micro insurance business plan

Insurance Business Plan Template

Written by Dave Lavinsky

Business Plan Outline

• Insurance Business Plan Home
• 1. Executive Summary
• 2. Company Overview
• 3. Industry Analysis
• 4. Customer Analysis
• 5. Competitive Analysis
• 6. Marketing Plan
• 7. Operations Plan
• 8. Management Team
• 9. Financial Plan

Insurance Agency Business Plan

You’ve come to the right place to create your own business plan.

We have helped over 100,000 entrepreneurs and business owners create business plans and many have used them to start or grow their insurance companies.

Essential Components of a Business Plan For an Insurance Agency

Below we describe what should be included in each section of a business plan for a successful insurance agency and links to a sample of each section:

• Executive Summary – In the Executive Summary, you will provide a high-level overview of your business plan. It should include your agency’s mission statement, as well as information on the products or services you offer, your target market, and your insurance agency’s goals and objectives.
• Company Overview – This section provides an in-depth company description, including information on your insurance agency’s history, ownership structure, and management team.
• Industry Analysis – Also called the Market Analysis, in this section, you will provide an overview of the industry in which your insurance agency will operate. You will discuss trends affecting the insurance industry, as well as your target market’s needs and buying habits.
• Customer Analysis – In this section, you will describe your target market and explain how you intend to reach them. You will also provide information on your customers’ needs and buying habits.
• Competitive Analysis – This section will provide an overview of your competition, including their strengths and weaknesses. It will also discuss your competitive advantage and how you intend to differentiate your insurance agency from the competition.
• Marketing Plan – In this section, you will detail your marketing strategy, including your advertising and promotion plans. You will also discuss your pricing strategy and how you intend to position your insurance agency in the market.
• Operations Plan – This section will provide an overview of your agency’s operations, including your office location, hours of operation, and staff. You will also discuss your business processes and procedures.
• Management Team – In this section, you will provide information on your insurance agency’s management team, including their experience and qualifications.
• Financial Plan – This section will detail your insurance agency’s financial statements, including your profit and loss statement, balance sheet, and cash flow statement. It will also include information on your funding requirements and how you intend to use the funds.

Next Section: Executive Summary >

Insurance Agency Business Plan FAQs

What is an insurance agency business plan.

An insurance agency business plan is a plan to start and/or grow your insurance business. Among other things, it outlines your business concept, identifies your target customers, presents your marketing plan and details your financial projections.

You can  easily complete your insurance agency business plan using our Insurance Agency Business Plan Template here .

What Are the Main Types of Insurance Companies?

There are a few types of insurance agencies. Most companies provide life and health insurance for individuals and/or households. There are also agencies that specialize strictly in auto and home insurance. Other agencies focus strictly on businesses and provide a variety of liability insurance products to protect their operations. 

What Are the Main Sources of Revenue and Expenses for an Insurance Agency Business?

The primary source of revenue for insurance agencies are the fees and commissions paid by the client for the insurance products they choose.

The key expenses for an insurance agency business are the cost of purchasing the insurance, licensing, permitting, and payroll for the office staff. Other expenses are the overhead expenses for the business office, utilities, website maintenance, and any marketing or advertising fees. 

How Do You Get Funding for Your Insurance Agency Business Plan?

Insurance agency businesses are most likely to receive funding from banks. Typically you will find a local bank and present your business plan to them. Other options for funding are outside investors, angel investors, and crowdfunding sources. This is true for a business plan for insurance agent or an insurance company business plan.

What are the Steps To Start an Insurance Business?

Starting an insurance business can be an exciting endeavor. Having a clear roadmap of the steps to start a business will help you stay focused on your goals and get started faster.

1. Develop An Insurance Business Plan - The first step in starting a business is to create a detailed insurance business plan that outlines all aspects of the venture. This should include potential market size and target customers, the services or products you will offer, pricing strategies and a detailed financial forecast.  

2. Choose Your Legal Structure - It's important to select an appropriate legal entity for your insurance business. This could be a limited liability company (LLC), corporation, partnership, or sole proprietorship. Each type has its own benefits and drawbacks so it’s important to do research and choose wisely so that your insurance business is in compliance with local laws.

3. Register Your Insurance Business - Once you have chosen a legal structure, the next step is to register your insurance business with the government or state where you’re operating from. This includes obtaining licenses and permits as required by federal, state, and local laws. 

4. Identify Financing Options - It’s likely that you’ll need some capital to start your insurance business, so take some time to identify what financing options are available such as bank loans, investor funding, grants, or crowdfunding platforms. 

5. Choose a Location - Whether you plan on operating out of a physical location or not, you should always have an idea of where you’ll be based should it become necessary in the future as well as what kind of space would be suitable for your operations. 

6. Hire Employees - There are several ways to find qualified employees including job boards like LinkedIn or Indeed as well as hiring agencies if needed – depending on what type of employees you need it might also be more effective to reach out directly through networking events. 

7. Acquire Necessary Insurance Equipment & Supplies - In order to start your insurance business, you'll need to purchase all of the necessary equipment and supplies to run a successful operation. 

8. Market & Promote Your Business - Once you have all the necessary pieces in place, it’s time to start promoting and marketing your insurance business. This includes creating a website, utilizing social media platforms like Facebook or Twitter, and having an effective Search Engine Optimization (SEO) strategy. You should also consider traditional marketing techniques such as radio or print advertising. 

Learn more about how to start a successful insurance business:

• How to Start an Insurance Business

Where Can I Get an Insurance Business Plan PDF?

You can download our free insurance business plan template PDF here . This is a sample insurance business plan template you can use in PDF format.

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How To Write an Insurance Company Business Plan + Template

Creating a business plan is essential for any business, but it can be especially helpful for insurance companies that want to improve their strategy and/or raise funding.

A well-crafted business plan not only outlines the vision for your company, but also documents a step-by-step roadmap of how you are going to accomplish it. In order to create an effective business plan, you must first understand the components that are essential to its success.

This article provides an overview of the key elements that every insurance company owner should include in their business plan.

Download the Ultimate Insurance Business Plan Template

What is an Insurance Company Business Plan?

An insurance company business plan is a formal written document that describes your company’s business strategy and its feasibility. It documents the reasons you will be successful, your areas of competitive advantage, and it includes information about your team members. Your business plan is a key document that will convince investors and lenders (if needed) that you are positioned to become a successful venture.

Why Write an Insurance Company Business Plan?

An insurance company business plan is required for banks and investors. The document is a clear and concise guide of your business idea and the steps you will take to make it profitable.

Entrepreneurs can also use this as a roadmap when starting their new company or venture, especially if they are inexperienced in starting a business.

Writing an Effective Insurance Company Business Plan

The following are the key components of a successful insurance company business plan:

Executive Summary

The executive summary of an insurance company business plan is a one to two page overview of your entire business plan. It should summarize the main points, which will be presented in full in the rest of your business plan.

• Start with a one-line description of your insurance company
• Provide a short summary of the key points in each section of your business plan, which includes information about your company’s management team, industry analysis, competitive analysis, and financial forecast among others.

Company Description

This section should include a brief history of your company. Include a short description of how your company started, and provide a timeline of milestones your company has achieved.

If you are just starting your insurance company , you may not have a long company history. Instead, you can include information about your professional experience in this industry and how and why you conceived your new venture. If you have worked for a similar company before or have been involved in an entrepreneurial venture before starting your insurance company firm, mention this.

You will also include information about your chosen insurance company business model and how, if applicable, it is different from other companies in your industry.

Industry Analysis

The industry or market analysis is an important component of an insurance company business plan. Conduct thorough market research to determine industry trends and document the size of your market. 

Questions to answer include:

• What part of the insurance industry are you targeting?
• How big is the market?
• What trends are happening in the industry right now (and if applicable, how do these trends support the success of your company)?

You should also include sources for the information you provide, such as published research reports and expert opinions.

Customer Analysis

This section should include a list of your target audience(s) with demographic and psychographic profiles (e.g., age, gender, income level, profession, job titles, interests). You will need to provide a profile of each customer segment separately, including their needs and wants.

For example, the customers of an insurance company may include individuals, families, small businesses, and large corporations.

You can include information about how your customers make the decision to buy from you as well as what keeps them buying from you.

Develop a strategy for targeting those customers who are most likely to buy from you, as well as those that might be influenced to buy your products or insurance company services with the right marketing.

Competitive Analysis

The competitive analysis helps you determine how your product or service will be different from competitors, and what your unique selling proposition (USP) might be that will set you apart in this industry.

For each competitor, list their strengths and weaknesses. Next, determine your areas of competitive differentiation and/or advantage; that is, in what ways are you different from and ideally better than your competitors.

Below are sample competitive advantages your insurance company may have:

• Specialized industry knowledge
• Proven track record
• Strong customer relationships
• Robust product offerings
• Innovative solutions

Marketing Plan

This part of the business plan is where you determine and document your marketing plan. . Your plan should be clearly laid out, including the following 4 Ps.

• Product/Service : Detail your product/service offerings here. Document their features and benefits.
• Price : Document your pricing strategy here. In addition to stating the prices for your products/services, mention how your pricing compares to your competition.
• Place : Where will your customers find you? What channels of distribution (e.g., partnerships) will you use to reach them if applicable?
• Promotion : How will you reach your target customers? For example, you may use social media, write blog posts, create an email marketing campaign, use pay-per-click advertising, launch a direct mail campaign. 
• Or, you may promote your insurance company business via word of mouth.

Operations Plan

This part of your insurance company business plan should include the following information:

• How will you deliver your product/service to customers? For example, will you do it in person or over the phone only?
• What infrastructure, equipment, and resources are needed to operate successfully? How can you meet those requirements within budget constraints?

The operations plan is where you also need to include your company’s business policies. You will want to establish policies related to everything from customer service to pricing, to the overall brand image you are trying to present.

Finally, and most importantly, in your Operations Plan, you will lay out the milestones your company hopes to achieve within the next five years. Create a chart that shows the key milestone(s) you hope to achieve each quarter for the next four quarters, and then each year for the following four years. Examples of milestones for an insurance company include reaching $X in sales. Other examples include expanding to a new geographic market, launching a new product or service line, or signing on new major customers.

Management Team

List your team members here including their names and titles, as well as their expertise and experience relevant to your specific insurance industry. Include brief biography sketches for each team member.

Particularly if you are seeking funding, the goal of this section is to convince investors and lenders that your team has the expertise and experience to execute on your plan. If you are missing key team members, document the roles and responsibilities you plan to hire for in the future.

Financial Plan

Here you will include a summary of your complete and detailed financial plan (your full financial projections go in the Appendix). 

This includes the following three financial statements:

Income Statement

Your income statement should include:

• Revenue : how much revenue you generate.
• Cost of Goods Sold : These are your direct costs associated with generating revenue. This includes labor costs, as well as the cost of any equipment and supplies used to deliver the product/service offering.
• Net Income (or loss) : Once expenses and revenue are totaled and deducted from each other, this is the net income or loss.

Sample Income Statement for a Startup Insurance Company

Balance Sheet

Include a balance sheet that shows your assets, liabilities, and equity. Your balance sheet should include:

• Assets : All of the things you own (including cash).
• Liabilities : This is what you owe against your company’s assets, such as accounts payable or loans.
• Equity : The worth of your business after all liabilities and assets are totaled and deducted from each other.

Sample Balance Sheet for a Startup Insurance Company

Cash Flow Statement

Include a cash flow statement showing how much cash comes in, how much cash goes out and a net cash flow for each year. The cash flow statement should include:

• Cash Flow From Operations
• Cash Flow From Investments
• Cash Flow From Financing

Below is a sample of a projected cash flow statement for a startup insurance company business.

Sample Cash Flow Statement for a Startup Insurance Company

You will also want to include an appendix section which will include:

• Your complete financial projections
• A complete list of your company’s business policies and procedures related to the rest of the business plan (marketing, operations, etc.)
• Any other documentation which supports what you included in the body of your business plan.

Writing a good business plan gives you the advantage of being fully prepared to launch and/or grow your insurance company . It not only outlines your business vision but also provides a step-by-step process of how you are going to accomplish it. All in all, a business plan is a key to the success of any business.  

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Insurance Company Business Plan

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Acme Insurance

Executive summary executive summary is a brief introduction to your business plan. it describes your business, the problem that it solves, your target market, and financial highlights.">.

By focusing on its strengths, its present client base, and new value priced products in the next year, Acme Insurance plans to increase gross sales by 10% and profit by 15%.

Our Keys to Success and critical factors for the next year are, in order of importance:

• Identify “Target Markets.”
• Institute our Property inspection program.
• Begin our “Insurance Partners” program.
• Develop a profitable property program.
• Provide small businesses with an affordable basic business package.

Acme Insurance Incorporated has been profitable, but recently we have had  declining market share  and this must be addressed. Therefore our goals are:

• To re-establish Acme Insurance Inc. as the market leader in quality and value-priced insurance products in Smalltown District.
• Establish good working relationships with our present insurance markets by meeting with their decision makers and plotting a mutual plan for success. Get commitments for support and products that we can market in our trading area starting April 1st of Year 1.
• Investigate new markets that meet our marketing criteria by a) committing to small rural brokerage; b) providing products suitable to our economic and social climate; and c) plans for the upload and download of insurance policies.
• Provide sales incentives to staff to meet sales goals of 10%.
• Complete inspection of all Pilot homeowners within one month before renewal date.
• Formulate plans to acquire another brokerage

Acme Insurance Inc. is dedicated to providing insurance products that provide quality protection with value pricing. We wish to establish a successful partnership with our clients, our staff members, and our insurance companies, that respect the interests and goals of each party.

Success will be measured by our clients choosing us because of their belief in our ability to meet or exceed their expectations of price, service, and expertise.

In order to implement our strategic goals, we will focus on developing the following tools.

• Knowledgeable, friendly staff that can empathize with our consumers needs and circumstances, especially in handling a loss.
• Policies that meet or exceed the expectations of our clients, and that are affordable, available, and understandable.
• Policies and endorsements delivered on time with minimal errors.
• A commitment to an annual insurance review for all of our clients. A phone call is more than any direct mass marketer offers. We believe personal contact and service is the cornerstone of our success.

Acme Insurance primarily markets and services Personal Lines Insurance. Its customers are mostly rural, lower income families or long time resident senior citizens who demand value priced insurance premiums in keeping with their lower and fixed incomes.

We also provide insurance to small business, mostly family-run seasonal operations primarily focused on the tourist trade.

Acme Insurance is a privately incorporated company in the Smalltown district and is licensed to transact both Life and General Insurance. The shares are held equally by John Smith and Peter Smith.

Our Insurance and Real Estate brokerage operates from two central locations. Our modern attractive office in Smalltown, at 178 Small Street, is located in a small plaza which is owned by the principals of our brokerage. It comprises 2,000 square feet.

In Nexttown, we operate from an 800 square foot, one-story brick veneer building overlooking Lake Small, which again is owned by the principals of our firm. The office is strategically located across from the Post Office.

We have stressed to our insureds the importance of good communication between the broker and client to insure proper coverage is in place. We have noticed as our clients become better informed about insurance that there has been a tremendous increase in clients wishing in-depth discussions about their policy coverage and how they can get the most value for their insurance dollar.

Our company’s strength lies in the quality and depth of our products and staff. Our offices, unlike our competition, are open six days a week. Because of our larger staff, we are able to service our clients even when a client’s broker is busy or out of the office on inspections.

Our staff has specialists in commercial insurance that can properly service and underwrite local business. We also have some quality commercial markets unavailable to our competition.

Our Real Estate division, which is a separate company, helps with market value and replacement cost analysis when required.

The past few years have seen tremendous upheaval in the insurance industry. The number of players has decreased in both the broker and company communities. The recession has curtailed insureds from properly maintaining their homes and automobiles, and insurance fraud has become a major issue for the entire insurance industry.

Brokers are concerned that in spite of commission reductions, quotas, contract cancellations, and refusal to write new auto business by some markets, they now may find themselves in competition with some of the traditional broker distribution companies that are setting up direct marketing facilities and branches. The banks now have announced they will open stand alone insurance offices to retail insurance.

In spite of the above, we believe that the independent broker will survive. We are more automated than most service industries. We are close to the customer, regardless of some insurance companies’ attempts to sever the traditional broker-client relationship. Our clients, in most cases, still do not care or know which company we place them with. They trust our judgement in selecting the proper coverage and company to place them in.

Upload/download capabilities are in many brokers offices, including our own. This will cut costs, improve efficiency and accuracy, and help us meet the competition from banks and direct writers. Companies that truly value and trust the broker distribution system will align themselves with professional brokers and grant more underwriting authority similar to Lloyds.

Among the substitutes that are our main competition we have Local independent brokers, Agents (such as Co-operators), Mass Markets, Mass merchandise programs heavily advertised over the radio such as “Gray Power”, and Group Plans.

We have depended in the past on a small advertisement in our local newspaper, listings in the Yellow Pages, and word of mouth. However with the changes in the market today, we must begin to investigate alternate ways to put our name in front of the public. We have set out several criteria for our marketing campaign that include”

• All advertising has to emphasize our differentiation point rather than price.
• We must sell the company, not the product. In spite of some companies’ efforts to minimize the importance of the broker, our clients still identify with the broker, not the insurance company.
• We must improve and increase our contacts with our clients.
• Make contacts and support senior citizen groups and cottage associations.

Based on these changes in our goals, outlook, and company culture, we anticipate that we will be able to increase revenues substantially by year 3 of the plan and increase net profit handsomely. The company does not anticipate any cash flow problems.

1.1 Mission

1.2 Objectives

• Investigating new markets that meet our marketing criteria by a) committing to small rural brokerage; b) providing products suitable to our economic and social climate; and c) plans for the upload and download of insurance policies.
• Formulate plans to acquire another brokerage.

1.3 Keys to Success

We believe the keys to success in a small town insurance business are:

Company Summary company overview ) is an overview of the most important points about your company—your history, management team, location, mission statement and legal structure.">

2.1 company ownership, 2.2 company history.

Acme Insurance was founded as a sole proprietorship in 1938 and was owned and operated by the founder Stan Smith. He originally ran the operation from his home, but moved to the business section of Smalltown when he outgrew his home based operation.

In 1972, the company constructed a new office building in the main business section and over the course of the last 15 years has purchased four other brokerages, one of which led to the establishment of our branch office in Nexttown.

In 1988, a new company was formed “Acme Insurance Inc.” which bought the insurance business from “Acme Insurance Limited.” All shares in the new company are owned by John S. Smith and Peter Smith.

Today, the fourth generation of Smiths, Stephen and Jason Smith, are working in the firm. We are also gratified to report that our founder, Stan Smith, is still in our office every day, and although still licensed, he is only active in a “goodwill ambassador” capacity.

2.3 Company Locations and Facilities

Our Smalltown operation enjoys its own private parking lot for our clients and our staff. A second story was recently added to our office which will allow ample room for expansion. It is presently used for training, staff meetings, and conferences.

Acme Insurance is committed to providing professional sales and service for its insurance customers. We have established what we consider to be an excellent reputation in our area, and are the largest multi-line insurance broker in our trading area.

3.1 Service Description

Acme Insurance provides home, automobile, and business insurance in Smalltown District. We take pride in knowing that for over 50 years we have helped our clients to find the best coverage at the right price that suits their needs and expectations. In the event of a claim, our clients know that we are there to provide help and counsel to ensure a fast, speedy claim settlement.

Like other independent brokers, we issue binders and new policies, endorsements and process renewals.

We also provide insurance services to non-clients, such as lawyers and mortgagees, to ensure our mutual clients have proper coverage and binding notes in place for the purchase of homes, businesses, and automobiles.

3.2 Competitive Comparison

Since we are brokers, (not agents such as Co-operators), we have access to a range of standard and specialty markets.

3.3 Sales Literature

We have recently produced a pamphlet titled “Insurance Partners” which stresses that a successful insurance partnership between the client, the broker, and the company is based upon a new concept.

Not only do the broker and the company take responsibility for proper protection and indemnity in the event of loss, but in the 1990’s, the client must also take his share of responsibility to insure the safety of his property by keeping it well maintained and using qualified professionals to update or change the heating, electrical, and plumbing systems in his home. We stress that multiple claims or claims arising out of poor maintenance may adversely affect his insurance.

In addition to the above, our brokerage uses a number of boilerplate letters on our computer system that are sent along with various types of policies explaining unique features or limitations in the contracts to avoid possible Errors and Omissions claims. They also encourage our clients to contact us about reviewing their coverage and promote other products and services we provide.

3.4 Fulfillment

We call upon the ample resources of our insurance markets to help with any unusual situations which occur and may present a problem finding proper coverage for our client.

When we required trained inspectors for evaluating the safety of our insured’s solid fuel heating devices and installations, we sent one of our own producers for training and who now has W.E.T.T. certification.

We are proud that Acme Insurance Inc. has never had an errors and omissions loss, but to protect our clients against that possibility, we have in place Errors and Omissions Insurance through our Insurance Brokers Association in the amount of $1,000,000 (Employer’s Reinsurance).

3.5 Technology

We have been fully computerized since 1982 and both offices and some of our producer’s homes are connected to our main computer server located in Smalltown.

As of February 1996, we have entered into an agreement with our present computer vendor, Teleglobe, to update our computer system to a Pentium server, and to Release 74, which allows upload/download capability with our companies, as well as email.

