The 2025 Hiscox Underinsurance in Small Business Report
Nearly 4 in 5 small businesses in the US are underinsured, leaving owners vulnerable to potentially business-ending risks.
The 2025 Hiscox Underinsurance in Small Business Report reveals that most small businesses in the US (77%) are underinsured — a 2% percent increase from 2023 — leaving them financially and legally liable for lawsuits and other threats to their businesses.
Business insurance is often seen as a ‘set-it-and-forget-it’ or ‘one size fits all’ purchase. When a policy is in place, policyholders can incorrectly assume that all risks are covered. The report gauges the extent of those misconceptions both internationally and in the US, and the tangible consequences of insurance illiteracy on businesses’ level of protection. The report surveyed 2,000 small business owners in the United States with 1-to-50 employees and used market-leading underwriting expertise.
Small businesses in the US are thriving, with 62% seeing a revenue increase in the past two years. This marks a significant uptick from 2023, when 47% of businesses reported an increase.
Those businesses with a revenue increase may now be underinsured, with the possibility of exposure to claims above their insurance limit. Conversely, those businesses observing a revenue decrease may have too much coverage, and may be paying more than they need to.
Most small business owners don't understand their coverage
The two most popular types of small business insurance policies are general liability and professional liability. For the majority, it's not necessary to be an expert, but gaining a fundamental understanding of different insurance policies will help your business to be better protected.
What is general liability (GL) insurance?
This is the foundational coverage that nearly every business, no matter how small, should have. Without a GL policy, small business owners could be unprotected against claims of bodily injury and other common claims.
Many small business owners do not know what basic insurance policies cover, with 74% of small business owners not understanding that this covers third-party claims of bodily injury and property damage. Our survey showed that many small businesses expected General Liability to cover them in situations where cover is often excluded such as:
- damage from a fire or flood on a business property you own;
- one of your clients filing a lawsuit for providing incorrect advice;
- your own business property being damaged.
What is professional liability (PL) insurance?
Professional liability insurance, also called errors and omissions (E&O) insurance or indemnity insurance, protects a business if sued for negligence in performing professional services. A vast majority (83%) of small business owners aren't able to correctly describe what a professional liability policy covers. Common misconceptions about professional liability are that it:
- would cover bodily damage from someone slipping and falling at your business property;
- would cover damage to your own business equipment;
- covers disclosure of Personally Identifiable Information.
Top concerns for small business owners
In 2025, the top concerns keeping small business owners up at night are macroeconomic — often what they have the least amount of control over. Inflation and a downturn in the economy are the top culprits of lost sleep. Theft and property damage is the third most common concern for small business owners.
Top concerns for US small businesses
Top concerns for businesses globally
Business owners are experts in their profession, but insurance terminology can seem tough to master. Business insurance is still chronically misunderstood, with most business owners expecting a policy to cover scenarios it isn’t designed for. Small businesses are the heartbeat and soul of our communities, and in fact, shoulder our entire US economy. They achieve the extraordinary every single day, and deserve to feel safe in the knowledge that their courage will be matched by their insurer and policy. The more knowledge they have about the risks they face and how specific policies match up, the safer their business. As an industry, we must continue to help business owners understand the differences between policies, omit alienating jargon, and encourage them to let us know when their business has changed.
Mary Boyd
Chief Executive Officer,
Hiscox USA
Cyber Insurance — a new necessity
Cyber insurance is the newest frontier for small business coverage and many are still catching up. No matter the size of a business, it’s usually a question of when they will experience a cyber attack, rather than if. While 75% of US small businesses have a heightened exposure to cyber risk, such as by having a website or taking online payments, 39% thought they did not need insurance because their systems are secure, and 30% because they were too small to be attacked. These misconceptions can often be weaponized by cyber criminals and leave businesses vulnerable.
How can small businesses improve their understanding of insurance?
There are many educational resources and tools available to assist in understanding coverage options and ways to protect your business. The most effective methods to ensure you’re adequately insured are:
- Reviewing your insurance every two years, or if your revenue or payroll has changed by more than 20% in either direction. A growing business is a good thing but it’s important to be sure your insurance coverage keeps up to protect the business you’ve worked so hard to build.
- Tell your insurance agent everything pertinent to the business, both positive and negative. Accurately representing your business means you’ll get the right coverage that will protect you if the unexpected happens and to help your business maintain adequate protection.
- Additionally, Hiscox’s Business Insurance 101 resource center is a great place to learn about ensuring your business is well-protected. Here, you can find explanations of each type of insurance your business may need, as well as answers to small business owners’ frequently asked questions.
Find out more about business insurance
Not sure what you need?
Just answer a few quick questions.
To receive more content like this from Hiscox USA, including market-leading research, reports and articles from our experts on running a small business, enter your email address here:
2022 Hiscox Diversity in Small Business Report
We investigated the benefits enjoyed by US small businesses that are diverse in gender and racial/ethnic makeup, and whether the events of the past two years have driven lasting change.
2023 Hiscox Underinsurance in Small Business Report
This report gauges US businesses’ protection against potential lawsuits and claims, as well as testing their understanding of insurance policies.
The content is provided for general information purposes and is not intended to and does not constitute business or legal advice to any particular person or entity.