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Written byLindsay Frankel
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Lindsay Frankel is a personal finance and insurance writer who’s been writing for Compare.com since 2023. Her work has been featured in publications such as Investopedia, LendingTree, The Balance, SFGate, Bankrate, and FinanceBuzz.
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Edited byNick Versaw
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Nick Versaw leads Compare.com's editorial department, where he and his team specialize in crafting helpful, easy-to-understand content about car insurance and other related topics. With nearly a decade of experience writing and editing insurance and personal finance articles, his work has helped readers discover substantial savings on necessary expenses, including insurance, transportation, health care, and more. As an award-winning writer, Nick has seen his work published in countless renowned publications, such as the Washington Post, Los Angeles Times, and U.S. News & World Report. He graduated with Latin honors from Virginia Commonwealth University, where he earned his Bachelor's Degree in Digital Journalism.
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In This Article
Whether your business sells snow cones, paints houses, or offers financial advice, you need business insurance to protect against lawsuits, property damage, natural disasters, and other mishaps. Depending on your business and its location, federal or state laws may also require you to carry certain business insurance coverages.[1]
Business insurance premiums vary by company, policy type, business size and location, and other factors. But many small businesses can qualify for cheap insurance coverage. Find out what you can expect to pay.
Key Takeaways
If you have employees, the federal government requires you to buy workers ’ compensation, unemployment, and disability insurance coverages.
Business insurers consider factors like your industry, business size, location, and other variables when calculating your premium.
You can get cheaper business coverage by choosing a high deductible, implementing risk management strategies, or shopping around for the best deal.
What Business Owners Can Expect to Pay for Insurance
Business insurance premiums vary depending on the coverage type and limits, the business type and location, and other factors.[2] Business insurance packages that include property coverage and workers’ compensation insurance tend to cost more than liability coverage alone. Premiums also differ from one insurance company to the next.
For example, Progressive charged an average premium of $66 per month for professional liability insurance and $118 per month for a business owners policy (BOP) in 2024.
How Policy Types Affect Business Insurance Costs
Insurers calculate premiums differently for each type of business insurance coverage. Your coverage choices, like the deductible and annual limits you choose, will also affect your business insurance cost.
State laws also play a role in the minimum premium — for example, some states have more robust workers’ compensation coverage requirements than others.
The table below shows the median monthly premium for different policy types from Progressive.
Policy Type  | Median Monthly Premium |
|---|---|
| General liability | $60 |
| Professional liability (E&O) | $42 |
| Business owners policy (BOP) | $67 |
| Workers’ compensation | $80 |
| Commercial property | N/A |
| Commercial auto | $219 |
| Cyber liability | Varies based on cybersecurity threats |
Many business owners find they need more than one type of small business insurance to provide the financial protection their business needs.
What Goes Into the Cost of Business Insurance?
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Business insurers consider several factors when determining insurance premiums:
Industry or profession: General liability and workers’ compensation coverage cost more for high-risk professions, like construction or manufacturing, than for low-risk businesses like accounting firms. But accounting firms may pay more for professional liability insurance, which covers different risks.
Business location: The location of your business operations can affect your premium in several ways. For example, state laws dictate minimum coverage requirements for some policy types, and local property values, theft rates, and natural disaster risks affect commercial property insurance costs.
Business size: The number of employees on your payroll directly affects the cost of workers’ compensation insurance. More employees, customers, or revenue also means greater exposure to risks, which requires more liability coverage and results in higher premiums.
Claims history: If you have a history of business insurance claims, you’ll likely pay more for coverage than an established business with no prior claims.
Coverage choices: The annual deductibles, coverage limits, and riders or add-ons you choose will affect the price of your business insurance policy.
For some policy types, insurers consider additional factors. For example, your employees’ driving records will factor into your commercial auto insurance premiums. And the value of your business assets will influence the cost of your commercial property insurance.
How insurers calculate premiums
During a process known as underwriting, insurers evaluate the likelihood that your business will file a claim in the future. They do this by reviewing factors like your business’s size, industry, and location.[3]
Insurers use information from your application and data from outside sources to determine whether your business is eligible for coverage. And they use that data to calculate your premium based on the assessed risk.
For example, a large personal security company will pay a high premium for general liability insurance because of the high risk of bodily injury inherent to the profession. On the other hand, a sole proprietor of graphic design services may pay a low premium for the same coverage, because their limited interaction with clients reduces the likelihood of a liability lawsuit.
But even similar businesses may pay vastly different premiums for the same coverage due to other risk factors. For example, a business that rents space in a low-cost industrial area will pay less for property coverage than a business that owns office space in New York City. A business with high annual revenue will likely pay more for business interruption insurance.
What’s more, each business insurance company calculates premiums differently. Choosing the right company can save you money.