We have elected to stay with the Teleglobe Tabs system since our staff is familiar with the program. It has exhibited excellent, reliable telecommunications ability. The high speed ISDN lines required for MS Windows-based communication between our branch office as well as our home offices are not available in our trading area, so at present we will not migrate to the new MS Windows-based products available from Teleglobe or Agency Manager.

3.6 Future Services

Although Stan Smith started out as a life insurance agent, the “life” part of our business represents only 1% of our sales. We are looking to strengthen this part of our operation in the future. Due to the complexity and number of life and disability products, we are presently using an outside service: Atlantic-Smith Insurance out of North Town, although two of our general insurance producers have life agent licenses.

We are in the process of setting up a substandard property market. We feel that there is a need for this service and that it can be profitable if strictly underwritten with proper controls in place.

Market Analysis Summary how to do a market analysis for your business plan.">

Recent demographic studies in our area reveal a total year-round population of approximately 13,000, which rises in the summer to approximately 25,000. We have a relatively high number of seniors and many younger, newly-formed families dependent on government assistance living mostly in a rural, unserviced, thinly populated area. This makes it costly to service our clients. Long distance phone bills represent our second largest expense (our two offices each have their own toll free phone numbers) and the cost of visiting our insureds to do home inspections is time consuming due to the large area we service.

We are targeting seniors which have proven to be a profitable, stable market for our brokerage in spite of our present difficult economy.

We are fortunate that we have not yet had the intrusion to a large degree of mass merchandising programs like “Silver Power.” Smaller brokers have made inroads into our traditional rural business, with low cost farm markets that sell home and auto insurance. We understand that some of these markets are in a poor financial position and may cease to be a factor in the future.

4.1 Market Segmentation

Our market consists of senior citizens, lower-income young families (many of who are on social assistance) and the small, family-run business (many of which are seasonal and based on the tourist trade). There are a few industrial risks and those that are located here are branches of larger industries which obtain their insurance through large brokers in Bigtown.

Our target market is the seniors, family business, and middle income earners in our area. Statistics show that over 42% of our permanent population is above 45 years of age. The average family income is approximately $27,000 and the unemployment rate 9%.

We are cautious about encouraging business from lower income prospects since they tend to have wood heat, homes in poor repair, and many attempt to install and repair their own plumbing, wiring, and heating systems.

Another market of concern is out-of-area clients who may have been payment or claim problems to local brokers and attempt to find a distant broker to provide coverage instead of making the necessary adjustments in their own lifestyle to prevent claims.

Clients who have moved repeatedly can be difficult to obtain proper underwriting information and past claims experience on, and we feel our staff is to be commended for their ability to properly assess if a client should be placed to our standard markets or would be better served by a specialty company.

4.2 Service Business Analysis

The past few years have seen tremendous upheaval in the insurance industry. The number of players has decreased in both the broker and company communities. The automobile product has, in the mind of the public, become unaffordable, unavailable, and impossible to understand. The recession has curtailed insureds from properly maintaining their homes and automobiles, and to exacerbate the situation, many clients have turned to wood heat and started doing their own repairs and maintenance which may have increased the number and severity of claims. Insurance fraud has become a major issue for the entire insurance industry.

Our traditional close relationship with our companies has been strained. Brokers are concerned that in spite of commission reductions, quotas, contract cancellations, and refusal to write new auto business by some markets, they now may find themselves in competition with some of the traditional broker distribution companies that are setting up direct marketing facilities and branches. The banks, even though thwarted by the federal government in its last budget to retail insurance from their premises, will continue pressure on the government and now have announced they will open stand alone insurance offices to retail insurance.

The new federal government is close to adopting a new automobile contract that hopefully will make it affordable, understandable, and available to our clients. A profitable automobile product will entice the companies to aggressively seek new sales and more brokers will see companies offering contracts.

4.2.1 Main Competitors

Local independent brokers Cal Roberts, Patrick C. Johnson, Rob Champlain

• Strengths – alternate markets, especially small farm mutuals, that still continue to give low prices, still continue to write wood stoves, and allow discounts and underwriting terms such as table 1 rates on homeowners within 8 km of fire hall protection.
• Weakness – most are smaller, one-man operations that do not have the backup or finances to aggressively impact the marketplace.
• Strengths – Large advertising budget and competitively priced products. Their commercial is difficult to compete against in some cases because they seem to not have the same restrictions on underwriting as our markets. Also they have large capacity to write certain risks.
• Weakness- one small operation that does not have the same hours as our offices. Staff, because of salary, do not appear to be very knowledgeable or aggressive.

Mass Markets

• Strengths – large advertising budget and very competitive prices.
• Weakness – not local and largely unknown to our clients at the present time.

Our own Companies

• Strengths – already known to our clients; will be competitively priced.
• Weakness – an unknown quantity to our insureds. Also, if their people skills are similar to what they now exhibit, they will have great difficulty empathizing with the client and selling the client what he needs, not what they think he needs.

Mass merchandise programs heavily advertised over the radio such as “Gray Power”

• Strengths – price.
• Weakness – a still untried, unknown quantity.

Group Plans – teachers, public employees

• Strength – group pricing.
• Weakness – very little obviously, since we insure very few of the professions.

4.2.2 Competition and Buying Patterns

The main volume of income for our brokerage is generated by automobile premiums because they are relatively higher priced to insure than property, and because automobile insurance is mandatory in the region.

As stated previously, our success is dependent on our staff and our companies convincing our clients and prospective clients that price, although important, is not the only criteria for the purchase of insurance. Our advertising stresses that we have two offices, open six days a week with after-hours support and we have been an active, concerned, community involved, local business since 1938.

Still, price is very important and we must work with our markets to ensure that our insurance products are available and affordable to a large part of the market. It is the broker’s job to ensure the client understands what he is buying, and if circumstances dictate a lower-priced product, we must make our insured aware of the trade-off in coverage versus price.

4.2.3 Business Participants

• Cal Roberts Insurance
• Markets – Royal, Dominion of Canada
• Patrick C. Johnson
• Markets – General Accident, Canadian Surety
• Rob Champlain
• Markets – Farmer’s Mutual, National Frontier
• Co-Operators
• Silver Power
• Markets – Trafalger
• Con-struct Direct

4.2.4 Distributing a Service

Our trading area is rural. Premiums are relatively low and therefore not subject to large brokerages or specialty direct writers mounting aggressive advertising campaigns to bring in business. There are few group plans providing insurance coverage with the exception of our teachers. Smalltown has two independent brokers and a Co-Operators agent, Nexttown has two independent brokers, and Southtown has one. We have just started to see some move by locals to “Silver Power” and other specialty retailers who advertise on radio and television. The banks are still a future unknown.

Strategy and Implementation Summary

• Emphasize service and ongoing support . We must avoid selling only one policy at the lowest price for each customer and concentration account selling which greatly enhances client retention.
• Build an Insurance Partnership . The customer does not want to shop every year for a new broker. Concentrate on building a long term relationship with our customers and make the client and our staff appreciate the value of a long-term relationship.
• Focus on target markets . We must focus on personal and business customers that we identify and select to insure, instead of allowing potential customers to choose us, which could result in our brokerage attracting problem clients from other brokers.

5.2 Marketing Strategy

• Emphasize service and support.
• Build a partnership business based on account selling.
• Focus on senior, claims-free personal lines business and the profitable, well-run, small family business.
• Target small, non-franchise business that does not have access to group insurance plans.
• Investigate acquiring other brokerages in our area.

5.2.1 Promotion Strategy

We have depended in the past on a small advertisement in our local newspaper, listings in the Yellow Pages, and word of mouth. We must begin to investigate alternate ways to put our name in front of the public.

• All advertising has to emphasize our differentiation point rather than price. We will be developing a “Now what do I do?” message to emphasize the need for dealing with Acme’s insurance professionals so that in the event a loss occurs, you know you have the proper protection.
• We must improve and increase our contacts with our clients. All clients should be contacted before renewal to ensure covers are current and adequate. Also, new insurance should be solicited. We are investigating the production of a company newsletter or use of the I.B.A.O. newsletter which is distributed on a bi-annual basis.
• We have put our email address in our newspaper advertising, but we must be careful about attracting clients from out of the area who may be difficult to service and properly inspect.
• Make contacts and support senior citizen groups and cottage associations. Identify sports and hobby groups that involve seniors and cottagers.

5.2.2 Distribution Strategy

• Select Seniors We will give special attention to this market in our advertising. We will make a concerted effort to support and sponsor seniors programs in our area. We will seek out Cottage associations and offer support and advice to attract new senior clients who are recently retired or about to in the near future.
• Insurance Partners We will include inserts in renewal, endorsements, and correspondence stressing the importance of the insured taking an active interest and responsibility for trying to control the severity and number of claims. Our staff should take every opportunity, when discussing insurance with a client, to emphasize the consequences of multiple claims.
• Business Partners Again we should encourage insureds to take responsibility for controlling claims in partnership with their broker by installing alarm systems and continuing to maintain and upgrade their property. We should stress the benefit that good loss ratios help to control rates and ensure markets that want to write their business.

5.2.3 Positioning Statement

Our target market is Smalltown District. The ideal client is claims-free aged between 45 – 75 who owns his own home and car and is debt free. Has exhibited stable family patterns and is known and respected in the community.

A similar profile should be used for commercial prospects with emphasis placed on the well-run, profitable business that has exhibited good claims experience.

5.2.4 Pricing Strategy

Our customers are especially sensitive to value. We must ensure that our price and service are perceived to be good value to our client.

Our markets must offer several payment options to our clients that are convenient to the client, not just to the company. Example – payment on insured’s preferred day of month, not on the company’s, and accepting payment by credit or debit card. Many insureds are on a fixed income and receive their income on a set day of each month or a paycheck on a particular day.

We encourage our companies to “Target Market.” Many of our companies are now focusing on what they have perceived to be profitable niche markets, where they can offer a competitive product with little, if any, competition.

We are seeing our commercial markets now moving toward basic coverage and limiting the “bells and whistles,” all-risk products available to only those clients who have modern, well-managed, profitable, low-risk operations. This should help stabilize pricing and, even more important, ensure that there is an insurance market available for most risks. Continued insistence by the industry on better protection, i.e. fire and burglar alarms, upgrading of buildings, etc., have started to lower loss ratios.

Many of the larger insurance markets have increased minimum premiums to $1,000 for any commercial package policy. Our Lloyds market should be able to accommodate these customers with a minimum premium of approximately $600.

5.3 Sales Strategy

We want to emphasize the benefit of dealing with professionals who live and work in our client’s area. We know their needs and their problems and we have a local reputation to protect, unlike an out-of-town market. If the out-of-town broker fails to provide proper cover or advice, they lose one client. We could stand to lose many if the public perceives a professional failure on our part.

Competitive prices for our identified target markets. Discounts of up to 25% for claims-free seniors who renew their home insurance with us.

Careful inspection and the judicious use of deductibles and warranties for insureds using wood stoves should help alleviate company concerns about solid fuel heating devices. Competitive pricing is not an important factor to attract business because competition is very limited for primary wood heat houses in our area. This may provide a chance to pick up all of the insured’s business because, in many instances, they contact us after being told by their previous broker that, in spite of their claims-free status, the broker doesn’t want their house insurance.

Business partners provide us the opportunity to sell lower-priced, basic insurance coverage to our client. Many clients have expressed interest in retaining part or all of the insurance risk, especially for burglary. They feel that if they have installed central alarms and bars, they can take the chance of self insurance.

5.3.1 Sales Programs

We are investigating sales incentives for our producers. They must encourage profitable new business and have a retention component. Presently, our producers receive $10 for every new policy written in our office, with the exception of recreational vehicles.

5.3.2 Sales Forecast

The following table and related charts show our present sales forecast. We are projecting sales to grow at a moderate but steady pace for the coming year and to continue into 1997.

5.4 Strategic Alliances

Some of our present companies have surveyed us to investigate co-operative advertising but we have not committed to any programs at present.

5.5 Service and Support

Acme Insurance is really a group of small brokerages housed under one name and location. Our producers are each responsible for a book of business. They sell, service, handle claims and are responsible for their accounts receivable. We have found over the years that our clients prefer to deal with one broker who is aware of their particular needs.

5.6 Milestones

We have listed our plan milestones in the table below.

5.7 Service and Support

Management summary management summary will include information about who's on your team and why they're the right people for the job, as well as your future hiring plans.">.

Acme Insurance is slow to hire new people and loyal to those whom we have hired. We hire only when there is a vacancy or growth dictates more staff. Most of our people have been in our organization over 15 years, which allows our clients and our companies to form long lasting business relationships with their broker.

6.1 Organizational Structure

Our brokerage is divided by client instead of service. Each broker is responsible not only to renew and service a client’s insurance, they also are responsible for collection and claims. We feel a client wants to deal with his or her broker, especially in a claim situation, instead of an unknown “specialist” whom they feel does not represent their interests.

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Business Planning for Microinsurance

This guide provides information on how to prepare a microinsurance business plan.

Poor households are particularly vulnerable to catastrophic financial ruin because of their limited resources. Industry experts increasingly believe that microinsurance can assist the poor in managing insurable risks. Microinsurance products and programs have grown rapidly in recent years, in response to growing demand. Many of these are set up without the benefits of a thorough business planning exercise.

The guide targets readers who want to start a microinsurance business, especially those who have not yet developed a systematic plan on existing microinsurance operations. It walks readers through important components of a microinsurance business plan and discusses topics that readers should reflect upon during the planning process. The guide includes topics on:

• Product idea and business goals;
• Market place and competition;
• Product development and pricing;
• Marketing and distribution;
• Form of company and organizational aspects;
• Financial planning;
• Risk assessment.

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Insurance Agency Business Plan Template

Written by Dave Lavinsky

Over the past 20+ years, we have helped over 3,000 entrepreneurs and business owners create business plans to start and grow their insurance agencies. On this page, we will first give you some background information with regards to the importance of business planning. We will then go through an insurance agency business plan template step-by-step so you can create your plan today.

Download our Ultimate Insurance Business Plan Template here >

What is an Insurance Agency Business Plan?

A business plan provides a snapshot of your insurance agency as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategy for reaching them. It also includes market research to support your plans.

Why You Need a Business Plan for an Insurance Agency

If you’re looking to start an insurance agency or grow your existing insurance agency you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your insurance agency in order to improve your chances of success. Your insurance agency business plan is a living document that should be updated annually as your agency grows and changes.

Source of Funding for Insurance Agencies

With regards to funding, the main sources of funding for an insurance agency are personal savings, credit cards, bank loans, and angel investors. With regards to bank loans, banks will want to review your business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to confirm that your financials are reasonable. But they will want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate the business.

The second most common form of funding for an insurance agency is angel investors. Angel investors are wealthy individuals who will write you a check. They will either take equity in return for their funding, or, like a bank, they will give you a loan. Venture capitalists will not fund an insurance agency unless it is based on a unique, scalable technology.

Finish Your Business Plan Today!

How to write a business plan for an insurance agency.

Your insurance agency business plan should include 10 sections as follows:

Executive Summary

• Company Overview

Industry Analysis

Customer analysis, competitive analysis, marketing plan, operations plan, management team, financial plan.

Your executive summary provides an introduction to your business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.

The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of insurance agency you are operating and the status; for example, are you a startup, do you have an insurance agency that you would like to grow, or are you operating multiple insurance agency locations already.

Next, provide an overview of each of the subsequent sections of your plan. For example, give a brief overview of the insurance agency industry. Discuss the type of insurance agency you are operating. Detail your direct competitors. Give an overview of your target market. Provide a snapshot of your marketing strategy. Identify the key members of your team. And offer an overview of your financial plan.

Company Analysis

In your company analysis, you will detail the type of insurance business you are operating.

For example, you might operate one of the following types:

• Direct Writer / Captive : this type of insurance agency only sells one insurance company’s products – like Allstate or State Farm
• Independent Insurance Agent : this type of insurance agency is privately-owned, and sells policies with may different insurance companies

In addition to explaining the type of insurance agency you operate, the Company Analysis section of your own business plan needs to provide background on the business.

Include answers to question such as:

• When and why did you start the business?
• What milestones have you achieved to date? Milestones could include sales goals you’ve reached, new location openings, etc.
• Your legal structure. Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.

In your industry analysis, you need to provide an overview of the insurance business.

While this may seem unnecessary, it serves multiple purposes.

First, researching the insurance industry educates you. It helps you understand the market in which you are operating.

Secondly, market research can improve your strategy particularly if your research identifies market trends. For example, if there was a trend towards weather-related policy purchases, it would be helpful to ensure your plans call for flood insurance options.

The third reason for market research is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.

The following questions should be answered in the industry analysis section of your insurance company business plan:

• How big is the insurance industry (in dollars)?
• Is the market declining or increasing?
• Who are the key competitors in the market?
• Who are the key insurance carriers in the market?
• What trends are affecting the industry?
• What is the industry’s growth forecast over the next 5 – 10 years?
• What is the relevant market size? That is, how big is the potential market for your insurance agency. You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.

The customer analysis section of your insurance agency business plan must detail the customers you serve and/or expect to serve.

The following are examples of customer segments: individuals, households, businesses, etc.

As you can imagine, the customer segment(s) you choose will have a great impact on the type of insurance agency you operate. Clearly baby boomers would want different pricing and product options, and would respond to different marketing promotions than recent college graduates.

Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, include a discussion of the ages, genders, locations and income levels of the customers you seek to serve. Because most insurance businesses primarily serve customers living in their same geographic region, such demographic information is easy to find on government websites.

Psychographic profiles explain the wants and needs of your target customers. The more you can understand and define these needs, the better you will do in attracting and retaining your customers.

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Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.

Direct competitors are other insurance agencies.

Indirect competitors are other options that customers have to purchase from you that aren’t direct competitors. This includes self pay and public (Medicare, Medicaid in the case of health insurance) insurance or directly working with an insurance carrier. You need to mention such competition to show you understand that not everyone who purchases insurance does so through an insurance agency.

With regards to direct competition, you want to detail the other insurance agencies with which you compete. Most likely, your direct competitors will be insurance agencies located in your geographic region.

For each such competitor, provide an overview of their businesses and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as:

• What types of customers do they serve?
• What insurance products do they offer?
• What is their pricing (premium, low, etc.)?
• What are they good at?
• What are their weaknesses?

With regards to the last two questions, think about your answers from the customers’ perspective.

The final part of your competitive analysis section is to document your areas of competitive advantage. For example:

• Will you provide superior insurance agency products/services?
• Will you provide insurance agency products that your competitors don’t offer?
• Will you make it easier or faster for customers to acquire your products?
• Will you provide better customer service?
• Will you offer better pricing?

Think about ways you will outperform your competition and document them in this section of your plan.

Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For an insurance agency, your marketing plan should include the following:

Product : in the product section you should reiterate the type of insurance agency that you documented in your Company Analysis. Then, detail the specific products/services you will be offering. For example, in addition to P&C insurance, will you also offer life insurance?

Price : Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your marketing plan, you are presenting the menu items you offer and their prices.

Place : Place refers to the location of your insurance agency. Document your location and mention how the location will impact your success. For example, is your insurance agency located next to the Department of Motor Vehicles, or a heavily populated office building, etc. Discuss how your location might provide a steady stream of customers.

Promotions : the final part of your insurance agency marketing plan is the promotions section. Here you will document how you will drive customers to your location(s). The following are some promotional methods you might consider:

• Making your insurance agency’s front store extra appealing to attract passing customers
• Advertising in local papers and magazines
• Reaching out to local bloggers and websites
• Partnerships with local organizations (e.g., auto dealerships or car rental stores)
• Local radio advertising
• Banner ads at local venues

While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.

Everyday short-term processes include all of the tasks involved in running your insurance agency such as serving customers, procuring relationships with insurance carriers, negotiating with repair shops, etc.

Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to acquire your 500th customer, or when you hope to reach $X in sales. It could also be when you expect to hire your Xth employee or launch a new location.

To demonstrate your insurance agency’s ability to succeed as a business, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.

Ideally you and/or your team members have direct experience in an insurance agency. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.

If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act like mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in insurance agencies and/or successfully running small businesses.

Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet and cash flow statements.

Income Statement : an income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenues and then subtracts your costs to show whether you turned a profit or not.

In developing your income statement, you need to devise assumptions. For example, will you acquire 20 new customers per month or 50? And will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.

Balance Sheets : While balance sheets include much information, to simplify them to the key items you need to know about, balance sheets show your assets and liabilities. For instance, if you spend $100,000 on building out your insurance agency location and/or website, that will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a bank writes you a check for $100.000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.

Cash Flow Statement : Your cash flow statement will help determine how much money you need to start or grow your business, and make sure you never run out of money.

In developing your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a successful insurance agency:

• Location build-out including design fees, construction, etc.
• Marketing expenses
• Website development
• Payroll or salaries paid to staff
• Business insurance
• Taxes and permits
• Legal expenses

Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your store design blueprint or location lease.

Free Insurance Business Plan Template

You can download our insurance business plan PDF .

Insurance Business Plan Summary

Putting together a business plan for your insurance business will improve your company’s chances of success. The process of developing your plan will help you better understand the insurance market, your competition, and your customers. You will also gain a marketing plan to better attract and serve customers, an operations plan to focus your efforts, and financial projections that give you goals to strive for and keep your company focused.

Growthink’s Ultimate Insurance Business Plan Template allows you to quickly and easily complete your Insurance Business Plan.  

