How Much Does Business Insurance Cost?

Annual sales, payroll and prior claims all factor into your insurance premium.

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Insurance is a necessity for most small businesses, but the cost of coverage varies widely from one company to the next depending on the size and nature of your business.

A small firm with 10 employees and a fleet of vehicles simply has different business insurance needs than a solopreneur with no employees or physical office space. And those differing needs come with differing premiums.

Keep reading to learn what types of coverage are available and what factors go into your rate. We’ll also dig into the average cost of business insurance to help establish a baseline as you shop for coverage.

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Factors that affect the cost of your small-business insurance

With most types of business insurance, your rate comes down to a few key factors:


Some professions are inherently riskier than others. And higher risk equals higher premiums. That’s one reason why a construction or manufacturing company will pay more for the same type of coverage as an advertising firm or home-based e-commerce business.

Workers’ compensation insurance gets even more specific, drilling down to the job function of each employee to determine the cost of coverage for a given business.


Insurance rates can vary based on where your business operates. This is especially true with workers’ compensation insurance since state laws can dictate everything from coverage levels to how you purchase a policy.

Location also plays a role in commercial auto insurance costs. Premiums are typically higher in cities and areas that have a higher-than-average claim rate.


The number of employees you have directly correlates to the cost of your business insurance. The reason? More employees equals more opportunity for injury, incident or accident.

Larger businesses can expect to pay more for business insurance than a company with few or no employees. And businesses with no employees may be exempt from state workers’ compensation mandates, saving them costly business insurance coverage.

Payroll and sales

The cost of workers’ compensation insurance is directly correlated to the size of your annual payroll. The average for this coverage is typically 70 cents to $2.25 per month, per $100 of payroll, according to a 2020 report from the National Academy of Social Insurance.

Insurers also use revenue as a measuring stick for risk for general liability insurance. The logic: The more customers you have, the better chance one will be injured or aggrieved in some way.

Prior claims

A history of business insurance claims is a red flag for insurance companies. It signals your business is either inherently risky or that your company is not taking proper steps to mitigate risk.

Coverage and deductibles

How much your policy will pay out, and under what circumstances, affects the overall cost of your business insurance.

A commercial auto insurance policy with comprehensive coverage, for example, will cost more than one with the minimum amount of liability coverage required by the state. Likewise, a general liability policy with an aggregate limit of $2 million will have a higher premium than one with a $1 million limit.

Opting for a low deductible will also increase the cost of your business insurance policy.

Average cost of small-business insurance

Business insurance costs will vary from one insurer to the next based on the factors noted above. Some insurance providers are more upfront with average costs, which gives you a figure to index against as you shop for coverage.

Here are the average costs of business insurance in 2020, as reported by Progressive.

Types of coverage

Average monthly cost

General liability


Professional liability


Commercial auto insurance


Workers’ compensation


Business owner's policy


It’s best to get multiple business insurance quotes for any coverage you need and always inquire about discounts (more on that below). Some insurance companies offer quick, easy online quotes while others require you to talk with a local agent or broker to get pricing details.
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How to lower the cost of your business insurance

The best way to save money on your business insurance is to have very few claims made against your policy.

Insurance companies reward businesses that are diligent about worker and customer safety but will ding those with a history of accidents, workplace injuries or negligence lawsuits.

You can often earn discounts on your business insurance if you take the following steps:

  • Bundle your coverage. Most insurance providers offer discounts if you combine multiple types of business insurance into one policy, such as a business owner's policy.

  • Prepay your annual premium. Your insurer may offer a discount if you pay annually rather than monthly.

  • Adjust your deductibles. Typically a higher deductible equals a lower premium.

  • Invest in workplace safety. Minimize your risk profile by offering formal safety training and keeping up with routine facility maintenance.