Start with the two lists
Before comparing any quote, write down two things.
List one: what the law requires. Workers' compensation once you have employees, which is mandatory in every state except Texas, where private-employer coverage is elective. Commercial auto liability for business-titled vehicles under state financial responsibility law. Industry-specific requirements — surety bonds for contractors, malpractice coverage for licensed clinicians in some states, specific bonds for freight brokers.
List two: what your contracts require. This is what actually drives most purchases, and it is already written down somewhere you have signed. Commercial leases specify general liability limits and require the landlord as additional insured. Client master service agreements specify errors and omissions and cyber limits, waivers of subrogation, and primary and non-contributory wording. Lenders require property coverage. General contractors require subcontractors to carry general liability, auto and workers comp before they set foot on site.
Read your lease and your three largest client contracts before you shop. Binding to those specifications the first time is far cheaper than mid-term endorsements bought under deadline pressure.
The core policies, in the order most businesses need them
General liability covers third-party bodily injury, property damage, and personal and advertising injury. The customer who trips, the client's floor your crew damages. The market default is $1 million per occurrence with a $2 million aggregate. On a standard form, defense costs are usually paid in addition to the limit, which matters more than a small premium difference.
Professional liability, or errors and omissions, covers claims that your advice or work product caused a client a financial loss. General liability explicitly excludes professional services, so for consultants, agencies, developers, bookkeepers and designers this is the more important of the two.
A business owner's policy (BOP) bundles general liability, commercial property and business interruption for small, low-hazard businesses, usually cheaper than buying the parts separately. The undervalued component is business interruption, which replaces lost income while you cannot operate after a covered property loss. Check the indemnity period, and note that most policies require actual physical damage to trigger.
Workers' compensation arrives with your first employee. See the thresholds below.
Commercial auto, or at minimum hired and non-owned auto, arrives the moment anyone drives for the business — including an employee running errands in their own car.
Cyber liability arrives the moment you hold customer data, take card payments, or depend on systems to operate.
Workers comp thresholds, and the Texas exception
Most states require workers' compensation from the first employee. A minority set higher headcount triggers: two (Virginia), three (Arkansas, Georgia, New Mexico, North Carolina), four (Florida, South Carolina) and five (Alabama, Mississippi, Missouri, and for certain employers Tennessee).
Texas is the only state where private-employer coverage is elective. A Texas non-subscriber must notify the state and its employees, and gives up the common-law defenses of contributory negligence, assumption of risk and the fellow-servant rule. Many non-subscribers therefore buy an alternative occupational injury plan plus employers liability coverage — which is not obviously cheaper than simply subscribing.
Two traps. First, owner and officer treatment varies: sole proprietors, partners and LLC members are commonly excluded by default and may elect inclusion, which adds their payroll to the premium. Second, independent contractor status is determined by state tests, not by what the contract calls the relationship — and uninsured subcontractors are routinely reclassified as your employees at audit, producing a bill you did not expect. Collect a current certificate from every subcontractor, every time.
Because these rules change, verify your own state's current requirement directly with its workers' compensation agency.
The claims-made trap
This is the most expensive thing a small business owner can misunderstand, and it applies to professional liability, cyber, directors and officers, and employment practices coverage.
General liability is occurrence-based: it covers incidents that happen during the policy period, whenever the claim arrives — even years after the policy expired.
These other policies are claims-made: they cover claims first made against you during the policy period, and only for work performed on or after the policy's retroactive date.
Three rules follow:
- Your retroactive date is an asset. If you have been continuously insured since 2019, it should still read 2019. A new insurer that resets it to the current year to cut the premium has just uninsured every year of past work. Check it at every renewal and every carrier change.
- Gaps are permanent. Let the policy lapse for a month and you generally cannot buy coverage back for work done before the gap.
- Ending the policy ends the protection. When you close, sell or retire, claims arriving afterward have nowhere to go unless you buy tail coverage — an extended reporting period, typically priced at 100% to 300% of the expiring annual premium, and usually only purchasable within a short window after expiry.
If you are selling the business or leaving a partnership, settle in writing who buys the tail before closing.
What it costs, honestly
There is no authoritative national average for small business insurance the way NAIC publishes one for personal auto, because exposures vary too much. The figures circulating online come from insurers and brokers reporting their own books, and they are order-of-magnitude guides rather than quotes.
Broker-reported benchmarks commonly place general liability for small low-hazard businesses around a median near $55 per month, and a business owner's policy around a median near $80 per month, with most small businesses landing between $500 and $2,000 a year for general liability or a basic BOP. Workers' compensation rates directly on payroll — commonly quoted in the range of roughly $0.57 to $1.62 per month per $100 of payroll depending on class code and state.
A roofing contractor, a restaurant and a medical practice will each pay multiples of those figures. Your actual price depends on class code, revenue, payroll, location, limits, deductible and five years of loss history — and any quote that does not ask for all of those is incomplete.
Remember too that most commercial policies are auditable. The premium at inception is an estimate against projected payroll or receipts; the insurer trues it up at year end. Understating revenue at binding does not save money, it defers a bill.
Frequently asked questions
Sources
Every figure above is drawn from the following publications. Links open on the publisher's own site.
- U.S. Small Business Administration — Get business insurance
- Texas Department of Insurance — Workers' compensation for employers
- U.S. Department of Labor — State workers' compensation officials
- FTC — Data breach response: a guide for business