Additional Resources for Insurance Agents

• How to Write a Marketing Plan for an Insurance Agency
• How to Start an Insurance Agency
• Association for Independent Agents
• Business License Requirements By State For Insurance Agencies

Don’t you wish there was a faster, easier way to finish your Insurance business plan?

OR, Let Us Develop Your Plan For You

Since 1999, Growthink has developed business plans for thousands of companies who have gone on to achieve tremendous success.   Click here to learn about Growthink’s business plan writing services .

Other Helpful Business Plan Articles & Templates

Business Planning for Microinsurance

This guide describes the main components of a microinsurance business plan and contains all the relevant information that needs to be considered when developing a business plan.

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• Business Insurance
• Small Business Insurance

Best Small Business Insurance Companies for July 2024

NEXT wins with low-cost coverage and an easy application process

With small business, you never know when certain kinds of crises could hit. Will a customer sue your business? Will a natural disaster wipe out your facilities? A good small business policy could save you thousands of dollars or more if you ever face such unhappy circumstances.

After extensive research, our experts found that Next is the best business insurance company overall because it offers a wide range of policy types and an easy online application process that lets you sign up in about 10 minutes.

To choose the best commercial insurance companies for small businesses, we evaluated 19 national and regional insurers on 53 criteria in the following categories: cost, quote and application experience, customer satisfaction, coverage, accessibility, and financial stability.

• Best Overall: Next
• Best for Independent Contractors: Hiscox
• Best Restaurant Insurance: Huckleberry
• Best for Financial Stability: biBERK
• Best Budget Coverage: Thimble
• Best Workers' Compensation Insurance: The Hartford
• Best for Larger Small Businesses: Chubb
• Highest Customer Satisfaction: State Farm

Use an insurance marketplace like Insureon to get matched to the best provider for your business.

• Our Top Picks

Huckleberry

The Hartford

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Our Expert Picks for Small Business Insurance in Any State

What is small business insurance.

• Types of Small Business Insurance
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• How to Choose

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• Methodology

Guide to Small Business Insurance

Best overall : next.

Next Insurance

Next provides a way to get a wide range of affordable business insurance coverages entirely online in about 10 minutes. But you also have the option of speaking with a U.S.-based advisor in your area.

Offers a live certificate of insurance for easy sharing

Allows you to customize your business insurance policy with a variety of coverages

100% online quote and application with assistance available

Fewer specialized coverages than some other companies

Next offers a wide array of commercial insurance coverage types, which can be purchased online for same-day coverage. Next offers a business owner’s policy (general liability insurance and commercial property insurance), commercial auto insurance, workers' compensation coverage, professional liability insurance, tools & equipment insurance, and more.

The company also offers a variety of digital policy management tools, including the ability to share a live certificate of insurance and quickly add an additional insured, free of charge. Monthly payments are available, and eligible customers can save up to 25% with discounts.

Next Insurance has an A- (Excellent) financial strength rating with AM Best.  However, other companies offer more enhancements and specialized coverages.

Based in Palo Alto, California, Next was founded in 2016 and uses artificial intelligence and machine learning to streamline the insurance buying process. In November 2023, it raised $265 million in funding from Allstate and Allianz X—one of the largest rounds of funding raised in the insuretech industry that year, according to Crunchbase. The deals include a strategic partnership with Allstate to develop new commercial auto insurance products.

Best for Independent Contractors : Hiscox

Hiscox offers several solutions for freelancers that make the company our top pick for the best independent contractor insurance among small commercial insurance providers.

Customization options for independent contractors

Monthly payments with no fees

Offers short-term liability insurance for business

Higher than expected number of complaints with the NAIC

Hiscox offers a straightforward business owner’s policy (BOP) that can be customized with business interruption insurance, electronic data loss insurance, professional liability insurance, and more.

You can also choose standalone policies for professional liability and general liability insurance, and you can get either coverage on demand for short-term projects. Plus, Hiscox allows you to pay for your business insurance policy in monthly payments, which can help freelancers better manage their cash flow. 

Hiscox has an A (Excellent) rating with AM Best, indicating excellent financial strength; however, the company received somewhat more complaints than expected over the last three years given its size. This indicates that Hiscox may have issues with customer satisfaction, although the company did receive fewer complaints each year, indicating improvement. BOPs start at around $500 per year.

You can get a business insurance quote online or speak with an agent by phone. You can also file claims online or by phone. Claims services can be accessed online 24/7.

With roots dating back to 1901, Hiscox USA is based in Atlanta. It is part of the Hiscox Group, an international company with more than 3.000 employees.

Best Restaurant Insurance : Huckleberry

Huckleberry offers a suite of essential restaurant insurance and food business insurance coverages that are suitable for brick-and-mortar restaurants, caterers, food trucks, and more.

BOP policies underwritten by Markel and Chubb

100% online quote and application

Wide range of customization options

Doesn’t offer employee benefits packages

Huckleberry, which is a broker that works with Chubb and Markel for its BOP policies, offers a restaurant endorsement as an add-on to its business owner’s policy. It’s a bundle of food-specific coverages that includes spoilage coverage, food contamination insurance, and ordinance or law equipment coverage, among others. Plus, you can add workers' comp, commercial auto, and liquor liability coverage to customize your business insurance policy as needed.

Most policies are underwritten by Markel or Chubb. Both companies have excellent financial strength ratings from AM Best. Like Next Insurance, Huckleberry offers an entirely online quote and application process that allows you to get coverage for your small business quickly. And you can get a certificate of insurance online to share with clients in less than a minute.

Huckleberry’s BOP includes general liability, commercial property, and business interruption insurance at a reasonable price. For example, a BOP for a food truck starts at $42 per month.

Founded in 2017 in San Francisco, Huckleberry is now owned by payroll company Paychex, which operates the Paychex Insurance Agency.

Best for Financial Stability : biBERK

biBERK has an A++ (Superior) financial strength rating from AM Best, the highest rating available, offers a wide range of industry-specific coverages, and is backed by Berkshire Hathaway.

Backed by Berkshire Hathaway Group

Online quote and application

Excellent customer service reviews

Dozens of endorsements to enhance a BOP

Doesn’t offer group employee benefits

biBERK Business Insurance is part of Berkshire Hathaway Group, which has decades of experience in the commercial insurance industry. BiBerk’s underwriters are all rated A++ (Superior) by AM Best, indicating a superior ability to meet financial obligations to policyholders.

What’s more, you can get a quote and apply to receive coverage instantly, entirely online. Policyholders have great things to say about the service and coverage on third-party websites.

biBERK can meet the needs of most small businesses, offering many commercial insurance options, such as business owner’s policies, commercial auto insurance, workers' compensation insurance , umbrella insurance, professional liability insurance, and general liability policies. You can add risk-specific endorsements and industry endorsements to your business owner’s policy, such as liquor liability and cyber liability coverage as well. BiBerk BOPs start at about $500 per year.

BiBerk was founded in 2015 and is based in Omaha, Nebraska.

Best Budget Coverage : Thimble

Thimble Insurance

Thimble offers on-demand policies for general liability insurance starting at $17 per month.

Offers monthly and on-demand coverage options

Liability policies start at $17 per month

Offers event insurance

Occurrence-based policies

Excellent reviews on Trustpilot

Doesn’t offer commercial auto insurance

Thimble is a great option for small businesses that need quick, temporary, affordable small business insurance, particularly those looking to purchase coverage for an event or on an on-demand basis. The company’s business owner’s policy includes general liability, commercial property insurance, and business interruption insurance, and you can also add professional liability, workers' compensation, and business equipment protection. 

Customers on Trustpilot have great things to say about the ease of the application process. You can get a quote and purchase coverage online or in the app. Several reviews also pointed out that Thimble’s customer service team was communicative and responded quickly.

Thimble works with several different insurance companies, each of which has an AM Best rating of at least A- (Excellent). Thimble policies are occurrence-based , which provides more robust coverage than claims-made policies. You’re covered for incidents that occurred while your business insurance policy was in force, even if you’ve since canceled it.

Thimble, which has been selling small business insurance coverage since 2018, was bought by Arch Insurance in April 2023. Thimble is based in New York City.

Best Workers' Compensation Insurance : The Hartford

As one of the largest providers of workers' compensation insurance in the country, The Hartford has a huge provider network and pay-as-you-go billing that helps you avoid overpaying.

Pay-as-you-go billing options

Access to a network of over 1 million providers

2nd-highest financial strength rating

Start claims online

Poor J.D. Power ranking

The Hartford is a top pick among small business insurance providers for the best workers' compensation insurance . The company provides a large network of doctors and nurse case managers to help your employees get healthy, and pay-as-you-go billing options.

When you choose to pay as you go, your premiums are based on actual payroll rather than estimates, which prevents overpayment. The Hartford also allows you to easily start a claim online. What's more, the company uses data analytics to provide injured workers with a toolkit to aid in faster recovery. 

The insurer has an A+ (Superior) financial strength rating from AM Best; however, the company was ranked below average in the J.D. Power 2023 U.S. Small Commercial Insurance Study.

The Harford is based in Hartford, Connecticut, and was founded in 1810.

Best for Larger Small Businesses : Chubb

Chubb is ideal for larger small businesses because it supports businesses with revenue up to $30 million and offers a very wide range of coverage options.

Supports businesses with up to $30 million in revenue

Few complaints relative to Chubb’s market share

Highest financial strength rating

Many enhancements to customize a BOP 

Must speak with an insurance agent to start your business insurance policy

Chubb is one of the largest carriers (by annual premiums) of commercial insurance and has a well-regarded small business owner's policy. The company has relatively high revenue limits for its small commercial business owner's policies and offers a wide array of customized endorsements for a broad range of industries.

You can enhance your business owner’s policy with electronic data liability coverage, professional liability insurance, a variety of property add-ons, crime coverage, equipment breakdown coverage , earthquake coverage (in certain states), and more. Workers' compensation, umbrella, commercial auto, and cyber risk coverages are also available.

Chubb can offer an instant quote, and policies are generated instantly, but you will need to speak with an insurance agent to start your coverage.

Chubb has an A++ (Superior) financial strength rating from AM Best and is ranked second for customer satisfaction in the J.D. Power 2023 U.S. Small Commercial Insurance Study.

Chubb Corporation dates its origins back to 1882. Chubb Insurance Group today is based in Warren, New Jersey.

Highest Customer Satisfaction : State Farm

State Farm is one of the top-ranked companies for customer satisfaction in the J.D. Power 2023 U.S. Small Commercial Insurance Study and offers coverage for virtually any industry.

Customizable business owner’s policies with many coverage options

State Farm has been meeting the needs of small businesses since 1935 and has superior ratings. The company has an B financial strength rating with AM Best .

It's also ranked second in the J.D. Power 2023 U.S. Small Commercial Insurance Study. NAIC data reveals that State Farm has had just slightly fewer complaints than expected for its commercial liability policies. But, you’ll need to talk to an insurance agent to get coverage. Some business owners may prefer handling the entire transaction online.

The company’s BOP covers commercial property insurance and general liability insurance, plus loss of income, equipment breakdown, and money and securities protection at no extra charge.

You can add professional liability to the package as well. In addition, you can get commercial auto coverage, workers' compensation insurance, and many more coverages. You can also work with State Farm to provide benefits for your employees, such as group life, disability, and health insurance.

State Farm was founded in 1922 in Bloomington, Illinois.

Compare the Best Small Business Insurance Providers

The size of your small business may dictate the type of business insurance you need and which insurance company is best for you. For a low-cost BOP and quick online coverage, compare quotes from Next, Huckleberry, and BiBerk. Independent contractors and event workers will be best served by Hiscox or Thimble. Consider The Hartford and BiBerk if you’re most concerned with workers' compensation. If you need extensive coverage, including an employee benefits package, you’ll be best served by companies like State Farm and Chubb. 

Keep in mind that you may have specialized coverage needs for your industry that a standard business owner’s policy doesn’t include. Some companies offer more enhancements than others. When narrowing down your options, ensure you choose a provider that protects your business from common risks in your industry. 

Business insurance, sometimes called commercial insurance, covers your business's assets and income in case of unexpected events during normal business operations, such as lawsuits, natural disasters, or accidents. There are many types of business insurance products, including coverage for property damage, legal liability, and employee-related risks, among others. A business owner's policy (BOP) includes general liability coverage, business property coverage, and business interruption coverage.

You may also want to add other kinds of coverage such as for commercial cars, errors and omissions, and key employees.

What Types of Small Business Insurance Are There?

To learn more, read our article on types of business insurance .

Pros and Cons of Small Business Insurance

Protects company assets

Safeguards employees

May fulfill legal or contractual obligations

May boost the company’s reputation

Exclusions, limitations, and availability issues

Documentation requirements

Adjustment and payment delays

Pros of Small Business Insurance, Explained

• Protects company assets : Business insurance protects your company’s financial assets from losses resulting from damage to your property or third-party negligence claims. 
• Safeguards employees : Workers’ compensation insurance pays the cost of medical treatment and lost wages for workers injured on the job. 
• May fulfill legal or contractual obligations : State laws may require you to buy workers’ compensation, auto liability, or other types of insurance. Likewise, contracts you sign may require you to buy specific kinds of insurance, such as general liability or auto liability insurance. 
• May boost the company’s reputation : When your business is insured, it’s a sign to customers and business associates that you care about your company and managing its risks.

Cons of Small Business Insurance, Explained

• Cost: Business insurance premiums can be a significant expense, especially for a small company.
• Exclusions, limitations, and availability issues : All insurance policies exclude or restrict coverage for some risks. Insurers may refuse to cover some risks you want to insure or they may limit coverage you feel you need. 
• Documentation requirements : Whether you’re applying for new insurance or filing a claim under an existing policy, you must comply with the insurer’s documentation requirements. Some insurers’ requirements can be cumbersome.
• Adjustment and payment delays : Once you’ve suffered a loss, you must file a claim and wait for an adjuster to assess the damage before making repairs. If the adjuster is slow to respond, repairs and claims payments may be delayed.

How Much Does Small Business Insurance Cost?

Investopedia's research into six insurers found that some insurers offer more affordable coverage than others, so you should gather quotes from at least three companies before you buy small business insurance. In general, a business owner's policy starts at $300 to $500 a year. The lowest premiums for professional liability also ranged from $300 to $500, and premiums for general liability insurance started at $200 to $400.

The price of a commercial insurance policy depends on several factors:

• Industry or profession : The type of business you have impacts your amount of risk. A construction company,  garage , or restaurant will have many more liability risks than a  retail store  or office, for instance. Also, your business type may be required by law to have certain types of coverage.
• Business location : Businesses in high-crime areas or places prone to natural disasters will likely pay more for commercial property insurance than those in low-risk areas. State regulations and whether you rent or own your space also help determine your costs.
• Claims history : If you have a history of claims in the past, insurers may consider you a higher risk and charge you more.
• Number of employees and customers : The cost of workers' compensation insurance is based on the number of workers your business employs. Also, if you have a large customer base, that exposes your business to more liability and property risks. 
• Coverage needs : Choosing higher annual aggregate liability limits will increase your premiums, as will choosing a $0 deductible for your property insurance. 

How Do I Know If I Need Small Business Insurance? 

Whether your business needs insurance depends on the nature and size of your operations and the laws in your state. Most businesses need general liability insurance to protect themselves from third-party bodily injury or property damage claims. You should consider buying liability coverage if you manufacture or sell products, invite customers to your premises, or provide services at customers’ locations. 

If your business owns buildings or other property that you use in your operations, you should consider buying property insurance. A commercial property policy protects your business against physical damage to property by a fire or other covered peril. It may also cover income you lose as a result of the physical damage. 

Do you use cars or trucks in your business? If so, state law may require you to buy auto liability insurance . You’ll need to insure the vehicles under a commercial (not personal) auto policy. If you employ workers, state laws may require you to buy workers’ compensation insurance . And if your business involves offering advice or providing a professional service, you should consider buying professional liability insurance . Also called errors and omissions insurance , professional liability insurance covers third-party claims against your business for financial losses resulting from malpractice, errors, or mistakes you allegedly made while performing a professional service.

While the cost of insurance for a small business may seem high, the cost of a big lawsuit could dwarf those expenses. So be sure to weigh those risks when deciding whether you need coverage or not.

Expert Insight

“If you’ve just started a business and are wondering about insurance, don’t assume your homeowners or renter’s policy will cover your business activities. Check with your insurer. If you employ workers, you’ll probably need to buy workers' compensation insurance. You should also consider general liability insurance, which protects your business from claims involving slip-and-falls and other common workplace accidents. As your business grows and accumulates assets, you may need additional coverages like commercial property and business auto insurance.”

— Marianne Bonner , Investopedia insurance expert, consultant, and former commercial insurance underwriter

How to Choose a Small Business Insurance Company

Here’s a step-by-step process for choosing the best insurance company for your small business:

• Ask trusted colleagues, business associates, or other business owners for recommendations. 
• Check online reviews of business insurers. This list is a good start, but check out reviews from several sources and compare the results. Look for insurers that rate highly in several reviews.
• Consider market share rankings from sources like the National Association of Insurance Commissioners . While large insurers aren’t necessarily better, most have a long track record and are financially stable.
• Review J.D.Power’s customer satisfaction rankings of small business insurers.
• Consider your preferred method of buying insurance. Do you want to buy a policy directly from an insurer or through an agent? Do you prefer buying insurance online or in person?  
• Once you have some insurers in mind, evaluate their financial strength by reviewing data from rating agencies such as AM Best and Moody’s Investors Services .
• Get quotes from the insurers you’ve selected (or their representative agents) and compare the results. When deciding between insurers, consider the coverages, limits, deductibles, and other features each offers, not just the price.

Some California businesses have been struggling since insurers began pulling out of the state as the cost of providing coverage there has increased. State Farm said in May 2024 that it would stop issuing new policies for business property casualty insurance in California “due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.” Allstate gave similar reasons in public statements.

But Farmers Insurance said on May 14 that it will resume accepting new business commercial multi-peril applications for auto service and repair, habitational, manufacturing, real estate, and wholesale distribution policies in California, starting August 1, 2024. It also announced earlier that it would lift its temporary moratorium on writing new commercial automobile insurance policies in the state, effective July 1, 2024.

Investopedia launched in 1999, and has been helping readers find the best small business insurance since 2020. We conduct extensive research to provide unbiased, comprehensive reviews to ensure you make the right decisions for your needs.

Frequently Asked Questions

Is business insurance required.

Generally, business insurance is optional unless it’s required by state law or the terms of a contract. For example, many states require workers’ compensation insurance or auto liability insurance if your company owns vehicles you use for business. Or a business contract you sign may require certain insurance. Say you own an electrical contracting business. You sign a deal with a general contractor in which you agree to install electrical panels in a building the contractor is constructing. The contract requires you to have general liability, auto liability, and workers' compensation insurance in place before you begin any work.

What Does Small Business Insurance Cover?

A business owner’s policy includes general liability insurance, commercial property insurance, and, often, business interruption insurance. General liability insurance covers lawsuits when your business is responsible for harming a third party. Commercial property insurance covers damage to your building. Business interruption insurance helps replace business income after a covered loss.

What Does Small Business Insurance Exclude?

Small business insurance excludes anything that you don’t specifically buy coverage for. For example, if you buy a business owner’s policy, but it doesn’t specifically include business personal property coverage, you won’t get coverage for the items inside your office or warehouse after a loss. There are also some disasters that are not typically covered. For example, you’ll need an endorsement to cover earthquakes and flooding. Certain catastrophic events, like war, won’t be covered at all. Commercial policies also won’t cover a loss if it’s covered by another policy.

Do I Need Small Business Insurance If I Work From Home?

If you have a home-based business, you still may need business insurance. Your homeowners policy may not be enough to cover your business equipment, inventory, or data, so you may need a separate business property insurance policy. You'll also want a liability policy if you're sued for damages caused by your products, services, or advice. And you may need business interruption insurance to cover losses from a natural disaster, theft, or equipment breakdown. Finally, if you have remote employees, you may need employers' liability insurance to cover you if they get injured, sick, or die because of their work.

Do I Need Small Business Insurance If I Have an LLC?

Yes, you need business insurance to protect your limited liability company (LLC) from lawsuits and property losses. Your personal assets are protected from lawsuits against your LLC, but that protection doesn’t extend to the LLC itself. Suppose a customer is injured at your business premises and sues your LLC for compensation. If your business has no liability insurance, it will have to pay legal fees and any damages or settlements awarded by a court. 

Your LLC may also be subject to property damage losses if it owns buildings, equipment, or other property that is damaged in a fire, say. Your LLC will have to use company assets to pay for repairs. You can protect your LLC from unexpected losses by purchasing general liability and commercial property insurance.

What Is Umbrella Insurance?

Umbrella insurance provides extra liability coverage, extending the limits of other policies such as general business liability and commercial auto insurance. It provides an additional layer of security to those who are at risk of being sued for damages to other people's property or injuries caused to others in an accident. It also protects against libel, vandalism, slander, and invasion of privacy.

Is Small Business Insurance Tax-Deductible?

Small business insurance premiums are generally tax-deductible if the insurance is considered "ordinary and necessary" for your business. This includes premiums for liability, commercial property, malpractice, workers' compensation (when required by law), commercial auto, business interruption, and overhead insurance. Life insurance for officers and employees if you aren't a beneficiary is also deductible. And if you're self-employed, you may be able to deduct premiums for health, dental, and qualified long-term care insurance for you, your spouse, and your dependents.