Important Information
More than 36 million small businesses operate in the U.S. Small business owners employ nearly 46% of all American workers.
5 Ways to Get Cheaper Business Insurance
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Buy the right coverage: An insurance bundle like a business owners policy can save you money, but only if you need every coverage type it includes.[4] Don’t buy coverage you don’t need. For example, if you don’t have employees, you don’t need to buy workers’ comp coverage. And choose your policy limits carefully. It may be cheaper to choose lower limits and add a commercial umbrella policy as backup.
Choose a higher deductible: A business insurance deductible is the amount your business needs to cover before your insurer will pay a claim. Picking a high deductible lowers your premium. Just be sure you have enough cash reserves to cover it out of pocket.
Implement risk management measures: Ask your insurance company how you can manage risks. You may get a lower premium if you install safety equipment at your commercial property or implement safety protocols with your employees. These measures protect your business as well.
Take advantage of discounts: Ask if your business is eligible for discounts — some insurers offer savings for paying annually, bundling your coverages, or being a loyal customer.[5]
Compare business insurance quotes: Each insurer weighs your business information differently when calculating premiums. Comparing customized business insurance estimates will help you find the best deal.
Best Places to Compare Business Insurance Quotes
If you want to compare business insurance quotes, you have a few options.
Online marketplace
Online business insurance comparison platforms allow you to fill out one application and receive estimates from multiple business insurance companies.
Pros
Quick and easy application process
Side-by-side comparison
Quote and purchase online
Cons
Limited support for understanding your options
May lead to unwanted calls and emails
May not offer niche coverage types
Direct-to-business insurers
Some business insurance companies issue policies directly to small businesses. You should confirm the insurer is licensed in your state before providing information about your business.[6]
Pros
You can discuss your options with an agent
Opportunity to explore insurer’s educational content
Lower overhead for the insurer may mean cheaper rates for your business
Cons
May require a phone call with an insurance agent to complete
Must apply with each insurer separately
Options limited to only the products the insurer sells
Independent broker
An insurance broker can shop for the insurance coverage you need on your behalf. Make sure to verify the broker’s licensing info.[7]
Pros
A knowledgeable professional explains your options
Access to niche insurers that don’t sell direct
Broker serves you, not the insurance company
Cons
Typically requires a fee
Same-day purchase may not be possible
Involves a phone call
Business Insurance Cost FAQs
Business insurance coverage can be complex, especially for niche businesses with unique liability risks or insurance needs. If you still have questions, keep reading.
How much is insurance for a small business?
Small business insurance costs vary depending on the type, size, and location of the business, among other factors. For example, small businesses paid a median monthly premium of $67 for a business owners policy from Progressive.
How much is a $2 million business insurance policy?
Business insurance costs vary depending on the insurance company, policy type, industry risk, business location, and other factors. Small businesses commonly choose a general liability policy with a $1 million per occurrence and $2 million aggregate limit.
How much does $1 million in business liability insurance cost?
Because each business has varying needs and risk factors, the best way to find out how much you’ll pay for $1 million in coverage is to seek quotes from multiple companies. How much you pay for a small business insurance policy will depend on factors specific to your business, including the coverage limits and type of policies you choose.
What’s the cheapest type of business insurance?
The cheapest policy type for your business depends on the risks your business faces, but a stand-alone liability policy is among the cheapest coverage types. For example, the median cost for a professional liability policy from Progressive is $42 per month.
Does your state affect how much you pay?
Yes. State-minimum coverage requirements, environmental risks, property values, and the cost of litigation, materials, and labor are all factors that affect business insurance premiums and can vary from state to state.
Sources
- U.S. Small Business Administration. "Get business insurance."
- Insurance Information Institute (Triple-I). "Small Business Insurance Basics."
- Triple-I. "Company Operations, Commercial Underwriting."
- Triple-I. "How can I save money on my business insurance?."
- Progressive Commercial. "How much does business insurance cost?."
- Triple-I. "Shopping for business insurance."
- National Association of Insurance Agents. "How to Choose an Insurance Agent."
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Lindsay FrankelInsurance Writer
Lindsay Frankel is a personal finance and insurance writer who’s been writing for Compare.com since 2023. Her work has been featured in publications such as Investopedia, LendingTree, The Balance, SFGate, Bankrate, and FinanceBuzz.
Nick Versaw leads Compare.com's editorial department, where he and his team specialize in crafting helpful, easy-to-understand content about car insurance and other related topics. With nearly a decade of experience writing and editing insurance and personal finance articles, his work has helped readers discover substantial savings on necessary expenses, including insurance, transportation, health care, and more. As an award-winning writer, Nick has seen his work published in countless renowned publications, such as the Washington Post, Los Angeles Times, and U.S. News & World Report. He graduated with Latin honors from Virginia Commonwealth University, where he earned his Bachelor's Degree in Digital Journalism.
