thimble
  • Embroker

Here is a sample quote for a cleaning firm with 2 full-time employees from NEXT: 

Different small business insurance types and their coverage

There are several insurance types to provide coverage for small businesses. Below are a few main types that you should know: 

General liability insurance 

General liability insurance protects businesses from financial losses that could occur as the result of an accident or injury on the company’s property or at the business’s customer locations due to the business’s operations. This type of insurance can also provide protection against claims of slander or libel.

General liability insurance can also include product liability coverage in some cases. However, manufacturers or retail companies may need to have a robust standalone product general liability policy since they are exposed to higher risk of product liability. 

Product liability insurance 

Product liability insurance is a type of insurance that covers businesses in the event that a product they produce causes harm to a consumer. This type of insurance is important for businesses that produce and sell products to consumers such as manufacturers, retailers, or wholesalers, as it can help protect them from costly lawsuits.

Businesses manufacturing and distributing baby, or food, or personal care products often need this policy. 

Commercial property insurance 

Commercial property insurance is a type of insurance that helps protect businesses from losses resulting from damage to or destruction of their properties. This type of insurance is typically purchased by businesses that own or lease commercial property, such as office buildings, retail stores, and factories.

Business Owners Policy (BOP) 

BOP insurance is a type of business insurance that provides coverage for property damage, loss of income, and liability. BOP is typically offered to small businesses and is a less expensive alternative to purchasing property, liability, and income protection separately.

Workers comp insurance 

Workers comp insurance covers medical expenses and lost wages for employees who are injured or become ill as a result of their job. Most employers in the United States are required to carry workers comp insurance, but there are a few exceptions. If you are self-employed or work for a small company, you may need to purchase workers comp insurance yourself.

Commercial auto insurance 

Commercial auto insurance is a type of insurance that covers businesses that use vehicles for commercial purposes. This type of insurance is important for businesses that rely on their vehicles to make money, such as delivery services and car rental companies. Commercial auto insurance can also cover vehicles used for business purposes in personal lives, such as when a business owner uses their vehicle to make deliveries on the side.

Professional liability insurance 

Professional liability insurance covers professionals for claims made against them for wrongful acts or negligence while performing their professional duties. This type of insurance is important for professionals who may be held liable for damages that result from their actions or advice. Professionals who may need this type of insurance include doctors, lawyers, and accountants.

Cyber liability insurance 

Cyber Liability insurance is a type of insurance that covers businesses against losses incurred from cyber attacks. This type of insurance is important for businesses because it can help protect them from the costs associated with data breaches, such as the costs of notifying customers, repairing damage to systems, and defending against lawsuits. Cyber Liability insurance is also important for businesses because it can help protect them from the costs associated with ransomware attacks, such as the costs of decrypting files and paying ransom.

Commercial umbrella insurance 

Commercial umbrella insurance is a type of insurance policy that provides additional coverage above and beyond the limits of other insurance policies that a business may have. This type of policy is important for businesses that have a lot of assets that they need to protect, as it can provide added protection in the event that something happens and the business is sued.

Thang Truong

Thang Truong covers small business insurance and small business success at BravoPolicy. He is a licensed P&C insurance agent. Previously, he held product leadership positions at realtor.com, Capital One, NerdWallet, and Mulberry Technology. He holds a MBA degree from UC Berkeley - Haas School of Business.

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