Insurance Companies Our Experts Reviewed

We researched and reviewed 18 companies to find the best eight companies you see above on this list. The companies that didn't make it to our list didn't score as well as competitors on one or more of our criteria, including measures of quality, cost, coverage, and customer experience.

These are the companies we researched:

NEXT Insurance , Chubb Ltd. , CoverWallet , Thimble , Nationwide , biBerk , Hiscox , AmTrust Financial , Huckleberry , Insureon , The Hartford , Farmers , Geico , Travelers , Progressive , CNA , Liberty Mutual , State Farm

How We Choose the Best Small Business Insurance Companies

In order to compile our list of the best commercial insurance companies for small businesses, we developed a comprehensive methodology. To identify which companies and criteria to include in our review, we analyzed business and market insight databases, considered commercial insurance company market share, looked at search data from Google, and reviewed company product pages and agents' guides to assess important product features.  

With those findings in mind, we spent three months digging up information about 53 features on 19 insurance companies, including ratings for financial strength by  AM Best , customer satisfaction rankings in the J.D. Power 2023 U.S. Small Commercial Insurance Study, and individual customer complaints reported to insurance state commissioners and recorded by the  NAIC (National Association of Insurance Commissioners) . We also considered nationwide availability; whether an online quote and application are available; and policy-specific features, including claim limits, cost, and coverage exclusions.

The criteria determine how easy it is to procure a small business insurance policy from the company, the quality of that policy relative to its cost, and how likely customers are to be satisfied with the purchase process and their experience as a policyholder. We ranked each company according to the following categories and weights:

• Quote and application experience: 25%
• Plan quality and customer satisfaction: 15%
• Coverage: 15%
• Accessibility: 10%
• Financial stability: 10%

Companies that make coverage widely available, have a streamlined quote and application process, offer robust features, and have strong ratings for financial stability and customer satisfaction topped our list. For more information, read our full small business insurance methodology .

• What is business insurance?
• What is business liability insurance?
• What is a Business Owner's Policy (BOP)?
• How much does small business insurance cost?
• Types of business insurance
• Best General Liability Insurance for Small Businesses
• Best Commercial Business Insurance
• Best Sole Proprietor Insurance
• Best Business Owner’s Policy Insurance
• Best Health Insurance Companies for Small Businesses

Next Insurance. " Business Insurance for 1300+ businesses ."

AM Best. " AM Best Assigns Credit Ratings to Next Insurance US Company ."

Crunchbase. " Small Biz Insurer Next Insurance Raises $265M ."

AM Best. " Hiscox Insurance Company Inc ."

NAIC. “ Hiscox Insurance Company, Inc .”

AM Best. " AM Best Affirms Credit Ratings of Chubb Limited and Its Subsidiaries ."

AM Best. " Markel Insurance Company ."

AM Best. " AM Best Affirms Credit Ratings of Berkshire Hathaway Homestate Insurance Company and Its Affiliates ."

Trustpilot. " biBerk Business Insurance ."

Trustpilot. " Thimble Reviews ."

Thimble. " Insurance Ratings ."

Arch Insurance. " Arch Insurance Acquires Thimble ."

Insurance Information Institute. " Facts + Statistics: Insurance Company Rankings | III ."

J.D. Power. “ 2023 U.S. Small Commercial Insurance Study .”

Chubb. " Business Policy Insurance Policy ."

Insurance Information Institute. " Facts and Statistics: Commercial Lines "

State Farm. " Product Growth ."

Businesswire. " AM Best Affirms Credit Ratings of State Farm Mutual Automobile Insurance Company and Its Subsidiaries ."

NAIC. “ State Farm Fire & Cas Co National Complaint Index Report .”

Insurance Newsnet. " Seeing an Improved Commercial Insurance Marketplace in California, Farmers to Resume Offering Key Lines of Business Insurance ."

IRS. " Publication 535 (2022), Business Expenses ."

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How microinsurance is viewed in the insurance industry, plus six examples

Other parts of this series:.

• Research on how usage-based insurance is viewed in the insurance industry, plus seven examples

Microinsurance, or small-ticket insurance as it is often called in developed markets, is making significant progress in the industry. From Bolivia to Bangladesh and Nigeria to the Netherlands, millions of people are turning to microinsurance to protect their assets against losses, whether it is for livestock in emerging markets or for pets in mature markets.

Barely two decades have passed since the concept of microinsurance was unveiled as an extension of microfinance. It soon became a credible financial services category in its own right, featuring ultra-low premiums.

Microinsurance is also called inclusive insurance, and for good reason. It offers services to a large segment of society which, until recently, had no access to insurance.

As a sign of its perceived importance, the World Economic Forum has joined forces with industry giants in creating a company that offers services such as crop indemnity coverage to vulnerable farmers in Africa. Blue Marble Microinsurance was unveiled in 2015. The company says its mission is to extend “socially impactful and commercially viable protection to the underserved.”

The International Labour Organization offers grants of up to $500,000 for microinsurance projects in developing countries through its Microinsurance Innovation Facility , which was launched in 2008.

In Puerto Rico, which was devastated by Hurricane Maria last year, legislative efforts are underway to provide coverage to the poor, the first US jurisdiction to do so.

A study published in 2017 by Microinsurance Network and Munich Re Foundation showed that more than 52 million people in Latin America and the Caribbean had at least one microinsurance policy as of December 2016. In Africa, according to the World Map of Microinsurance , close to 62 million people had coverage at the end of 2014.

Mature markets are also witnessing rapid growth in the small-ticket insurance sector, where demand is robust for products such as travel insurance and extended warranties.

How microinsurance is viewed in the industry

Much of this growth has been achieved thanks to evolving technologies. Accenture, as part of our Technology Vision 2018 survey, reached out to more than 6,300 business and IT executives to gauge their views. The respondents included 623 executives from the insurance industry.

The survey of insurers found that 25 percent of those polled have already entered the market, while a further 43 percent believe it has good potential and plan to enter soon.” Just 2 percent found it unattractive.

The study provides a perspective on what insurers are doing now and whether their projects are sustainable in the long-term.

Six examples of microinsurance and small-ticket insurance

Much of the inspiration for the current state of the market has come from insurtechs, which are leading nothing short of a revolution in the small-ticket industry. Here are some examples:

Cuvva offers one of the most mainstream forms of small-ticket insurance with its pay-as-you-go car insurance in the United Kingdom. Motorists need to buy coverage only when they need it. The all-digital transactions are carried out in under 10 minutes, adding to the popularity of the service.

Lemonade incorporates a peer-to-peer insurance model, which allows policyholders, typically friends, to pool their premiums, thus reducing costs. The New York insurtech’s business model is based in part on behavioral economics.

Based in India, Toffee offers what it calls “bite-sized” insurance for things such as fitness, commuting and backpacking.

Blockchain technology is also being used in the microinsurance business. In the latest such initiative, British charity Oxfam has announced a partnership with Etherisc to offer insurance to rice farmers in Sri Lanka.

In the West African country of Mali, an Israeli startup is doing brisk business selling coverage by simply using an interface based on text messages. OKO ’s pilot project has attracted hundreds of farmers as all transactions are done on mobile devices. As the company is focused on crop insurance, it uses satellite imagery and radar-based technologies to define weather risks with precision.

And in Myanmar, Swiss startup Stonestep is working with an international aid agency to expand microinsurance coverage in the Asian country, with a target of 600,000 customers over the next two years

These examples illustrate the growing geographic and functional diversity of the microinsurance industry. By teaming up with insurtechs or developing disruptive technologies of their own, insurers are gradually expanding the market for their products.

To learn more:

Register to download the full report, Accenture Technology Vision 2018 .

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• Business Insurance
• Best Small Business Insurance

Best Small Business Insurance Of July 2024

Fact Checked

Updated: Jul 1, 2024, 5:19am

We analyzed the official complaint records of 28 insurers and found that Allianz and Clear Blue are the best small business insurance companies.

Small business insurance will cover your company from a variety of issues, like workplace injuries, stolen business property, fire, severe weather and lawsuits. But with so many options available, finding the right policy can be challenging. We’ll help you identify the best small business insurance companies to meet your needs.

• Best Workers Compensation Insurance
• Cheap Business Insurance
• How Much Small Business Insurance Costs
• How Much Does Workers Compensation Insurance Cost?

Summary: Best Small Business Insurance

What are the different types of small business insurance, how do i get the best small business insurance, how much small business insurance coverage do i need.

• How Much Does Small Business Insurance Cost?

Methodology

Other small business insurance companies we rated, best small business insurance frequently asked questions, next insurance.

Tailored policies for thousands of professions

A.M. Best financial strength rating

A- (Excellent)

How We Chose the Best Small Business Insurance

We evaluated complaint data for commercial liability and commercial property insurance collected by the National Association of Insurance Commissioners. Our editors are committed to bringing you unbiased ratings and information. Our editorial content is not influenced by advertisers. You can read more about our editorial guidelines and the methodology for the ratings below.

• 28 insurance companies evaluated
• 102 years of insurance experience on the editorial team

The Best Small Business Insurance Companies

Complaint level

Extremely low

A+ (Superior)

While Allianz may be better known for insuring large global enterprises, small businesses can also take advantage of its insurance industry acumen.

• Provides risk consulting for all industries.
• Allianz’s Crisis Management team helps businesses navigate terrorism, political violence and hostile environments.
• Recognized as a Sustainable Insurer by the Dow Jones Sustainability Index in 2022 because of its work to integrate sustainability and climate actions into its global business.
• Does not offer small business insurance quotes online.

Have you considered Next Insurance?

Download the NEXT app and get your certificate of insurance in seconds

Clear Blue Insurance

Clear Blue provides business insurance through partner agencies, not directly to small businesses. Available coverage types include all the essentials such as general liability, inland marine, commercial property and employment practices insurance.

• Operates in all states and Washington, D.C.
• Specializes in providing insurance programs by partnering with managing general agencies, reinsurers and others.
• Does not sell directly to small businesses. You’ll need to go through one of Clear Blue’s partner agencies.
• Does not offer business insurance quotes online.

You probably know Allstate for its auto and homeowners insurance but the company also sells business insurance with a stellar complaint track record. An Allstate agent can help you select the coverage that’s right for your particular business.

• Covers many  industries including retailers, food and beverage, medical, photographers and more.
• Can provide insurance for small businesses that operate out of homes.
• Website has lists of coverage types you may need based on your  industry.
• Offers online quotes for business owners policies.
• Does not offer online claims filing. You’ll need to call Allstate to file a business insurance claim.
• Does not sell workers compensation insurance.

Farmers Insurance

A (Excellent)

You’ll find a wide variety of commercial coverage types and the assistance of a Farmers agent.

• Provides useful information on its website explaining business insurance coverage types.
• Offers workplace safety videos and material, called MySafetyPoint, without extra charge to its business insurance customers.
• Has online business insurance quotes.
• You can submit a business insurance claim online.
• Does not sell business insurance in all states.

Acuity works through local agents to provide insurance for a wide variety of businesses, from hotels to auto repair shops to retailers and restaurants.

• The Acuity Nurse Helpline can facilitate access to the appropriate health care for your injured employees.
• Provides on-site loss control consultation and training.
• Offers a free online newsletter that addresses the specific concerns of truckers.
• Has a variety of videos with insurance information for various professions, such as construction and retail.
• Offers online business insurance quotes.

CNA has an excellent complaint track record. With over 300 coverage types available from CNA, you’ll have plenty of options to find the right business insurance fit.

• Industries that can be covered by CNA business insurance include construction, health care, financial institutions, law firms, manufacturing and more.
• CNA’s PrepWise provides a number of risk management services, such as cybersecurity awareness and ways to improve ergonomics in the workplace.
• Offers a pay-as-you-go workers compensation insurance option, so that small businesses can budget better.
• Offers online claims filing.
• Has a lower financial strength rating compared to other top competitors but still solid.

A++ (Superior)

As one of the largest insurers for commercial insurance on our list, Travelers also boasts very few complaints about its business insurance. Its wide range of commercial insurance solutions are available through independent agents.

• Offers TravPay, a pay-as-you-go workers compensation system that links your payroll directly to your workers compensation premiums, so you don’t have to guess the amount of annual payroll.
• Travelers’ TravComp is a workers compensation claims system that includes a dedicated return-to-work team of nurses and claims professionals with the goal of getting employees back to work quickly.
• Risk control resources include self-service material such as checklists.
• A variety of online services includes bills and payment histories, certificates of insurance and checking the status of claims.
• Does not offer online business insurance quotes. You will need to contact an agent.

Frankenmuth Insurance

Frankenmuth has customized, business-specific insurance packages for operations such as retail stores, manufacturing and small offices. Frankenmuth is a regional carrier operating in 15 states in parts of the Midwest and Southeast.

• Frankenmuth insurance is sold by local independent agents.
• Types of businesses that can be insured by Frankenmuth include retail stores, contractors, personal services and wholesalers.
• Only available in 15 states.
• Does not offer online business insurance quotes.

Cincinnati Insurance

Cincinnati Insurance sells its coverage through local independent agents who will tailor coverage to fit the needs of a business. Cincinnati’s business insurance is available in most states.

• Industries that can be covered include craft beverages, dentists, manufacturers, medical facilities, retail and more.
• The CinciPlus package combines expanded coverage types at a cost-savings from buying them separately. Cincinnati Insurance also offers CiniPak, which bundles coverage geared toward business types such as retail stores.
• Cincinnati’s three-year commercial package policy lets you lock in rates that won’t increase for the duration of your policy term. (Rates may change if your business’s needs change.)
• Complimentary loss control services can help you identify and manage workplace accidents, injuries and other problems.
• Not available nationwide.

Westfield Insurance

Selling business insurance in 21 states, Westfield Insurance has a notable track record for low complaints.

• With its Westfield Signature Series you can bundle together optional coverage types to address your specific business size and type.
• Among the top sellers of farm business policies.
• Only available in 21 states.

Chubb’s small business insurance targets small businesses with up to $30 million in revenue.

• Chubb offers insurance for operations such as cultural institutions, food services, health care, manufacturers, retail stores and technology.
• Small business owners may want to check out Chubb’s Business Owners Policy (BOP), which provides a blanket limit for property coverage so you have flexibility in where to spend a claim payment after a loss.
• Chubb’s BOP can be customized with coverage types such as flood insurance, electronic data liability, equipment breakdown, professional liability and other valuable protection.
• Only offers online business insurance quotes for businesses with a current or projected annual gross revenue of $2 million or less.

When buying small business insurance, your coverage decisions depend on your business’s type, size and specific risks. Common types of small business insurance include general liability, commercial property, and workers’ compensation insurance.

The Hartford

AM Best financial strength rating

ASK THE EXPERT

Insurance Lead Editor

Insurance Managing Editor

Michelle Megna

Start With a BOP

I recommend starting with a business owners policy (BOP). It combines three essential small business insurance types: liability insurance, commercial property insurance and business interruption insurance. It’s usually cheaper to buy a BOP than purchasing each coverage type separately.

Add Other Coverage as Needed

A BOP won’t cover everything, so I recommend adding more coverage types as necessary. For example, a BOP won’t cover car accidents. If you get into an accident with your work vehicle, you’ll need to add commercial auto insurance . Similarly, if you have employees, you’ll need to add workers’ comp insurance in most states.

Reassess Every Year

I think it’s a smart move to reassess your business risks every year. As your business grows, you’re bound to take on more risks, such as buying new equipment or adding more responsibilities for your employees. For example, you can add equipment breakdown insurance to cover equipment like refrigerators, computer systems and manufacturing equipment.

We recommend looking at several factors to determine how much small business insurance you need, such as:

• Your business type. Your industry has certain risks that are associated with it and you’ll need to buy the appropriate coverage types for those risks. For example, if you are an accountant who gives tax advice, you’ll want to buy professional liability insurance.
• The size of your business. As your business grows, you may need to increase coverage such as your liability limits. If you want to add an extra layer of protection, we recommend buying a commercial umbrella insurance policy.
• Your business location. You may need certain types of small business insurance required by law , depending on your city or state.
• Contractual requirements. Your client may require coverage such as general liability insurance, professional liability insurance or a surety bond .

The average cost of small business insurance is $57 per month, according to Insureon. That’s for a business owner’s policy (BOP) , which bundles general liability insurance, commercial property insurance and business interruption insurance. It’s generally cheaper to buy a BOP rather than buying each policy separately.

Your small business insurance costs depend on several factors:

• Industry. Industries with a higher risk will typically pay more than industries with a lower risk. For example, a construction company with multiple employees would cost more to insure than a graphics designer who works on their own.
• Size of payroll and annual revenue. The higher your operating costs and expenses, the more you can expect to pay for liability insurance.
• Number of employees. The greater the number of employees, the higher the risk of accidents.
• Location. If your business operates in a high-risk area with higher crime rates, you may pay more for business insurance.
• Building age and size. Older and larger buildings cost more to insure than newer and smaller buildings.
• Coverage amount and types. The higher your coverage limits and the types of business insurance policies you buy impact your costs. For example, if you have a business vehicle, you need to buy commercial auto insurance, which increase your overall business insurance costs.
• Claims history. If you have a history of filing claims for your small business, it could increase your premiums.

The best way to find cheap business insurance is to compare business insurance quotes from several different insurers. You can find business insurance quotes online or by speaking with an independent insurance agent.

Average Monthly Costs of Small Business Insurance

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Ratings methodology

We ranked business insurance companies based on complaint data for commercial liability and commercial property insurance in 2020. Complaint data is based on complaints upheld by state insurance departments in every state and collected by the National Association of Insurance Commissioners.

How do I know if I need small business insurance?

The vast majority of small businesses would suffer financially if they were sued or experienced a devastating loss, such as losing inventory in a fire. For those businesses, commercial insurance is a must.

Without small business insurance, you’d have to pay for the legal costs of lawsuits and find a way to pay for damage to your business property. General liability insurance and commercial property insurance are good places to start. Commercial auto is important if you have cars, trucks or vans that you use for business.

And workers’ compensation insurance is required in most states.

What does small business insurance not cover?

Certain types of accidents are generally excluded from small business insurance policies, including floods and earthquakes. You can typically buy separate policies to cover these types of problems, such as a commercial flood insurance policy.

Small business insurance also excludes coverage for fraudulent and intentional acts that you commit. For example, if you assault a customer, general liability insurance won’t cover your legal costs.

Do I need business insurance if I have an LLC?

It’s a good idea to get business insurance for your LLC . That’s because business insurance covers your business assets. For example, if someone slips in your store and gets injured, general liability insurance can pay for medical bills as well as legal costs if you get sued because of the accident.

While business insurance is essential for high-risk industries, such as manufacturing and construction, it’s also a good idea if you’re in a lower-risk industry, such as freelancing or bookkeeping. For example, if you get hit with a copyright infringement claim for one of your digital ads, your general liability insurance can cover your legal costs.

What type of insurance is best for a small business?

A good place to start is with a business owners policy (BOP) . It bundles three essential coverage types: general liability insurance, commercial property insurance and business interruption insurance . Combined, these three policies cover problems like accidental injuries and property damage, reputational harm, damaged or stolen business property, and income replacement if you can’t open your business due to a problem covered by your policy.

But a BOP alone may not cover all your needs. You may need to buy other types of small business insurance to cover the risks that affect your company. For example, if you have a work vehicle, a BOP won’t pay for repairs if you get into a car accident. You’ll need to add commercial auto insurance. It’s a good idea to speak with your insurance agent to make sure your business insurance policy meets the specific demands of your industry.

Do remote businesses need insurance?

Yes, remote businesses need business insurance to cover risks such as lawsuits, accidents and stolen business property. For example, if you own business property like computers and office furniture, you’ll need commercial property insurance to cover problems like theft and fire.

Your remote business may need other types of small business insurance. For example, if you visit clients, you’ll need commercial auto insurance. Or if you store sensitive data, such as client’s contact information and credit card numbers, you’ll want to consider cyber liability insurance .

Do you need a business owners policy (BOP)?

You need a business owners policy (BOP) if you want coverage for problems like lawsuits, lost business income and damage and theft of your business property. Without a BOP, you’ll have to cover these problems out-of-pocket, which could be financially devastating to your small business.

You can add other coverage types to your BOP. For example, if you drive a vehicle for work purposes, add commercial auto insurance .

Get Forbes Advisor’s ratings of the best insurance companies and helpful information on how to find the best travel, auto, home, health, life, pet, and small business coverage for your needs.

Next Up In Business Insurance

• Best General Liability Insurance
• Types Of Small Business Insurance
• What Is Professional Liability Insurance?
• How To Get Product Liability Insurance?

As a former claims handler and fraud investigator, Jason Metz has worked on a multitude of complex and multifaceted claims. The insurance industry can be seemingly opaque, and Jason enjoys breaking down confusing terms and products to help others make well-informed decisions.

Phone and email support may be limited from Thursday, 7/4 through Friday, 7/5 as we observe Independence Day. You can still access your account and apply for quotes online.

Small business insurance: How to compare and get the right policies

Find out how small business insurance policies differ in coverage and which ones will benefit your business. Some policies may be required by local laws, client contracts, or commercial leases.

Business insurance policies cover different risks

Insurance providers sell many different small business insurance policies , each designed for specific risks.

The most common policy,  general liability insurance , covers customer accidents that can happen in any workplace. That includes slip-and-fall injuries, such as a customer slipping on a recently mopped floor and breaking an ankle.

