Breaking the bank: Why small business insurance costs keep climbing in 2025

Breaking the bank: Why small business insurance costs keep climbing in 2025

In 2025, insurance is a major expense for small business owners. Premiums are climbing with no sign of easing up.

Sharp increases in climate events, cyber threats, and general costs all play a role. It's no longer just about covering a storefront or work van because risks are changing fast, and so is the price of protection.

For the majority of business owners, insurance has shifted from a safeguard to a financial burden. What's driving these higher prices? And what steps can business owners take?

CheapInsurance.com reviewed data, expert insights, and trends to explore why this coverage is getting pricier, and how small businesses can manage rising costs.

Higher premiums: There's more than inflation at play

Insurance rates for businesses have risen in nearly every industry. Although growth slowed in early 2025, rates remain painful. A recent Marsh report noted global pricing eased 3% in Q1 and 4% in Q2, but U.S. liability coverage stayed stubbornly high.

Here's what small businesses are paying on average each month:

* General liability: about $42

* Business owner's policy (BOP): about $57

* Cyber insurance: up to $145

* Workers' compensation: about $45

Your actual cost may vary based on location, business size, industry, and claims history.

Why prices keep going up

Insurance doesn't cost more just because of inflation. These three forces are reshaping the market.

Climate disasters hit more often and harder

The U.S. has seen 27 incidents causing over $180 billion in losses in 2024, according to the National Centers for Environmental Information. Insurers are raising rates, restricting coverage, or leaving high-risk regions. A National Bureau of Economic Research paper found that from 2020 to 2023, home insurance rates across the country increased by an average of 13%. Businesses in coastal or wildfire zones are seeing premiums spike much more dramatically: Colorado's Department of Regulatory Agencies reported that from 2019 to 2022, premiums shot up 51%.

Theft

Nearly 90% of small businesses report theft, according to a survey commissioned by Forbes Advisor and conducted by OnePoll in 2023. According to the Association of Certified Fraud Examiners' Occupational Fraud 2024: A Report To The Nations, the total cost of occupational theft cost businesses $3.1 billion worldwide. These losses push premiums even higher.

Cybercrime is a growing threat

The FBI reports (in its latest internet crimes report) that ransomware attacks accounted for a combined loss of $12,473,156 in 2024 alone. A single breach now costs nearly $4.4 million on average. Most small firms lack strong security, making them easy targets.

How business owners can respond

Insurers are adjusting coverage and pricing, so business owners need to adapt.

Bundle coverage

Combine property and liability at a lower rate. Consider raising your deductible to lower monthly premiums, but make sure you can pay if the worst happens.

Reduce your risk profile

Install better physical security. Invest in cyber protection tools. Create safety procedures. Many insurers reward proactive risk reduction.

Shop around

Independent agents can compare quotes from multiple insurers. Industry-specific insurers often offer better fits at lower prices.

What coverage should you carry?

Most businesses should start with these essentials:

* General liability insurance

* Commercial property insurance

* Workers' compensation

* Cyber liability insurance

Beyond these, tailor coverage to your work. Retailers may need crime insurance. Consultants often carry errors and omissions (E&O) policies. Manufacturers should consider product liability.

Pick adequate coverage limits and deductibles. Too little leaves you exposed, too much means overpaying. High-risk or fast-growing businesses may choose an umbrella policy for extra protection.

Looking ahead

There's flat-rate relief on the horizon. Experts say the sharp increases of recent years may begin to level off. Rates remain high, but they might grow more slowly.

New policy types are emerging. Businesses using AI tools may need AI liability insurance. Climate resilience programs aim to help companies recover from weather damage. Supply chain coverage is gaining traction amid uncertain logistics.

Insurers are also becoming more efficient. Expect more digital tools, better analytics, and built-in options that make managing coverage easier.

Managing rising insurance costs

You can't stop rising prices or natural threats, but you can manage risk and budget smartly:

* Check your coverage annually to match your business.

* Add cybersecurity tools and safety measures.

* Work with an agent who understands your needs.

* Include premium increases in your yearly planning.

Insurance isn't just protection; it's part of a smart business strategy in a tough economy.

This story was produced by CheapInsurance.com and reviewed and distributed by Stacker.