#USA #Small Business #Insurance #Burbank #Liability Claims

The Rising Costs of Small Business Liability Claims

Recent findings from the 2025 National Small Business Risk Index, published by USA Business Insurance, have unveiled alarming statistics regarding the increasing costs of liability claims for small businesses in the United States. As businesses navigate through economic fluctuations and rising medical costs, the average expense for liability claims has now reached a staggering $97,200. This figure poses a significant threat to the sustainability of small enterprises across the nation.

A Drastic Increase in Claims

The data indicates that the cost of liability claims has increased by an impressive 18% since 2022, setting off alarm bells for small business owners throughout the country. As the pressure of inflation builds, it is evident that medical expenses and legal fees have surged, aggravating the situation. In fact, legal fees now account for almost 40% of the total cost of claims—a notable rise from just 27% five years prior.

The implications of these rising costs are severe. If a small business faces a claim of this magnitude, the potential outcomes include halted growth, loss of operational space, or even foreclosure. Such outcomes highlight the urgency for businesses to reassess their liability insurance covers and ensure they are adequate to handle current market demands.

Factors Contributing to Rising Costs

The report identifies several factors driving up the costs of these claims. Alongside escalating medical bills, common liability issues such as slips and falls, contractor injuries, and property damages remain the top contributors to financial losses. Moreover, many small businesses are caught unprepared, with approximately one-third lacking the appropriate coverage that aligns with the ever-increasing liability claim costs.

The economic landscape is continuously shifting, with various states, including California, Florida, Texas, and New York, reporting the highest average claim costs. However, experts caution that rising claim costs are a national trend that will likely impact businesses in every region.

The Impact of Inflation

Amplifying the narrative is the ongoing inflation crisis, which threatens to outpace the protections offered by current insurance policies. Small businesses are generally hesitant to increase their policy limits, even as their operations expand over time. Consequently, many are left vulnerable to changes in labor costs, escalating material prices, and rising legal fees—all of which are unlikely to be adequately covered by their existing insurance limits.

As the workforce evolves, small businesses are increasingly hiring less experienced team members to replace retiring employees. Such changes in staffing can lead to a higher incidence of workplace accidents, particularly in retail settings where businesses are adjusting back to in-person service. This shift underscores the growing need for robust liability insurance and heightened risk awareness among small business owners.

A Call for Action

For small business owners, this data serves as a wake-up call. Understanding the risk profile for their specific state and industry is crucial. The report encourages business owners to collaborate closely with their insurance agents to develop a comprehensive understanding of their coverage needs in today’s changing environment. As injuries and accidents continue to rise, adapting insurance policies to meet these new challenges is essential.

Jaklin S. Senior Risk Analyst emphasizes the changes in claims costs over the past decade, revealing, “We’re seeing claims today that would have cost $40,000 ten years ago now exceed $100,000. Inflation has quietly widened the gap between what businesses carry and what they actually need.”

Acknowledging this reality will empower small businesses to mitigate their risks and prepare for potential future claims. With small businesses forming the backbone of the American economy, the need for appropriate insurance coverage has never been more evident. The National Small Business Risk Index aims to provide clarity to business owners, ensuring they understand the potential financial repercussions of significant incidents, affording them the strength to navigate these challenging times.

As the landscape becomes more complex and unpredictable, small business owners must take proactive steps in safeguarding their financial future. Now, more than ever, evaluating and potentially enhancing liability coverage is not merely a suggestion—it is a necessity for survival and success in the modern market.