Other policies are more specific. For example, commercial auto insurance is required for businesses that own vehicles. It provides coverage in the event of an auto accident.

Workers' compensation insurance pays for medical expenses from work injuries. Workers' comp is required in most states when you have employees, and also protects sole proprietors against work injury costs that their health insurance might deny.

Read on to learn more about types of business insurance and how they differ. If you are unsure which policies you need, Insureon's licensed agents can help you.

Business liability insurance vs. property insurance

Most insurance coverage can be broken down into two main categories: property coverage and liability coverage . Small business owners usually need both types of insurance.

Property insurance , also called business hazard insurance , covers your business's property, such as a building, furniture, inventory, tools, or equipment. It helps you recover from fires, weather damage, theft, and vandalism.

Liability insurance provides financial protection in the event of a lawsuit. There are many different reasons for lawsuits against businesses, which is why there are many different kinds of liability insurance policies.

For example, someone might sue your business over a bodily injury , a mistake that caused them to lose money, or failure to prevent a data breach. These would all require a general liability policy , a professional liability policy , and a cyber liability policy , respectively.

Read more about the differences between property insurance vs. liability insurance .

Combine liability and property coverage in a business owner's policy

Insureon's licensed agents recommend a business owner's policy (BOP) for small, low-risk businesses.

A BOP bundles general liability insurance with commercial property insurance at a discount. It protects against third-party legal fees for common accidents and the cost of business property damage or loss.

You can often add other coverage options to a BOP, such as business interruption insurance for financial protection against temporary closure.

How does business insurance compare for different professions?

Because insurance policies cover different risks, you may need additional coverage for your industry or profession.

For example, accountants , consultants , and others who provide advice or a professional service may need professional liability insurance , also called errors and omissions insurance , to defend against lawsuits over the quality of their work.

Tech companies should consider technology errors and omissions insurance (tech E&O) for financial protection against E&O claims as well as cyber risks.

Some states also have business insurance requirements for certain professions. For example, real estate agents are usually required to carry E&O coverage, and businesses that sell or serve alcohol likely need liquor liability insurance .

Top professions we insure

Don't see your profession? Don't worry. We insure most businesses.

Learn how Insureon experts remain committed to protecting your small business

[video: an animated header displays the Insureon logo]

DY KUNKEL, VP ACCOUNT MANAGEMENT: Typically, our clients come to us originally for, let's say, a general liability policy. And they are getting that to meet contract requirements.

When they come to the account management team or at renewal time, they're looking to grow those contracts or they have a new contract, so they typically are adding on workers compensation, or they might need an umbrella limit to meet those requirements, or professional liability.

[video: illustrated footer displays the text: "Dy Kunkel, VP Account Management"]

When a customer comes to our website, the producer will work with them to get their coverage in place initially, and then after 32 days post bind of that policy, it'll rotate over to an account manager based on the business class and which vertical that client fits into in our account management team.

[video: an illustrated header displays the "Trustpilot" logo with the word rating "Excellent"]

And then the account manager will handle that policy and that customer for its longevity as long as it stays with Insureon, it stays with that account manager to work with the client, grow the client, and provide them whatever they might need.

[video: an illustrated header displays the text: "Dedicated account managers"]

These account managers, they help retain our book of business, so their goal is to renew all the business that comes through our agency and keep it on the books, as well as grow our clients, provide customer service, as well as also cross-selling and upselling new policies to those clients to meet their business needs.

[video: a number of animated logos display for a variety of insurance carriers, including The Hartford, Philadelphia Insurance Companies, AmTrust Insurance, Travelers Insurance, Acuity Insurance, Chubb Insurance, The Hanover Insurance Group, Hiscox Insurance, and Liberty Mutual Insurance.]

We best serve our customers through making sure that they fit with each of our carriers by underwriting, as well as looking at each of the business's needs individually, and then matching that with our core markets that we work with and their pricing, as well as their coverages that they offer.

[video: an illustrated header displays the text: "Focus on individual business needs"]

We've seen a steady increase in customers over the past few years because of our technology offerings that we have. The marketplace, and most of the world, looks for things to be instantaneous. They want it on their cell phone, they want to be able to receive it immediately, and our product offerings give that to the client.

We can give them a quote in a minute, or we can provide them a certificate of insurance automatically, and all of that is done through our technology. We keep our customers coming back to us year-over-year because we have trusted insurance advisors as account managers.

[video: an illustrated header displays the text: "Nearly 100% retention rate"]

They have numerous years of experience in the insurance industry, as well as we also offer great renewal processes and procedures that provide ease of use to our clients by utilizing our technology. Typically our customers are purchasing additional policies, as well as renewing year after year. We don't typically see them coming to us for other needs.

Clients are unable to get something in an instant as far as insurance goes, they're going to walk into a local insurance agency where it could take up to a week for them to get their insurance quote or their certificate, where we can provide it to them in an instant.

[video: an illustrated header displays the text: "Immediate quotes unlike traditional agencies"]

Insureon has a customer portal that gives clients access to their policies. If they want to review their policies, they can also make changes and request those changes direct on our portal, as well as they can go in and get their own certificate of insurance without ever having to interact with a human. Technology is definitely the future for small business insurance.

[video: an illustrated header displays the text: "Get a policy the same day"]

Most of the insurance carriers and companies out there don't offer a technology advantage like we do, and again, everybody wants things on an instant basis, and so we're able to provide that to customers, and I think that's the way the insurance industry has to go if they want to keep up with the everchanging world.

[video: an illustrated header displays the text: "#1 digital agency"]

What our customers are saying

Find the right insurance partner to get your policy.

While both insurance agents and brokers can help offer small business owners insurance quotes on different policies, there are some notable differences between an agent and a broker .

• Agents represent insurers, while brokers represent the client.
• Agents can complete insurance sales (bind coverage), while brokers cannot.

An insurance agent represents one or more insurance companies and can complete an insurance sale for their client, while insurance brokers represent consumers in their search for coverage and can offer policies from multiple different companies, but will need to work with an agent or carrier to complete the sale.

Insureon is both an agency and an insurance brokerage, with licensed professionals in every state. We can help you find a quote , put together an insurance program that fits your risk management needs and are available for questions after we help you find coverage.

We partner with top-rated insurance companies

Learn more about our insurance partners.

How much do different types of business insurance cost?

Factors that affect your premium include industry risks, the number of employees, and the policy's limits.

Average costs for common policies are:

• General liability policy: $42 per month
• Business owner's policy: $57 per month
• Workers' compensation: $45 per month
• E&O insurance: $61 per month

Business insurance costs depend on policy limits, deductibles, and exclusions

Be aware that policies with the same name can differ in terms of coverage and cost. If a policy's premium seems too good to be true, take a closer look. It may have exclusions that leave you defenseless in certain circumstances, a high deductible , or coverage limits that are too low to cover a financial loss.

Most insurance policies have both a per-occurrence limit and an aggregate limit . The per-occurrence limit is the maximum your insurer will pay out on a single incident, while the aggregate limit is the maximum for the policy period (usually one year).

Higher limits cost more, but provide better coverage. A higher deductible means you pay more before you can collect on a claim, but your premium will be lower.

For limits that are higher than average, you may need to purchase commercial umbrella insurance or excess liability insurance . Umbrella insurance boosts the limits on your underlying general liability, commercial auto, and employer's liability insurance. Excess liability insurance increases the limits on one policy, such as errors and omissions insurance (E&O).

Explore business insurance comparisons in detail

For a deeper look at how small business insurance works, explore how these different policies compare:

• General liability vs. workers' compensation insurance
• General liability vs. professional liability insurance
• General liability vs. errors and omissions (E&O) insurance
• General liability insurance vs. business owner's policy
• Business owner's policy vs. commercial package policy
• Technology E&O vs. cyber liability insurance
• Professional liability vs. malpractice insurance
• Commercial auto vs. hired and non-owned auto insurance
• Commercial auto vs. personal auto insurance
• Excess liability vs. commercial umbrella insurance
• Employer's liability vs. workers' compensation insurance
• Disability insurance vs. workers' compensation insurance

Save time and money with Insureon

Complete Insureon’s easy online application today to get small business insurance quotes from trusted U.S. insurance companies and receive advice from knowledgeable agents. Once you find the right policy for your small business, you can begin coverage in less than 24 hours.

Get small business insurance quotes

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Tina Orem is an editor at NerdWallet. Prior to becoming an editor, she covered small business and taxes at NerdWallet. She has been a financial writer and editor for over 15 years, and she has a degree in finance, as well as a master's degree in journalism and a Master of Business Administration. Previously, she was a financial analyst and director of finance for several public and private companies. Tina's work has appeared in a variety of local and national media outlets.

Ryan Lane is an editor on NerdWallet’s small-business team. He joined NerdWallet in 2019 as a student loans writer, serving as an authority on that topic after spending more than a decade at student loan guarantor American Student Assistance. In that role, Ryan co-authored the Student Loan Ranger blog in partnership with U.S. News & World Report, as well as wrote and edited content about education financing and financial literacy for multiple online properties, e-courses and more. Ryan also previously oversaw the production of life science journals as a managing editor for publisher Cell Press. Ryan is located in Rochester, New York.

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1. Find out what coverage each business insurance company offers

2. compare business insurance quotes, 3. research business insurance discounts, 4. check customer satisfaction and complaints, 5. consider financial strength, 6. talk to a professional.

Virtually every small-business owner faces risks that business insurance can help mitigate, but not all business insurance companies are the same. Here are the steps to take to compare business insurance companies and what to think about as you shop.

Looking for tools to help grow your business?

Tell us where you're at in your business journey, and we'll direct you to the experience that fits.

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Not every business insurer sells every type of insurance. This will narrow your options once you’ve determined the types of business insurance you need. But you may also be limited by the following:

Not every insurer sells insurance in every state, and insurers may sell certain types of policies in certain states only. For example, Hiscox doesn’t provide coverage in Alaska, and business owner's policies are unavailable in several states.

Make sure each insurer’s policy provides enough coverage. If you need extra insurance for specific assets or situations — for example, data breaches or liquor liability — you can eliminate companies that don’t offer those options.

If you need several different policies, you may need to buy them from different providers.

Some big-name insurers don’t underwrite all the commercial policies they sell. You might buy a policy from Progressive or Geico , for example, but the coverage might come from another company. That’s important to think about if you want all of your policies to be with the same provider.

Get more information about some of the major business insurance providers here:

Getting quotes from several different commercial insurance companies can help you find the best coverage at the best price. Here are some things to consider when looking at insurers’ quotes.

You can shop for quotes online or by phone, or you can work with an insurance agent or broker to find the cheapest business insurance for you. Whichever route you choose, make sure to compare policies with similar coverage and deductibles .

To get a quote, you will have to provide some basic information about your business, including its name, number of employees and ZIP code. Some insurance providers can generate a quote online, but others may require you to talk to a human in order to get a quote.

Rates vary dramatically because no two businesses are the same and each insurer uses its own formula to calculate premiums and discounts.

Be aware that a business insurance quote is an estimate only. The price may change if an insurance company checks out your business and determines you need a different amount of coverage.

» MORE: How to get business insurance in 4 steps

As your business hires employees, adds locations or grows its product line, your insurance needs will grow too. Check your insurance policies every year to make sure they still provide enough coverage, and take a look at other business insurance companies to make sure you’re still getting the best coverage at the best price.

Some companies offer discounts for buying multiple policies. For example, Next gives you a 10% discount when you bundle more than one kind of coverage.

You may see differences in the number and type of discounts available. Comparing the discounts your business is eligible to receive will ensure that you not only get the policy you want but also benefit from investments you’ve made to make your business safer in the eyes of the insurer.

» MORE: How to get business insurance for restaurants and food companies

Studies on business insurance and property claims satisfaction from J.D. Power, which surveys thousands of small commercial insurance customers annually, may help you feel more confident that you’ll have a good experience.

The NAIC website is another source of information about how insurance companies perform. You can find out how many complaints people filed with state regulators against an insurer, the reasons for the complaints and whether there are more complaints than expected for a company its size.

Buy business insurance from stable companies with enough money to pay claims. Financial strength is one way to evaluate whether an insurer meets that standard. You can check financial strength through a rating firm such as A.M. Best .

NerdWallet typically recommends considering insurers with ratings of A- or higher.

A company rated B+ or higher has a "good" ability to meet its obligations, in A.M. Best’s opinion. Companies rated below that may be riskier and get more complaints.

» MORE: The ultimate guide to business insurance for freelancers

A licensed commercial insurance broker or agent can help you evaluate your risks and compare what various business insurance companies offer.

Brokers and agents earn money from commissions. In general, brokers offer products from a wider range of business insurance companies than agents do but may charge extra fees. Many states require agents and brokers to disclose their fees and commissions upfront.

Home » Blog » Business Insurance » Best Small Business Health Insurance

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Best Small Business Health Insurance

Are you a small business owner looking to offer health insurance to your employees? Check out our picks for the top five best small business health insurance providers.

WRITTEN & RESEARCHED BY

Expert Contributor

Last updated on Updated August 3, 2023

REVIEWED BY

If you’re looking for small business health insurance, you’ve come to the right place.

Knowing what to look for in small business health insurance plans can be tricky, and the options can keep overwhelming. We’re here to break down some of our favorite providers and walk you through the pros/cons of each.

Read on to learn more about our favorite small business health insurance providers.

Learn More About Our Top Picks

Read more below to learn why we chose these options.

Table of Contents [ hide ] [ show ]

Why Do You Need Small Business Health Insurance?

The 5 best small business health insurance providers, kaiser permanente: best integrated health care, bluecross blueshield: best provider network, unitedhealthcare: best additional coverage, oscar: best telehealth, aetna: best for self-insured, our methodology for choosing the best health insurance options for small business, what you should look for in a health insurance provider, which small business health insurance provider is right for your business, small business health insurance faqs.

Table of Contents

Why We Chose Kaiser Permanente For Small Business Health Insurance

Kaiser permanente pricing, kaiser permanente small business health insurance features, kaiser permanente coverage areas, why we chose bluecross blueshield for small business health insurance, bluecross blueshield pricing, bluecross blueshield small business health insurance features, bluecross blueshield coverage areas, why we chose unitedhealthcare for small business health insurance, unitedhealthcare pricing, unitedhealthcare small business health insurance features, unitedhealthcare coverage areas, why we chose oscar for small business health insurance, oscar pricing, oscar small business health insurance features, oscar coverage areas, why we chose aetna for small business health insurance, aetna pricing, aetna small business health insurance features, aetna coverage areas, how do i get health insurance for my small business, how much does health insurance cost for a small business per employee, how much does small business health insurance cost.

Small business health insurance plans are important for business owners like you for a number of reasons.

• It May Be A Legal Requirement: You may be legally required to offer health care to your employees depending on the size of your business. If your business is considered an Applicable Large Employer (ALE) with 50 or more full-time employees for more than six months out of the year, then you will need to provide your employees with health insurance as a legal requirement of the Affordable Care Act.
• Happy & Healthy Employees Are Better For Business: You can do your part to keep your employees happy and healthy, which leads to a better and more productive work environment. Worries about money and health are high on the list of what creates stress in an employee’s life, but health insurance can relieve that stress and make an employee feel valued.
• Keeps You Competitive In The Job Market: Your competitors are most likely already offering it, so staying competitive in the job market will often come down to health care benefits. The reality is that employees want health insurance and are looking for businesses that offer it. These target employees may not consider job offers that come without the benefit of health insurance.
• Helps With Taxes: You can even save on taxes by offering a health care plan depending on the size of your company and your annual income. If you have fewer than 25 employees, your average yearly income is less than $50,000, and you offer health insurance, then you may be eligible for tax credits. Even if you aren’t, the money you spend on employee health is tax deductible. Employee-paid premiums are tax-exempt. Talk to your accountant or tax professional to see if you qualify.

To learn more about small business health insurance and why you should be offering it to your employees, check out our ultimate guide to small business health insurance.

The best small business health insurance options will be affordable, have ample features for both business owners and employees, and offer unique coverage for your unique business. The best options include Kaiser Permanente, BlueCross BlueShield, United Healthcare, Oscar, and Aetna.

• Low co-pays for members
• Wide access to variety of programs
• Easy to get a quote
• Limited availability
• Can’t see doctors out of network
• Expensive treatment for chronic conditions

Kaiser Permanente is hands down your best option for integrated small business health insurance. With an easy-to-use quote tool that will get you the numbers you need in under 15 minutes, Kaiser is an easy option for busy small business owners.

Kaiser Permanente is a nonprofit, integrated healthcare delivery organization. These organizations are also called integrated managed care consortiums. Kaiser takes a coordinated and connected approach to care, which provides convenience and savings for its members.

By offering comprehensive medical, dental, vision, and specialty coverage in their own facilities, Kaiser is able to provide a consistent member experience across each region more easily. They also save members money by ensuring they don’t have to see providers or use pharmacies/labs that might be out-of-network. The convenience of seeing a provider, getting tests done, filling your prescriptions, and scheduling your next appointment with a different provider, all in the same building on the same day, cannot be understated.

If you value integrated care, are located in a state where Kaiser operates, and don’t want to worry about balancing multiple providers for your employees, Kaiser Permanente is the best option for you.

Pricing for Kaiser will vary based on your location, number of employees, and chosen coverage. They make it easy for you to get a quote in under 15 minutes online. You can get three different kinds of quotes:

• All available plans quote
• Select plans quote
• Detailed quote (quote given for individual employees and their situations)
• Thrive Local community partner network
• Integrated care through a personal care team
• Mobile app for medical records and communication

Kaiser’s coverage is currently limited to California, Colorado, Georgia, Hawaii, Maryland, Oregon, Virginia, Washington, and Washington, D.C. While they have plans to continue expanding, Kaiser is at a slight disadvantage to other insurance providers because they don’t contract with other hospitals/facilities and have to build their own.

Get Started With Kaiser Permanente

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• Partnered with over 1.7 million providers
• Blue365 provides discounts on products and services
• Highly rated by small businesses in most regions
• Poor customer satisfaction in some locations
• Benefits can vary greatly
• Agent must be involved in order to get a quote

BlueCross BlueShield (BCBS) has one of the largest provider networks in the country. It is accepted by over 95% of physicians and 96% of hospitals. This provider is unique in that BCBS isn't one singular entity; it is comprised of 34 independent companies operating under the BCBS name.

BCBS isn't integrated healthcare in that each provider you'll see is a BCBS provider, but it will be easy to find providers that contract with BCBS and are considered "in-network."

BCBS has a specific dedication to serving small businesses. BCBS companies provide coverage for around 7.3 million small business employees.

BCBS is America’s oldest health insurance provider (making it one of the most experienced) and is committed to providing health care coverage that’s high-quality and affordable.

If you’re looking to change insurance providers or offer health insurance for the first time, BCBS is a good option to consider. Because there are so many different providers and facilities that partner with or fall under the BCBS umbrella, there’s a good chance that your employees wouldn’t have to find a new PCP or doctor’s office.

BCBS does offer better options than Kaiser Permanente to those in need of specialty care/procedures, complex care, and management of chronic conditions through their Blue Distinction Specialty Care and Total Care plans.

If you have remote employees in different states/regions, want to work with local providers, or want to take advantage of workplace wellness plans, BCBS is the best choice for you.

In order to obtain a quote from BCBS for your small business, you will have to work with an insurance agent/broker. This means you’ll be waiting longer for your quote.

• Workplace wellness plans
• Blue365 health product discount program
• Local community-based insurance companies
• Telehealth through Anthem
• Chronic/Specialty care management plans

BCBS is available in all 50 states and Washington, D.C., and even offers some international coverage, unlike the other options on our list.

Get Started With BlueCross BlueShield

• Largest insurance provider in America
• Additional coverage beyond medical
• Offers short-term plans
• Some legal action over wrongfully denied claims
• No platinum health insurance plan

The largest insurance provider in the country (and our choice for our Merchant Maverick team), UnitedHealthcare (UHC) is a great choice for business owners looking for more than just medical coverage for their employees. UnitedHealthcare includes options for part-time and seasonal employees, as well as short-term insurance plans.

UHC understands the critical nature of small business health insurance both in retaining/recruiting employees and sustaining productivity/satisfaction. Their small business health insurance plans are designed to help you save money while still providing for your employees’ well-being. They focus on the simplest experience, affordable coverage, and quality supported care for their members.

UHC offers specific plans for businesses with 2-50 employees through their Small Business Store. You can obtain a quote, compare popular plans, and purchase your perfect plan through this store.

Their plans all offer or sometimes even include additional coverage for your employees, like dental, vision, behavioral health, disability, life, and even pet insurance!

If your business has part-time or seasonal employees, you want to provide your employees with other forms of insurance beyond medical or want to take advantage of workplace wellness programs, UHC could be the best choice for you!

Like Kaiser Permanente, UHC makes it easy for you to obtain a quote. Using their Small Business Store, you’ll be able to see what deductibles, copays, and premium amounts are most popular for businesses like yours and get a quote in under 10 minutes.

If you happen to be in a state where the Small Business Store is unavailable, UHC will still provide a quote to you; just visit its website and choose your state.

• Benefit options for part-time and seasonal employees
• In-app services
• Bundle discounts
• Vision, dental, hearing, disability and absence, pet, and life insurance benefits

UHC is available in 49 states (excluding New York) and Washington, D.C.

