Small Businesses Face Insurance Premium Spike Amid Economic Uncertainty

Across the United States, small business owners are being hit with higher insurance premiums, adding to an already challenging economic landscape shaped by inflation, rising wages, and slowing consumer demand. From neighborhood restaurants to tech startups, the cost of risk protection is climbing—forcing entrepreneurs to make difficult decisions about their operations.

According to a June 2025 report by the American Small Business Coalition, the average commercial insurance premium for small businesses rose by nearly 12% in the past year. Key drivers include extreme weather losses, cybercrime, and increasing legal claims related to employee safety and data privacy.

«Insurance used to be a set-it-and-forget-it item in our budget,» says Jamie Liu, owner of a small chain of nail salons in the Midwest. «Now it’s one of our top three monthly expenses, and it’s still not clear if we’re covered for everything we might face.»

The rising complexity of small business insurance has made it harder for owners to understand what they’re buying. Many policies bundle general liability, property coverage, and workers’ comp—but key exclusions often go unnoticed until it’s too late. For example, some policies no longer cover pandemic-related losses or cyberattacks unless specifically requested and priced separately.

Insurance brokers and consultants are urging small businesses to take a more proactive approach. This includes conducting regular risk audits, reviewing policies annually, and exploring safety upgrades that may qualify for discounts. For example, installing modern fire suppression systems or implementing staff safety training can result in lower premiums.

Cyber coverage, in particular, is becoming more important. In 2025, over 40% of data breach incidents targeted companies with fewer than 100 employees. Yet fewer than 30% of those companies had any form of cyber insurance in place. The result is not just financial loss, but reputational damage that can take years to recover from.

To help business owners navigate the shifting landscape, some state governments are expanding access to advisory services. California and New York have both introduced grants for businesses that complete certified risk training programs or invest in green infrastructure.

Still, many entrepreneurs feel left behind. “We’re trying to grow, hire, and stay afloat,» says Tony Delgado, who runs a construction business in Denver. «But every year our insurance goes up, and we’re forced to cut costs somewhere else—usually staffing.»

As the U.S. heads into another uncertain fiscal quarter, industry experts say small businesses need to treat insurance not just as a cost—but as a core component of survival. With better knowledge, strategy, and guidance, the burden of small business insurance may become more manageable.