Get Started With UnitedHealthcare

• $0 virtual urgent care available 24/7
• Convenient and easy-to-use mobile app
• Access to Cigna’s large provider network
• Difficult to get a quote as an employer

Oscar's telehealth experience is far beyond most insurance providers. Alongside their easy-to-use and helpful technology, Oscar is partnered with Cigna, which gives their members access to Cigna's national and local providers. Oscar offers two network options, but both include the Cigna Behavioral Health Network and do not require specialist referrals.

Oscar is about more than just health insurance. They are a company that claims to be there for its members no matter the question or issue, and their 24/7 customer support backs that up.

The Oscar app allows your employees to speak to a doctor online for no cost (for most plans), refill their prescriptions, message their care team, track deductibles, and even receive rewards for meeting fitness goals. From the comfort of home and $0, members are able to talk to a provider 24/7.

Cigna + Oscar also boasts $3 prescriptions for commonly prescribed medications, a team of care guides and a nurse who can answer questions and save members money, and providers dedicated to understanding the language, race, ethnicity, and health situation of every member.

If you’re a company that values accessibility, technology, and resides in one of their limited areas of coverage, Oscar is a great choice for you and your employees.

Cigna + Oscar small business health insurance is similar to BlueCross BlueShield in that you have to work directly with one of their agents to get a personalized quote.

Through their system of $0 virtual urgent care, $0 care teams, and no referrals, Oscar’s website claims that they can save your employees $600 on average per year, according to their 2018 data.

• 24/7 customer support
• $0 virtual urgent care
• Access to Cigna’s network
• Easy-to-use mobile app

Oscar has fairly limited availability at this time. Oscar is available in Georgia, Tennessee, Connecticut, some Arizona counties, some California counties, the Philadelphia metro area, Kansas City, Chicago, and St. Louis.

Because this is a newer and unconventional insurance provider, Oscar is expected to continue to expand to larger areas in the near future.

Get Started With Oscar

• No out-of-pocket expenses for preventative care
• Members choose their own coverage options
• Saves you up to 25% on monthly coverage costs
• High NAIC customer complaint index score
• Subject to IRS reporting requirements

Aetna is our pick for the best self-insurance for small businesses. Opting for self-insurance for your company can save you up to 25% monthly, and the insurer returns a 50% surplus to your business. Aetna also boasts an Excellent financial strength rating, above-average member satisfaction, and $0 copays to visit MinuteClinic locations.

Aetna provides health insurance support specifically designed for small businesses. They offer benefits typically reserved for larger groups, like surplus sharing, lower taxes and fees, and high-cost claims protection.

As an employer, you can receive a monthly payment based on the health trends of your employees for up to 25% savings upfront. You can also access online benefits shopping, enrollment, administration, and other simple and helpful features for you and your employees.

Aetna also offers public exchange options in select states through their Small Business Health Options Program (SHOP) coverage.

Health expense funds included in their consumer-directed plans benefit both employers and employees. Employers receive tax savings from salary deductions, and employees get great care that encourages smart spending.

If you value 24/7 care at little to no cost, want to offer self-insurance to your employees, and want to offer more than just medical coverage, Aetna is a good choice for you!

Like BlueCross BlueShield and Oscar, Aetna’s quoting process is not instant. You will be contacted by an agent with plan options that would work for your business once you complete the information request form.

• Self-insurance funding options
• HSA accounts
• $0 copays for MinuteClinic services
• Medicare, dental, vision, supplemental, and Medicaid plans
• Convenient mobile app

Aetna is available in all 50 states and Washington, D.C. Keep in mind that not all covered regions have MinuteClinic locations, so that benefit might not apply to your plan.

Get Started With Aetna

We considered more than 10 different small business health insurance providers to create this list. We rated these providers based on how easy it is to get a quote, the type of plans offered, features specifically designed to benefit small businesses, member satisfaction, and overall coverage.

We specifically looked at each provider’s personalized quote process. The best companies offer fast, easy, and accurate quotes for prospective new members and tailor their process specifically for owners of small businesses.

We also weigh unincentivized reviews from actual members. That means checking review sites like the Better Business Bureau, G2, and Consumer Reports. We consider members’ experience with these insurance providers and use that to supplement our ranking factors.

We gathered information from each company’s website and representatives to create this list. The Merchant Maverick editorial team reviews information to ensure accuracy.

When deciding on a small business health insurance provider, you need to keep a few things in mind. You want to make sure that you’re getting the best balance of coverage for your employees and cost as a business owner.

The biggest things that will impact the cost of your insurance coverage are:

• Medical history
• Prescription drug coverage
• Number of doctor visits per year
• Available specialists
• Specific employee medical needs
• Plans for pregnancy, surgery, etc.

While it is illegal for you as an employer to ask your employees for health information, you need to ask yourself the following questions:  What benefits do my employees need? How much choice am I giving them? What will their out-of-pocket costs be?

Once you receive a quote from a prospective insurance provider, you will need to evaluate it based on the following criteria:

• Quality of medical care
• Member experience ratings
• Wellness Programs
• Administrative ranking

Learn more about how to understand your small business health insurance quote .

This answer is going to depend on all of the factors we’ve gone over today. Do you want excellent telehealth? Integrated care? Get a quote and compare prospective insurance providers to make sure you’re offering the best small business health insurance plans for your employees.

Want more guidance on your small business health insurance journey? Check out o ur how-to guide and learn how you can offer insurance even if you only have one employee .

To get health insurance for a small business, you’ll need to set a budget, decide on benefits, gather documents, shop around, and compare insurance quotes. Check out our how-to small business health insurance guide.

The cost of health insurance for a small business per employee is going to depend on the insurance provider, benefits, and type of plan. The average cost for small business owners as of 2021 was $547 per employee and $1,175 for family coverage per month.

The average cost for small business owners as of 2021 was $547 per employee and $1,175 for family coverage per month. Read more about how to understand your business insurance quote .

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The vendors that appear on this list were chosen by subject matter experts on the basis of product quality, wide usage and availability, and positive reputation.

Merchant Maverick’s ratings are editorial in nature, and are not aggregated from user reviews. Each staff reviewer at Merchant Maverick is a subject matter expert with experience researching, testing, and evaluating small business software and services. The rating of this company or service is based on the author’s expert opinion and analysis of the product, and assessed and seconded by another subject matter expert on staff before publication. Merchant Maverick’s ratings are not influenced by affiliate partnerships.

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The Burden of Health Insurance Premiums on Small Business

June 26, 2024

The growing cost of healthcare is often cited as a concern both for owners of small businesses and their employees, with potential implications for the sector to contribute to the growth of the U.S. economy. For small businesses that provide health insurance benefits, insurance premiums may be a material portion of their cost of conducting business. Among small employers that do not offer health insurance, 65 percent cited cost as the most important reason (Wade and Oldstone 2023). Health insurance premiums may also be of particular concern to the majority of U.S. workers—54.5 percent—that are covered through employer-sponsored health plans (Keisler-Starkey, Bunch, and Lindstrom 2023). Many of these workers are employed at small businesses—over 27 percent of private sector employees in 2023 were employed in firms with 1 to 49 employees. 1

Concerns about the impact of healthcare costs on the small business sector may be grounded in assessments of the size and growth of overall healthcare expenditures. Health care spending was an estimated 18.3 percent of the U.S. gross domestic product (GDP) in 2021 and is projected to grow to 19.6 percent of GDP in 2031 (Keehan et al. 2023). However, these aggregate analyses may not reflect the financial outcomes of individual small businesses and their owners making dynamic choices in the health insurance market. 

To better document these outcomes, we analyzed small businesses health insurance premium payments, focusing on the five years from 2018 to 2023. Our unique data asset allowed us to follow cohorts of firms over time, providing insights into the small business experience of paying for health insurance relative to other costs. Over the last five years, nonemployer health insurance premiums payments have increased by 19 percent, and employer payments have increased by 33 percent, implying compound annual growth rates of 3.5 percent and 5.9 percent, respectively. We also used cross-sectional samples to illustrate the range of premium payments. Together, these data reflect how firms adapted to their changing prices and workforces, experiences which are not necessarily captured by benchmarks alone. Our findings:

Health insurance premiums are an increasing share of operating expenses for nonemployer businesses, but tax credits could be moderating premium growth for some.

• Health insurance premiums comprise a larger share of compensation costs for employer businesses with lower revenues.  

Data asset and methodology

We designed our research samples to analyze small business owners who purchase health insurance for themselves and small businesses that provide health insurance benefits to their employees. As in much of our small business research, the de-identified firms in our sample all had Chase Business Banking deposit accounts that met our criteria for being active and small. In addition, we required evidence of regular electronic health insurance premium payments. We used payroll activity and estimated operating expenses to classify firms as nonemployers or employers.

Our nonemployer sample included small business owners who paid health insurance premiums for themselves and their families. Our employer sample included small businesses who made both health insurance and payroll payments. While businesses with 50 or more employees face penalties if they do not offer health insurance benefits, smaller businesses do not. 2 As a result, the typical firm in our employer sample may be larger than those in samples unrelated to health insurance. The Appendix provides additional details about our sample construction.

The vast majority—over 81 percent of 33 million—small businesses in the U.S. have no employees (SBA 2023). Nonemployer small business owners must purchase health insurance for themselves and their families on the individual market if they do not have coverage through another source, such as a family member’s plan. In 2023, an estimated 18.2 million people were enrolled in the individual market (Ortaliza, Amin, and Cox 2023). They may enroll in a plan through one of the Affordable Care Act (ACA) marketplaces 3 or buy directly from an insurer. For these small business owners, health insurance is one of the many expenses they face.

We analyzed nonemployer health insurance costs by (1) calculating the median health insurance burden for a cohort of firms that paid premiums over five years; and (2) looking at the range of health insurance payments made by nonemployers since 2014. Each method illustrates the experiences of business owners purchasing health insurance and how those experiences are not completely captured by statistics on average premiums, which we also show for context.

Health insurance premiums are an increasing share of operating expenses among firms that continue to hold health insurance. First, we considered a longitudinal panel of firms that consistently paid health insurance premiums over five years, in order to assess the changes experienced by individual firms. In prior research, we noted that the typical health insurance burden—the share of operating expenses devoted to health insurance premiums—increased for a longitudinal panel from 2014 and 2017 (Farrell, Wheat, and Mac 2017). Health insurance premiums grew faster than other expenses, leading to increasing health insurance burdens. 

Figure 1: Health insurance premiums as a share of expenses have increased for nonemployers.

Two line charts; where the left chart shows median health insurance premiums and operating expenses indexed to their value at the start of the period, September 2018, through August 2023, for nonemployer firms and the right chart shows the median health insurance burden for nonemployer firms. In the left chart, median indexed health insurance premiums increased from 1 in September 2018 to 1.19 in August 2023. Median indexed operating expenses decreased slightly from 1 in September 2018 to 0.96 in August 2023. Median indexed operating expenses dropped to their lowest point of 0.82 in May and rebounded to 0.94 in July of 2020. The right chart shows a steady increase in median health insurance burden from 3.3% in September 2018 to 4% in August 2023. The median health insurance burden spiked in May of 2020 to 4.6% and fell to 3.7% by July 2020. 

We updated this analysis with a new longitudinal panel of 1,655 firms with health insurance payments in the last five years of our sample, ending in August 2023. 4 Firms in this sample were actively operating and paid health insurance premiums in each month of the five-year period.

The left panel of Figure 1 shows the median indexed health insurance premiums and operating expenses for the firms in our panel. That is, each firm’s expenses and health insurance premiums were divided by their respective values at the beginning of the period so that the indexed values were 1.0 in September 2018. The values over time show the cumulative change in each series. Over the five-year period, health insurance expenses increased by about 19 percent for the median firm, or a compound annual growth rate (CAGR) of 3.5 percent. For a hypothetical firm that paid $400 a month in premiums in 2018, premiums in 2023 had increased to $476. Despite some fluctuations, operating expenses were relatively flat. This is somewhat surprising since the last five years included a period of materially higher inflation—one dollar in 2018 was equivalent to $1.22 in 2023, representing inflation of 22 percent. 5 How firms managed their expenses in a period of historically high inflation is beyond the scope of this report, but our results suggest that they were able to find cost-saving measures as some expenses—such as health insurance premiums—were increasing.

The right panel of Figure 1 shows the median health insurance burden increased from over 3 percent of operating expenses to about 4 percent. 6 This increase is not due to changes in the composition of firms—all firms in the sample are present for the entire duration of the analysis. The noticeable increased burden in early 2020 was likely not due to a marked increase in premiums but rather a decrease in overall expenses at the onset of the COVID-19 pandemic (Farrell, et al. 2020). These results are consistent with health insurance premiums increasing faster than other operating expenses for the typical nonemployer.

Typical premium payments have mostly been stable, but many small business owners are paying substantially higher premiums in 2024 as compared to 2014. While the consistent sample of firms in our longitudinal panel has advantages, it may not capture the full range of experiences that small business owners have in the individual health insurance market. We also used a cross-sectional sample of nonemployer firms that paid health insurance premiums between 2014 and 2023. Firms need not make premium payments throughout the period and may exit the sample. The resulting sample included approximately 15,000-26,000 firms each month. This larger sample allowed us to analyze how the distribution of health insurance premiums changed over time.

Figure 2: Median nonemployer health insurance premiums have remained stable, while the distribution of premium payments has widened.

Line chart showing the 25th, 50th, and 75th percentiles of monthly health insurance premiums for nonemployer firms from January 2014 through August 2023.The 25th percentile decreased from $237 in January 2014 to $165 in August 2023. The median decreased from $409 in January 2014 to $390 in August 2023. The 75th percentile increased from $708 in January 2014 to $1,081 in August 2023.

Figure 2 shows that while the median and 25 th percentile payments have remained stable or decreased since 2014, the distribution of payment amounts has widened. The median payment in August 2023 was $389, very similar to the median payment of $409 in January 2014. The 25 th percentile payment decreased from $237 to $165 over this same period. We did not inflation-adjust these amounts, suggesting at least a directional decrease in inflation-adjusted median payments. However, the lack of a clearly appropriate deflator limited our ability to size this decrease. The Appendix discusses two measures of health insurance costs and why we chose not to use them.

By contrast, the 75 th percentile payment in August 2023 was $1,081—53 percent higher than the 75 th percentile payment of $708 in 2014. Several forces could explain this pattern: The mix of individual and family plans in our sample could have changed; the mix of plan types (e.g., bronze, silver, gold, and platinum) could have changed; and subsidies could have kept payments from rising, particularly on the lower end of the distribution.

Changes in premium payments may reflect differences in product choices or differential use of subsidies over time. First, consider the differences between premiums for individuals and families. Family plans typically cost more since they cover two or more people, including dependents. In 2014, the average unsubsidized individual premium was $271, compared to $667 for a family plan (eHealth 2021). 7 In 2014, the median payment of $406 in our sample would be consistent with a mix of individual and family plans. In 2021, the median in our sample was similar to the $450 average monthly individual unsubsidized premium among eHealth applications. Notwithstanding the differences between medians and averages, 8 this could be consistent with a decrease in the share of small business owners in our sample who purchased family plans. Our sample may include fewer business owners with families over time, or their family members could have increasingly acquired health insurance through other means, such as employer-sponsored plans.

Second, the share of small business owners choosing lower-priced plans may have increased over time. Data from health insurance applications on the individual market showed a decrease in overall customers choosing platinum plans, from 6 percent in 2015 to 1 percent in 2021, and an increase in customers choosing gold plans, from 13 percent to 17 percent over the same years (eHealth 2021). Premiums are typically stratified by metal tiers, as shown in Figure 3. For example, the average lowest-cost gold plan premium was $526 in 2018, compared to $456 and $341 for lowest-cost silver and bronze plans, respectively (KFF State Health Facts 9 , 10 ).

Figure 3: Individual health plan premiums decreased or remained stable since 2018.

Line chart showing the average monthly premium for bronze, silver, gold, and benchmark premiums from 2018 to 2024. Average premiums across bronze and silver plans increased from $341 and $456 in 2018 to $364 and $468 in 2024, respectively, while the gold and benchmark plan decreased from $526 and $481 in 2018 to $488, and $477 in 2024, respectively.

Moreover, average monthly premiums were stable or declined since 2018. Figure 3 shows average individual premiums between 2018 and 2024. The average benchmark premium, which represents the second-lowest-cost silver plan for a 40-year-old was $481 in 2018 and $438 in 2022. The benchmark premium increased to $477 in 2024 but was nevertheless lower than the average in 2018.

Third, subsidies could have kept premium payments stable, particularly at the lower end of the premium distribution. For those purchasing insurance from ACA marketplaces, advance premium tax credits (APTC) may lower the monthly premiums. Households are generally eligible if their income is between 100 and 400 percent of the Federal Poverty Level (FPL), although the criteria was expanded in to include incomes beyond 400 percent of the FPL with the passage of the American Rescue Plan Act (ARPA) in 2021. The ARPA provisions are currently scheduled to sunset at the end of 2025 (Fernandez 2024). 

Figure 4: Advance premium tax credits reduced monthly health insurance payments.

Bar chart showing the average marketplace premiums, advance premium tax credits (APTC), and average premiums after APTC for Federally-facilitated and State-based health insurance exchanges from 2017 through 2023.Average premiums across all consumers increased from $470 in 2017 to $605 in 2023. Average advance premium tax credits increased from $373 in 2017 to $527 in 2023. The average premium after APTC decreased from $151 in 2020, the first year it was reported, to $124 in 2023.

The Center for Medicare and Medicaid Services (CMS) reported that the vast majority of participants enrolled in ACA marketplace plans also received APTC. In 2017, 84 percent of the 9.7 million ACA marketplace enrollees were also enrolled in APTC. That share increased over time: in 2023, 91 percent of the 15.7 million marketplace enrollees qualified for APTC. The APTC substantially decreased the monthly premium. Figure 4 shows that in 2023, the average monthly premium for marketplace enrollees was $605, but the average premium after APTC for all consumers was $124, as not all marketplace enrollees qualified for APTC. Despite increasing average premiums since 2021, the average premium after APTC for all consumers has decreased since 2020.

We cannot observe whether premiums paid by small business owners in our sample benefited from APTC. 11 However, the estimated business earnings among businesses with lower premium payments were conceivably associated with incomes that could qualify for the tax credits. The FPL for an individual in 2023 was $14,480 and $30,000 for a family of four. 12 Incomes at 400 percent of FPL would be $57,920 and $120,000 for an individual and a family of four, respectively.

Among the business owners with health premiums below the 25 th percentile in 2023, which was about $165 per month, the median annual business earnings (i.e., revenues less expenses, as estimated with deposit account transactions) was about $16,000. For business owners with premiums between the 25 th and 50 th percentiles, or about $165 to $400 per month, median business earnings in 2023 was about $20,000. These estimates may not reflect all the income that a business owner earned in a year: for example, owners could have taken draws from their business accounts or have other wage or investment income. Nevertheless, our estimates suggest that some business owners may have been eligible for APTC, lowering their premiums. That would be consistent with relatively little change in the lower end of the premium payment distribution while the upper end increases.

The typical nonemployer firm in our longitudinal panel experienced increasing health insurance premiums over the last five years (Figure 1), while the median firm in our cross-sectional sample did not (Figure 2), although the wide distribution illustrates that some firms experienced increasing premiums. These seemingly inconsistent trends could be reconciled by changes in plan types within each sample, as discussed above. The cross-sectional sample allows entry and exit, showing the choices made by varying sets of firms. However, the longitudinal panel of a fixed set of firms may better illustrate the experiences of small business owners over time. The panel may be capturing the increasing premiums of business owners who renew the same or similar insurance policy.

Although health insurance premiums have increased since 2014, evidence from our sample as well as average ACA marketplace premiums suggest that the increases have moderated since 2019. Moreover, some business owners may be able to use tax credits to reduce their monthly premiums or choose different plans. However, business owners may nevertheless experience increasing insurance premiums if they generally renew the same policy.

Health insurance premiums comprise a larger share of compensation costs for employer businesses with lower revenues.

Businesses with less than 50 employees are not subject to penalties related to the employer shared responsibility provisions of the ACA (Whittaker 2016), but small employers may nevertheless choose to offer health insurance as part of competitive pay and benefits packages for their employees. More than 94 percent of employer establishments in the U.S. have 1-49 employees, and more than half (54 percent) have fewer than 5 employees 13 (Hait 2021).

Although the total cost employers pay for health benefits would generally be expected to increase with the number of employees, the cost may vary based on several factors. For example, employers often do not offer coverage to part-time or temporary employees. Employers who offer health benefits may nevertheless cover only some eligible employees if some of them choose coverage elsewhere, such as through a family member’s plan. In 2023, an estimated 82 percent of employees at small firms 14 offering health benefits were eligible for coverage, and 71 percent elected coverage (Claxton et al. 2023). The total cost could also vary based on the mix of individual and family plans selected by employees, as well as the employers’ policies on cost-sharing.

With so many variations in employer-sponsored health benefits, it can be difficult to discuss the typical experience of small employer businesses. To facilitate this discussion, we calculated a health insurance payroll burden for small employers in our sample. This measure is the monthly health insurance payment divided by the sum of monthly payroll and the health insurance payment. The denominator is a proxy for the monthly cost of payroll and benefits, and the ratio can be interpreted as the health insurance share of total compensation. This estimate would be closer to the upper bound of such a measure since we do not have data on the cost of other benefits.

Figure 5: Health insurance premiums were a larger share of compensation costs for smaller firms.

Four kernel densities showing the distribution of health insurance payroll burdens faced by employer firms broken into four four groups by annual revenue bin; below $600,000, $600,000 to $1.2 million, $1.2 million to $2.4 million, and $2.4 million and above. Firms with lower annual revenues had larger health insurance payroll burdens. Firms with annual revenues below $600,000, from $600,000 to $1.2 million, from $1.2 million to $2.4 million, and $2.4 million and above had median health insurance payroll burdens of 11.7%, 9.3%, 8.0%, and 7.1%, respectively.

Smaller firms with fewer employees may be less able to negotiate favorable insurance premiums compared to their larger counterparts. Figure 5 shows the distributions of the health insurance payroll burden 15 by revenue quartile. Among firms with less than $600,000 in annual revenues, the median health insurance payroll burden was nearly 12 percent, compared to 7 percent among firms with revenues greater than $2.4 million. The distributions also show that material shares of firms have higher burdens, implying that health insurance is a sizable cost for small employers.

In comparison, the U.S. Bureau of Labor Statistics reported that health insurance was 6.8 percent of total compensation for private industry workers in 2023 (BLS 2024). Their estimate of insurance costs (including health, life, and disability insurance benefits) for firms with 1-49 workers is 5.8 percent of total compensation and 7.1 percent for firms with 50-99 workers. Larger firms may be more likely to offer these benefits, which may result in higher estimated costs per worker because all workers are included in the cost estimates, including those that do not have access to those benefits. In contrast, our estimates in Figure 5 included only firms with health insurance. Each firm may have employees who cannot or do not participate in the health plan, but all firms in our sample made health insurance payments.

Figure 6: Businesses with fewer employees paid higher monthly premiums.

Two line charts showing average annual premiums which we then divide by 12 from 2018 through 2022, where the left chart shows these average monthly premiums, by number of employees; less than 10, 10 through 24, and 25 through 99, and the right chart shows average monthly premium by coverage type; Single, Plus one, and Family.In the left chart average monthly premiums were smaller for firms with more employees and increased steadily across all employer sizes. The average monthly premium for firms with less than 10 employees, firms with between 10 and 24 employees, and firms with 25 to 99 employees increased from $581, $555, and $528 in 2018 to $647, $624, and $617 in 2022, respectively. The right chart shows average monthly premiums for Single, Plus one, and Family plans increased steadily from $556, $1,087, and $1,525 in 2018 to $626, $1,174, and $1,701, respectively.

Other data sources also document higher health insurance premiums among smaller firms. The left panel of Figure 6 shows the average monthly premium for a single person plan among firms of different sizes. Firms with fewer than 10 employees paid the highest premiums. This is consistent with our finding that smaller firms, such as those with less than $600,000 in annual revenues, have higher health insurance burdens than their larger counterparts, such as those with more than $2.4 in annual revenues. 

Figure 7: Health insurance premiums and payroll expenses both increased by more than 30 percent since 2018.

Two line charts; where the left chart shows median health insurance premiums and payroll expenses indexed to their values at the start of the period, September 2018, through August 2023 for employer firms and the right chart shows the median health insurance burden for employer firms. In the left chart, median indexed health insurance premiums increased from 1 in September 2018 to 1.33 in August 2023. Median indexed payroll expenses increasedfrom 1 in September 2018 to 1.42 in August 2023. The right chart shows a decrease in median health insurance payroll burden from 9.3% in September 2018 to 8.8% in August 2023.

The health insurance payroll burden may vary across firms due to the mix of plans or the ability of firms to negotiate rates. However, as Figure 6 shows, average employer-sponsored health insurance premiums have increased over time for the same type of plan. Even absent premium changes, a firm’s health insurance payroll burden could vary over time as employees choose different plans or no longer choose to receive insurance through the employer, or as the workforce composition changes. Figure 7 shows how the median health insurance payroll burden changed over time for a sample of 1,863 employers that consistently made health insurance payments over five years. 16

The left panel illustrates the median indexed firm-level health insurance premiums and payroll. That is, each firm’s payroll expenses and health insurance premiums were divided by their respective values at the beginning of the period so that the indexed values were 1.0 in September 2018. The values over time show the cumulative change in each series. Health insurance costs increased by 33 percent for the typical firm in the panel, while payroll increased by 42 percent, or CAGRs of 5.9 percent and 7.3 percent, respectively. For example, a hypothetical firm with monthly payroll expenses of $10,000 and health insurance premiums of $900 in 2018 would be paying $14,200 in monthly payroll and nearly $1,200 in monthly health insurance premiums in 2023. Consequently, the burden decreased slightly since 2018 and has remained relatively stable around 9 percent in the last three years. As with the health insurance expense burden for nonemployers shown in Figure 1, the payroll burden increased in early 2020 for employer firms. This may have been related to the reduction in payroll at the onset of the COVID-19 pandemic.

Increases in payroll expenses and health insurance premiums could result from increasing prices as well as quantities. For example, payroll expenses could increase as a firm raises wages or hires additional employees, or a combination of both. For context, the Employment Cost Index, which measures cost changes based on a fixed sample, showed an increase of 22 percent between 2018 and 2023. 17 Similarly, health insurance payments could increase if plan premiums increase, different plans are selected, or more employees are covered. The right panel of Figure 6 shows how average monthly premiums for single, plus one, and family plans changed between 2018 and 2022. Family plans, which typically cover an employee and her family, cost about $1,700 a month in 2022, compared to about $600 for an employee-only single plan. KFF has also documented increases in both single and family plan premiums in employer-sponsored health benefits. 18 For example, annual premiums for single coverage in 2023 was $8,435 and $6,896 in 2018, or $703 and $575 monthly, respectively.

Despite rising premiums, the typical firm in our longitudinal sample experienced declining health insurance payroll burdens in the last few years. This could be the result of payroll increasing at higher rates, changing workforce composition, changing plan selections, requiring workers to increase their contributions, or combinations of these and other factors that could mitigate costs.

Health insurance premiums are a material portion of total compensation expenses. Although small employers with fewer than 50 employees do not face penalties for not offering health benefits, those that do may find that the health insurance premiums are a larger share of compensation costs for the smallest firms.

Implications

In the U.S., health insurance is important for managing health care costs, and the majority of people—54.5 percent—get coverage through employer-sponsored plans (Keisler-Starkey, Bunch, and Lindstrom 2023). Small employers who want to offer health benefits to their employees may find it more burdensome compared to their larger counterparts. As policymakers and decision makers consider how to make health benefits accessible and affordable for over 9 million 19 self-employed workers and the 66 million 20 who work at small businesses, we offer the following implications of our findings:

Health insurance premiums are just one part of the total cost of health care. In this report, we analyzed health insurance premiums relative to operating expenses and payroll, which are important measures of the burden small businesses face. For many small businesses and their employees, premiums may be the largest component of health care costs. However, the premium payments do not tell us about the plan deductibles or employee contributions, which are also part of the total health care costs that small businesses and their employees face, especially if some businesses manage their costs by shifting costs to their employees.

Cost is just one aspect of the health insurance burden small businesses face. Health insurance premiums are material costs for both nonemployer and employer businesses. However, the value from these premiums, such as the quality of care received may be opaque. In addition, small businesses must navigate a complex health insurance market to find suitable health plans as well as a complex tax system of tax credits and potential penalties. Large businesses may have the staff to manage these issues, but small businesses may struggle to understand all their options. A combination of policy and product solutions could address these challenges.

Health insurance cost and availability may affect entrepreneurship and economic growth. Lack of health insurance could dissuade potential entrepreneurs from starting businesses that could contribute to innovation and economic growth. For employer businesses, health insurance benefits are part of the total compensation required to recruit and retain the talent needed to grow their businesses. Moreover, both payroll and health insurance premium payments have grown substantially in recent years. While most small businesses may not grow large enough to impact economic growth, the business starts, growth, and exits are important for how the economy reallocates its resources. An economy without this business dynamism risks stagnation.

Our research sample included de-identified firms with Chase Business Banking deposit accounts who made regular health insurance premium payments and satisfied our activity filters. The activity criteria of at least $500 in outflows and 10 transactions in each month ensured that our analyses of health insurance payments relative to business expenses and payroll excluded dormant firms while allowing for variations of business activity.

To ensure that we were capturing regular health insurance payments, we examined firm activity using rolling three-month windows. A firm was included in the sample in a focal month if it made at least three health insurance premium payments during the last three months, and the amount of the payment was the average across the payments. This allowed for variation in timing that was still relatively consistent. For example, payments made towards the end of a short month such as February sometimes posted at the beginning of the next month, which made it appear as though the health insurance payment was twice as large in March and zero in February. 

We divided our sample into nonemployers and employers based on evidence of electronic payroll and estimated annual expenses. Again, we employed rolling three-month windows to determine whether a firm had regular payroll. Firms in our employer sample showed evidence of payroll averaging at least $500 per month in at least three transactions during the three-month window. This relatively low threshold allowed for fluctuations in payroll among employers. Nonemployers did not have payroll in any of the three months and their annual expenses were under $500,000. Firms with relatively large expenses are likely employers even though we may not observe their payroll payments.

For both nonemployers and employers, we created a cross-sectional sample and a longitudinal panel of firms. Firms included in any given month in a cross-sectional sample met the criteria outlined above for the three months ending in the focal month. Firms entered and exited the sample as their circumstances changed. For example, a firm could exit the nonemployer sample if the firm began making payroll payments, if the business owner discontinued health insurance payments, or if the firm closed its deposit accounts. Consequently, the composition of the cross-sectional sample changes over time, although all included firms meet the outlined criteria.

Each longitudinal panel is a balanced panel: the sample consists of firms that meet the criteria in each month of the sample. These firms pay health insurance premiums consistently and do not transition between nonemployer and employer statuses. An advantage of these longitudinal panels is that the composition does not change over time; changes in the typical experience in these samples are not due to changes in the composition of the sample. Each firm may nevertheless undergo changes, such as increased revenue or adding more employees, but they continued to meet the criteria for paying health insurance premiums and remaining either a nonemployer or employer. Only a small fraction of nonemployers become employers (Farrell, Wheat, and Mac 2018).

The disadvantage of such panels is that relatively fewer firms can meet the criteria for every month in a period of several years. Our nonemployer panel included 1,655 firms, and our employer panel included 1,863 firms. About half of new establishments survive five to six years, 21 so a five-year panel consists of firms that have survived longer than many of their counterparts. However, since businesses with fewer than 50 employees do not face penalties if they do not offer health insurance, it may be that the ones that do provide the benefit are also the ones that are more stable.

Table A1: Industry shares of each sample of small businesses paying health insurance premiums

Table showing the share of small businesses by industry across samples; nonemployer panel, employer panel, nonemployer cross-section, employer cross-section. Shares for the cross-section samples were calculated using data from August 2023.Industries shown are other professional services, health care services, real estate, construction, repair and maintenance, retail, wholesalers, personal services, high-tech services, restaurants, metal and machinery, and high-tech manufacturing, in that order. Shares range from 29 percent to less than one percent.

Table A1 shows the shares of each sample by industry. Professional services and health care services comprised material shares of each sample. Retail businesses and restaurants represented relatively small shares of each sample, perhaps reflecting industry practices.

Measures of health insurance inflation

The measures of health insurance payments documented in this report have not been adjusted for inflation. One reason why we chose not to do so is because it was not clear what an appropriate adjustment would be. We considered two measures: the health insurance component of the medical care Consumer Price Index (CPI) and the Employment Cost Index for health insurance. While each provides information on how health insurance has changed over time, we decided against using either for the following reasons.

Medical care index, health insurance component The U.S. Bureau of Labor Statistics (BLS) divides the CPI into eight major groups, one of which is the medical care index, and medical care services is the largest component. 22 Most of medical care services consists of hospital services and physicians’ services, and the remaining part represents health insurance. The BLS defines the health insurance CPI using a retained earnings methodology that accounts for the utilization of health benefits. 23 It is not clear that this would be an appropriate deflator, and its volatility would make it difficult to interpret premiums deflated using this index.

Employment Cost Index, health insurance benefits The BLS measures the changes in compensation with the Employment Cost Index (ECI). A health insurance benefits series shows 12-month percentage changes in health benefit costs for private industry workers. However, the BLS urges caution in using this series because of substantial nonresponse to these questions. 24

“ACA Index Report on Unsubsidized Consumers.” eHealth. 2021. https://news.ehealthinsurance.com/_ir/68/20217/ACA_Unsubsidized_Index_Report_2021.pdf .

“ACA Index Report on Unsubsidized Consumers in the 2020 Open Enrollment Period.” eHealth. 2020. https://news.ehealthinsurance.com/_ir/68/20205/eHealth_2020_ACA_Index_Report_Unsubsidized_Consumers.pdf .

Claxton, Gary, Matthew Rae, Aubrey Winger, and Emma Wager. 2023. “Employer Health Benefits 2023 Annual Survey.” KFF. https://files.kff.org/attachment/Employer-Health-Benefits-Survey-2023-Annual-Survey.pdf .

“Early 2018 Effectuated Enrollment Snapshot.” Center for Medicare and Medicaid Services. 2018. https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/2018-07-02-Trends-Report-1.pdf .

“Early 2019 Effectuated Enrollment Snapshot.” Center for Medicare and Medicaid Services. 2019. https://www.cms.gov/sites/default/files/2019-08/08-12-2019%20TABLE%20Early-2019-2018-Average-Effectuated-Enrollment.pdf .

“Early 2020 Effectuated Enrollment Snapshot.” Center for Medicare and Medicaid Services. 2020. https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/Early-2020-2019-Effectuated-Enrollment-Report.pdf .

“Effectuated Enrollment: Early 2021 Snapshot and Full Year 2020 Average.” Center for Medicare and Medicaid Services. 2021. https://www.cms.gov/document/Early-2021-2020-Effectuated-Enrollment-Report.pdf .

“Effectuated Enrollment: Early 2023 Snapshot and Full Year 2022 Average.” Center for Medicare and Medicaid Services. 2023. https://www.cms.gov/files/document/early-2023-and-full-year-2022-effectuated-enrollment-report.pdf .

“Employer Costs for Employee Compensation – December 2023.” U.S. Bureau of Labor Statistics. 2024. U.S. Department of Labor News Release. https://www.bls.gov/news.release/pdf/ecec.pdf .

“Frequently Asked Questions, March 2023.” U.S. Small Business Administration. 2023. https://advocacy.sba.gov/wp-content/uploads/2023/03/Frequently-Asked-Questions-About-Small-Business-March-2023-508c.pdf .

Farrell, Diana, Christopher Wheat, and Chi Mac. 2017. “Paying a Premium: Dynamics of the Small Business Owner Health Insurance Market.” https://www.jpmorganchase.com/content/dam/jpmc/jpmorgan-chase-and-co/institute/pdf/institute-smb-health-insurance.pdf .

Farrell, Diana, Christopher Wheat, and Chi Mac. 2018. “Growth, Vitality, and Cash Flows: High-Frequency Evidence from 1 Million Small Businesses.” JPMorgan Chase Institute. https://www.jpmorganchase.com/content/dam/jpmc/jpmorgan-chase-and-co/institute/pdf/institute-growth-vitality-cash-flows.pdf .

Farrell, Diana, Christopher Wheat, Chi Mac, and Bryan Kim. 2020. “Small Business Expenses during COVID-19.” JPMorgan Chase Institute. https://www.jpmorganchase.com/institute/research/small-business/report-small-business-expenses-during-COVID-19 .

Fernandez, Bernadette. 2024. “Health Insurance Premium Tax Credit and Cost-Sharing Reductions.” Congressional Research Service report R44425. https://crsreports.congress.gov/product/pdf/R/R44425 .

Hait, Andrew W. 2021. “The Majority of U.S. Businesses Have Fewer Than Five Employees.” U.S. Census Bureau. https://www.census.gov/library/stories/2021/01/what-is-a-small-business.html .

Keehan, Sean P., Jacqueline A. Fiore, John A. Poisal, Gigi A. Cuckler, Andrea M. Sisko, Sheila D. Smith, Andrew J. Madison, and Kathryn E. Rennie. 2023. “National Health Expenditure Projections, 2022-31: Growth To Stabilize Once the COVID-19 Public Health Emergency Ends.” Health Affairs, Vol. 42 No. 7. https://doi.org/10.1377/hlthaff.2023.00403 .

Keisler-Starkey, Katherine, Lisa N. Bunch, and Rachel A. Lindstrom. 2023. “Health Insurance Coverage in the United States: 2022.” U.S. Census Bureau. https://www.census.gov/content/dam/Census/library/publications/2023/demo/p60-281.pdf .

Ortaliza, Jared, Krutika Amin, and Cynthia Cox. 2023. “As ACA Marketplace Enrollment Reaches Record High, Fewer Are Buying Individual Market Coverage Elsewhere.” KFF. https://www.kff.org/private-insurance/issue-brief/as-aca-marketplace-enrollment-reaches-record-high-fewer-are-buying-individual-market-coverage-elsewhere/ .

Wade, Holly and Madeleine Oldstone. 2023. “Small Business Health Insurance Survey.” NFIB Research Center. https://strgnfibcom.blob.core.windows.net/nfibcom/Health-insurance-survey-NFIB.pdf .

Whittaker, Julie M. 2016. “The Affordable Care Act’s (ACA) Employer Shared Responsibility Determination and the Potential Employer Penalty.” Congressional Research Service report R43981. https://crsreports.congress.gov/product/pdf/R/R43981 . 

Acknowledgments

We thank Lucas Nathe and Karmen Hutchinson for their hard work and vital contributions to this research, and the Morgan Health team for their partnership in the work. Additionally, we thank Oscar Cruz, Annabel Jouard, and Alfonso Zenteno for their support. We are indebted to our internal partners and colleagues, who support delivery of our agenda in a myriad of ways and acknowledge their contributions to each and all releases.

We would like to acknowledge Jamie Dimon, CEO of JPMorgan Chase & Co., for his vision and leadership in establishing the Institute and enabling the ongoing research agenda. We remain deeply grateful to Peter Scher, Vice Chairman; Tim Berry, Head of Corporate Responsibility; Heather Higginbottom, Head of Research, Policy, and Insights and others across the firm for the resources and support to pioneer a new approach to contribute to global economic analysis and insight.

This material is a product of JPMorgan Chase Institute and is provided to you solely for general information purposes. Unless otherwise specifically stated, any views or opinions expressed herein are solely those of the authors listed and may differ from the views and opinions expressed by J.P. Morgan Securities LLC (JPMS) Research Department or other departments or divisions of JPMorgan Chase & Co. or its affiliates. This material is not a product of the Research Department of JPMS. Information has been obtained from sources believed to be reliable, but JPMorgan Chase & Co. or its affiliates and/or subsidiaries (collectively J.P. Morgan) do not warrant its completeness or accuracy. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. No representation or warranty should be made with regard to any computations, graphs, tables, diagrams or commentary in this material, which is provided for illustration/reference purposes only. The data relied on for this report are based on past transactions and may not be indicative of future results. J.P. Morgan assumes no duty to update any information in this material in the event that such information changes. The opinion herein should not be construed as an individual recommendation for any particular client and is not intended as advice or recommendations of particular securities, financial instruments, or strategies for a particular client. This material does not constitute a solicitation or offer in any jurisdiction where such a solicitation is unlawful.

Suggested Citation 

Wheat, Chris and Chi Mac. 2024. “The Burden of Health Insurance Premiums on Small Business.” JPMorgan Chase Institute.  https://www.jpmorganchase.com/institute/all-topics/business-growth-and-entrepreneurship/small-business-health-insurance-burdens

See https://www.bls.gov/web/cewbd/table_f.txt . 

See https://www.irs.gov/affordable-care-act/employers/employer-shared-responsibility-provisions for details on the ACA’s employer shared responsibility provisions. 

The ACA required each state to have a health insurance exchange. Most states use the Federal marketplace at Healthcare.gov. For the 2024 plan year, there were 19 state-based exchanges and three states exchanges that used the Federal platform ( https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/state-marketplaces ). We use the term “ACA marketplaces” to refer to the Federal and state-based exchanges collectively. 

The median burdens of this longitudinal panel should not be directly compared to that of our 2018 report. This panel covers a longer period and includes a different set of firms. Moreover, we have improved our algorithm for estimating operating expenses based on deposit transaction outflows. 

Based on the BLS Consumer Price Index inflation calculator ( https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=1&year1=201809&year2=202308 ). 

We also analyzed the burdens for three- and four-year panels ending in August 2023. The sample sizes were larger, with 3,045 and 2,298 firms, respectively, but the median health insurance expense burdens were very similar during the overlapping time periods. 

Based on rates quoted for health insurance for unsubsidized customers at eHealth, a health insurance broker. https://news.ehealthinsurance.com/_ir/68/20217/ACA_Unsubsidized_Index_Report_2021.pdf . 

Outliers can have large effects on averages. Medians are not affected by outliers; by definition, half the values are above the median, and half are below. 

KFF analysis of ACA Marketplace premiums. Data from “Average Marketplace Premiums by Metal Tier, 2018-2024,” are available at  https://www.kff.org/affordable-care-act/state-indicator/average-marketplace-premiums-by-metal-tier/?activeTab=graph&currentTimeframe=0&startTimeframe=6&selectedRows=%7B%22wrapups%22:%7B%22united-states%22:%7B%7D%7D%7D&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D .

The data in Figure 3 are from KFF and presented without alteration. The data are based on KFF analysis of data from Healthcare.gov, state rate review websites, state plan finder tools, and CMS analysis of rate changes in the benchmark silver plan, October 2023. KFF’s website content is licensed under a  Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) license (https://www.kff.org/permissions-citations-reprints/:~:text=Learn%20more%20about%20us.,proper%20attribution%20and%20without%20alteration). 

Advance premium tax credits are based on estimated household income. Recipients must later reconcile the advance tax credits with the amount allowed based on actual income ( https://www.irs.gov/affordable-care-act/individuals-and-families/premium-tax-credit-claiming-the-credit-and-reconciling-advance-credit-payments ). We do not observe this reconciliation. 

“Income” is based on modified adjusted gross income, which is similar to adjusted gross income for most people. The FPL amounts are higher in Alaska and Hawaii. https://www.healthcare.gov/glossary/federal-poverty-level-fpl/ . 

Based on data from 2018 County Business Patterns, which includes only employer businesses and is not limited to small businesses. 

In the KFF survey, small firms have 3-199 employees.

The distributions shown are for the natural log of the health insurance payroll burden. The health insurance payroll burden is always greater than zero by construction. 

We also analyzed the burdens for three- and four-year employer panels ending in August 2023. The sample sizes were larger, with 4,541 and 3,134 firms, respectively, but the median health insurance payroll burdens were very similar during the overlapping time periods. 

The Employment Cost Index (ECI) “uses a fixed ‘basket’ of labor to produce a pure cost change, free from the effects of workers moving between occupations and industries” ( https://www.bls.gov/eci/home.htm ). The 22 percent growth in ECI wages and salaries represents the change between Q4 2018 and Q4 2023 ( https://fred.stlouisfed.org/series/ECIWAG ). 

https://www.kff.org/interactive/premiums-and-worker-contributions-among-workers-covered-by-employer-sponsored-coverage/ . 

In February 2024, the BLS reported nearly 9.4 million self-employed workers in unincorporated businesses in nonagricultural industries. Self-employed workers in incorporated businesses are included in wage and salary workers. https://www.bls.gov/web/empsit/cpseea07.htm . 

In 2023, 66 million were employed in firms with 1 to 499 employees in the private sector, representing 51 percent of private sector employment. Nearly 35 million, or 27 percent of private sector employment, were employed in firms with 1 to 49 employees. https://www.bls.gov/web/cewbd/table_f.txt . 

For example, the BLS estimated that among the private sector establishments opened in 2018, 52 percent survived through 2023 ( https://www.bls.gov/bdm/us_age_naics_00_table7.txt ). 

See https://www.bls.gov/cpi/factsheets/medical-care.htm for a full description of the medical care index.

See https://www.bls.gov/cpi/additional-resources/improvements-cpi-health-insurance-index.htm for details on the health insurance index.  

See https://www.bls.gov/eci/factsheets/eci-health-benefits-factsheet.htm for more details.

Chris Wheat

Business Research Director

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How owning insurance in a corporation can address changes to the capital gains inclusion rate

Advisors can clear up misconceptions about insurance by having strong product knowledge and a comprehensive grasp of the client’s personal situation, finances and goals. SB/iStockPhoto / Getty Images

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The increase in the capital gains inclusion rate may force some Canadians to see the crucial role insurance can play as part of a holistic plan for minimizing taxes, building wealth, protecting against life’s uncertainties and leaving a lasting legacy.

Although insurance can be useful to all Canadians with assets, it’s particularly important for business owners and entrepreneurs.

Permanent life insurance in a corporation

Corporate-owned permanent life insurance stands out as one of the most powerful and tax-efficient tools for building wealth and protecting the value of an estate. It allows premium payments with lightly taxed corporate dollars, avoids taxes on passive income, fosters tax-free growth, and facilitates tax-efficient cash flow.

In Ontario, the small business corporate tax rate is only 12.2 per cent on the first $500,000 of active business income compared with personal marginal tax rates as high as 53.53 per cent. By paying premiums with corporate dollars, a client can save 30 to 40 percentage points on the cost of premiums compared with the non-incorporated individual purchasing the same product.

Investment income within a corporate-owned permanent life insurance policy also enjoys tax-free growth, which preserves the small business deduction by not affecting the $50,000 passive income threshold.

In addition, permanent life insurance policies offer flexible options for liquidity through policy loans, dividend payments, partial surrenders, or leveraging the policy as collateral for a loan while incurring less taxes compared with traditional withdrawals from corporate accounts. While these strategies come with their own risks and considerations, they provide a degree of flexibility in times of unexpected need.

Because the death benefit of any life insurance policy is received free of taxes, corporate-held permanent life insurance can pass most, if not all, the funds to estate beneficiaries tax-free. In Ontario, to achieve the same after-tax estate value as a $2-million corporate-owned life insurance policy, one would need roughly $3.8-million in cash in the corporation given the high marginal tax rate on non-eligible dividends of 47.74 per cent.

Permanent life insurance isn’t a silver bullet, though. Most individuals should pursue additional investments and possibly additional term life insurance. While changes in tax policy, economic conditions and personal circumstances can affect the strategy’s viability, integrating a corporate-owned permanent life insurance policy into a well-structured financial plan allows clients to build wealth and protect investments and assets while minimizing taxes.

Owning risk insurance in a corporation

Risk insurance is all about protecting income in the early stages of building wealth and providing for dependents. Life, disability, critical illness and long-term care insurance all fall under this category. The ultimate objective is to amass sufficient wealth to become self-insured, relying on one’s assets to the point at which risk insurance is no longer necessary.

However, the insurance industry often emphasizes the sale of generic, off-the-shelf products, sometimes employing scare tactics and hypothetical worst-case scenarios, rather than tailoring insurance to fit a client’s specific wealth management strategy and lifestyle needs.

In general, life and disability insurance are crucial, while critical illness and long-term care insurance may be considered “luxury insurance” except in certain circumstances, such as being denied coverage from disability insurance. The appropriate level of coverage is highly dependent on the individual and influenced by personal circumstances, spending habits, savings, and a spouse’s earning capacity.

One should also be cautious about riders. Although some are situationally useful, opting for a luxury insurance package with all the bells and whistles can balloon costs with little tangible benefit. For instance, the future insurability option for disability insurance allows one to increase coverage up to 25 per cent, or by a fixed-dollar amount, without going through the underwriting process. This is essentially paying a premium for an insurance plan on an insurance plan. In rare cases, this rider may make sense, but those with no intentions of increasing coverage should save money by removing this rider.

Should risk insurance be owned corporately? Well, it depends. Life insurance should almost always be owned corporately, as proceeds are credited to the estate in a tax-efficient manner. Conversely, unless disability insurance pays out less than $5,000 a month, it should be paid for personally, as the benefits of saving on the premium payments by using after-tax corporate dollars tend to be offset by the taxes paid when amounts are distributed from the corporation. Other types of insurance should be evaluated similarly on a case-by-case basis.

Insurance as part of a holistic plan

The misconception that insurance products are a one-size-fits-all solution has made insurance a polarizing topic among both wealth advisors and clients. The reality is insurance may not be the answer to every financial concern.

It’s up to advisors to clear up misconceptions by not only having strong product knowledge, but also by having a comprehensive grasp of the client’s personal situation, finances and goals to explain how insurance fits into an overall financial plan.

Andrew Feindel is a portfolio manager and investment advisor with Richie Feindel Wealth Management at Richardson Wealth Ltd.

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Best Retirement Plans for 2024: Choosing the Right Path for Your Future

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Why Start Saving for Retirement Now?

Financial experts all agree: The sooner you start saving, the better. Retirement savings accounts offer long-term wealth-building features like compounding, tax advantages, and retirement-focused investment strategies. 

Compound interest allows you to earn interest on your interest. The longer your money grows, the faster it accumulates and the closer you are to achieving a financially secure retirement. Contributing a little here and there is better than not contributing at all. 

Moreover, retirement plans like IRAs and 401(k)s offer tax benefits. You can contribute pre-tax money to lower your taxable income today. Or you can contribute after-tax money for tax-free growth and withdrawals. 

Here are Business Insider's editors' top picks for the best retirement plans in 2024. 

401(k) Plans

401(k)s are popular retirement savings plans offered by for-profit companies. Employees can open a traditional 401(k) or a Roth 401(k). Traditional 401(k)s grow with pre-tax dollars, but Roth 401(k)s rely on after-tax contributions, just like with IRAs.

Employees can contribute up to $23,000 in 2024, and individuals age 50 and older can contribute additional "catch-up" contributions of $7,500. 

Many 401(k)s offer employer-matching contributions. Your employer matches up to a certain limit for every dollar you put into your account. This is generally considered "free money" toward your retirement. For instance, if you make $50,000 annually, and your company matches 50% of your 401(k) contributions up to 5% of your salary, you would need to contribute $2,500 into your account to receive the full match amount. Your employer would then contribute an additional $1,250 a year.

403(b) Plans

403(b)s, or tax-sheltered annuities, are retirement plans for public school employees, tax-exempt organizations, churches, and other nonprofit companies. Similar to a 401(k), 403(b)s may offer the benefit of an employer match. You can contribute pre-tax or after-tax money. 

If you're under 50, you can contribute up to $23,000 in 2024. Employees 50 and up can contribute an additional $7,500. In addition to pre-tax and after-tax contributions, you can contribute to your 403(b) by allowing your employer to withhold money from your paycheck to deposit into the account.

Thrift Savings Plans

Thrift savings plans (TSPs) are retirement accounts for federal and uniformed services employees. Like 401(k)s, these plans let you contribute pre- or after-tax dollars. But, unlike many 401(k) employer matches, most TSPs offer a full 5% contribution match. Your employer will match your contributions up to 5% of your salary.

The annual contribution limit for 2024 is $23,000. The catch-up contribution limit is $7,500. 

457(b) plans are retirement savings accounts offered by certain state and local governments and tax-exempt organizations. Like 403(b)s, you can contribute to your 457(b) plan by asking your employer to withhold a portion of your paycheck and deposit it in your retirement plan. Some employers allow you to make Roth contributions. 

The annual contribution limit for 2024 is $23,000. The catch-up contribution limit is $7,500. Folks 50 and older can contribute up to the annual additions limit, currently $69,000. 

Pension Plans

Pension plans are retirement plans fully funded by your employer, who are required to make regular contributions toward your retirement. However, depending on the plan's terms, you may not have control over how the money is invested. 

There are two main types of pension plans: the defined contribution plan and the defined benefit plan. 401(k)s are technically considered defined-contribution pension plans, and your employer is not responsible if your investments perform poorly.

Traditional pension plans are defined benefit plans (plans with fixed, pre-established benefits). Employers are liable to provide retirement funds for a certain dollar amount, calculated based on employee earnings and employment years.

Solo 401(k)

Solo 401(k)s are an option for business owners who work for themselves and have no employees. They can contribute as both an employer and employee (and spouses of business owners may be able to contribute as well), meaning they can contribute twice as much. You can make pre- or post-tax (Roth) contributions to your account. 

As an employee, you can defer up to $23,000 of your self-employed income in 2024. If you're 50 or older, you can make an additional $7,500 catch-up contribution. As an employer, you can contribute up to $23,000, plus the catch-up contribution if you're 50 or older. The total contribution limit is $76,500. 

Simplified employee pension (SEP) IRAs are retirement vehicles managed by small businesses or self-employed individuals. According to the IRS, employees (including self-employed individuals) are eligible if they are 21 years old, have worked for the employer for at least three of the last five years, and have made a minimum of $750. 

SEP IRAs also require that all contributions to the plan are 100% vested. This means that each employee holds immediate and complete ownership over all contributions to their account, including any employer match. You can contribute up to $69,000 or 25% of your employee's compensation 2024.

Vesting protects employees against financial loss. For instance, according to the IRS, an employer can forfeit amounts of an employee's account balance that isn't fully vested if that employee hasn't worked more than 500 hours in a year for five years.

SIMPLE IRAs are for self-employed individuals or small businesses with 100 employees or less. According to the IRS, these retirement plans require employers to match each employee's contributions on a dollar-for-dollar basis up to 3% of the employee's salary.

To qualify, employees (and self-employed individuals) must have made at least $5,000 in the last two years and expect to receive that amount during the current year. But once you meet this requirement, you'll be 100% vested in all your SIMPLE IRA's earnings, meaning you have immediate ownership over your and your employer's contributions. 

Employees can contribute up to $16,000 in 2024. You can also add a catch-up contribution of $3,500 if you're 50 or older.

Payroll Deduction IRAs

Small businesses and self-employed people can set up employee IRAs even simpler. With payroll deduction IRAs, businesses delegate most of the hard work to banks, insurance companies, and other financial institutions.

After determining which institutions their employer has partnered with, employees can set up payroll deductions with those institutions to fund their IRAs. These accounts are generally best for employees who don't have access to other employer-sponsored retirement plans like 401(k)s and 457(b)s.

For 2024, you can contribute up to $7,000 in annual contributions and up to $1,000 in annual catch-up contributions for employees aged 50 or older. 

Best Individual Retirement Arrangements (IRAs)

One of the most appealing components of independent retirement plans like IRAs is that you can open one as long as you've got taxable (earned) income. And even if you have an employer-sponsored retirement account, you can usually set up a traditional IRA, Roth IRA, and other independent retirement accounts.

Traditional IRA

Traditional IRAs let you save with pre-tax contributions toward your retirement savings. You'll pay tax when you withdraw during retirement. Traditional IRAs are recommended for higher-income workers who prefer to receive a tax deduction benefit now rather than later.

The 2024 contribution limit is $7,000, with up to $1,000 in catch-up contributions.

Roth IRAs are funded by after-tax dollars, meaning you pay taxes on your contributions now and make tax-free withdrawals later. As long as you're eligible, experts recommend Roth IRAs for early-career workers who expect to be in a higher tax bracket when they withdraw. Traditional and Roth IRAs share the same contribution limits: $7,000 in 2024, with up to $1,000 in catch-up contributions.

If you want to open one of the best Roth IRAs , single filers can only contribute the maximum amount in 2024 if their modified adjusted gross income (MAGI) is less than $146,000. Married couples must earn less than $230,000 annually to contribute the full amount in 2024. You can still contribute less if you earn a little more, though. 

You can find your MAGI by calculating your gross (before tax) income and subtracting any tax deductions from that amount to get your adjusted gross income (AGI), then adding back certain allowable deductions.

Spousal IRAs

There's also an option for married couples where one spouse doesn't earn taxable income. Spousal IRAs allow both spouses to contribute to a separate IRA as long as one spouse is employed and earns taxable income. This account allows the nonworking spouse to fund their own IRA. 

In 2024, each can contribute $7,000 (or $8,000 if they are 50 or older) for up to $16,000 annually.

Rollover IRAs

The best rollover IRAs let you convert your existing employer-sponsored retirement plan into an IRA, something experts generally recommend doing when you leave a job for a few reasons: primarily because you have more control over the investment options in an IRA than in a 401(k), and also because it's easier to consolidate your accounts for record-keeping.

Many online brokerages and financial institutions offer rollover IRAs; some will even pay you to transfer your employer-sponsored plan to an IRA.

Self-Directed IRAs (SDIRAs)

You can fund a self-directed IRA using traditional or Roth contributions ($7,000 and contribution limits in 2024, plus another $1,000 for catch-up contributions). But the difference between these accounts is mainly one of account custody and investment choices.

Unlike traditional and Roth IRAs, the IRS requires that all SDIRAs have a certified custodian or trustee who manages the account. These third parties handle the setup process and administrative duties of the IRA (e.g., executing transactions and assisting with account maintenance).

SDIRAs also give investors access to a wider range of investment options. With traditional and Roth IRAs, you're limited to mutual funds, ETFs, stocks, and other traditional investments. But, SDIRAs allow you to invest in alternative assets like real estate, precious metals, and cryptocurrencies .

Nondeductible IRAs

Nondeductible IRAs are for people who earn too much to get the full tax benefits of an IRA. Contributions for these accounts aren't tax deductible, meaning you'll fund your IRA with post-tax dollars like a Roth IRA. The difference is that you'll still have to pay taxes on any earnings or interest from the account once you withdraw at age 59 1/2.

Annuities are investment vehicles purchased from insurance companies at a premium. You'll receive periodic payouts during retirement once you purchase an annuity using pre-tax or after-tax dollars. Annuities offer a reliable income stream for retirees and reassurance they won't outlive their savings. 

The funds in an annuity can also be invested. Before you start receiving payouts, the investment gains grow tax-free, but you'll still be liable to pay income tax. Plus, annuities have limited liquidity and high fees that may diminish potential gains. 

Health Savings Accounts (HSAs)

Health Savings Accounts (HSAs) are savings accounts designed to cover medical expenses but can double as retirement savings. Once you're 65, you can withdraw the funds from your HSA penalty-free for non-medical expenses. 

While an HSA isn't a great main retirement savings vehicle, it can be a great addition to a different long-term savings account. In addition to penalty-free withdrawals on qualifying expenses, HSAs are funded with pre-tax dollars and grow-tax-free. But you'll still be subject to income tax. 

In 2024, you can contribute up to $4,150 for self-coverage and $8,300 for family coverage. Folks 55 and older can contribute an additional $1,000 catch-up contribution. 

Choosing the Best Retirement Plan for You

If you're not a small-business owner or self-employed, the best retirement plan for you usually depends on your type of employer, marital status, and short- and long-term savings goals. 

However, for most employer-sponsored retirement accounts, you can decide whether to make pre-tax or post-tax (Roth) contributions to your account. Roth contributions are best for those who expect to pay more in taxes as they age, but you should consider pre-tax contributions if you don't mind paying taxes when you withdraw money from your account in retirement.

You can boost your retirement savings even more by opening a separate IRA in addition to your employer-sponsored plan (you can still save toward retirement with an IRA if you're unemployed).

FAQs About Retirement Plans

Your best retirement option depends on your income, employer, financial situation, time horizon, and goals. If you can access a retirement savings account through your employer, especially a pension or 401(k) plan, that is likely your best option. If not, a traditional or Roth IRA offers tax advantages, compounding power, and flexible investment options.

A traditional or Roth IRA may be a better retirement saving account than a 401(k) due to the low fees and flexibility. Although 401(k)s come with great benefits like an employer match, they have high fees that can eat away at gains. An IRA may be a better option if your employer is not covering those fees. 

A Roth IRA may be the better option, depending on your situation. In most cases, a 401(k) is the stronger retirement account due to the convenience of automatic payroll deduction and the additional benefit of an employer match. However, Roth IRAs can double as emergency funds. A Roth IRA may be better if you're looking for increased flexibility and Roth tax benefits. 

Why You Should Trust Us: Our Expert Panel For The Best Retirement Plans

We interviewed the following investing experts to see what they had to say about retirement savings plans. 

• Sandra Cho , RIA, wealth manager, and CEO of Pointwealth Capital Management
• Tessa Campbell , Investment and retirement reporter at Personal Finance Insider

What are the advantages/disadvantages of investing in a retirement plan?

Sandra Cho:

"The main advantage is the tax implications of the account. Depending on the account, taxes will either be deferred or not included at all. For employer-sponsored retirement plans like 401(k)s, contributions to the plan are made with pre-tax funds, and the account grows tax-deferred. Taxes are then owed upon withdrawal.

"Roth IRAs, on the other hand, are contributed to with post-tax funds but grow tax-free. Both should be included in an investor's portfolio. Another advantage is that 401(k)s often have an employer matching component. That is, an employer will match your contributions up to a certain point (usually around 3% of your salary). 

"The disadvantage is that retirement accounts have a max contribution limit. Another disadvantage is that these funds cannot be used until age 59 1/2. For younger investors, that can be a long time wait."

Tessa Campbell: 

"Tax benefits and compound interest are two of the major advantages of contribution to a retirement savings plan like a 401(k) or individual IRA. Depending on the kind of plan you open (traditional or Roth), you can benefit from contributions after- or post-tax dollars. In addition, some 401(k) plans are eligible for employer-sponsored matches, which are essentially free money.

"The disadvantage of a retirement plan is that you won't be able to access the funds in your account penalty-free until you're at least 59 1/2 years old. Unless there are no other options, early withdraws from a retirement savings plan isn't advised."

Who should consider opening a retirement plan?

"Every individual should be investing through a retirement plan if they have the financial capability to. At the minimum, investors should try to contribute up to the matching amount for their 401(k) and the maximum amount for their Roth IRA. The growth in these funds compounds over time, helping to enhance the long-term return."

Tessa Campbell:

"I can't think of a single person that wouldn't benefit from a retirement savings plan, other than maybe someone that is already well into retirement. Although some younger individuals don't feel the need to start contributing quite yet, it's actually better to open an account as soon as possible and take advantage of compound interest growth capabilities."

Is there any advice you'd offer someone who's considering opening a retirement plan?

"I would advise them to work with a financial advisor or trusted professional. This will give them insight into where they should be investing their money, whether that be a 401(k), Roth IRA, or another vehicle. There are plenty of people and sources out there who provide important information and can help you create a strong financial future."

"Don't contribute huge portions of your salary if it doesn't make sense with your budget. While contributing to a retirement savings plan is important, you must still afford your monthly expenses and pay down an existing debt. If you're having trouble establishing a reasonable budget, consult a financial advisor or planner for professional help."

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