82% of small businesses in their first year of operation report having business insurance, according to a survey of 501 U.S. small business owners, founders and sole proprietors conducted by ERGO NEXT from April 29 to May 12, 2026. The figure compares with 67% of businesses that have been operating for one to five years.
The survey distinguishes between having insurance and having enough protection for a business’s risks. It found that 73% of small businesses either have no insurance or have less coverage than they need. ERGO NEXT said the results show that many entrepreneurs still struggle to determine the coverage they need.
ERGO NEXT surveyed 250 entrepreneurs in their first year of business and 251 entrepreneurs in their first two to five years of operation. The survey found that businesses in their first year were more likely to report having insurance than those operating longer.
ERGO NEXT said the higher adoption rate among newer entrepreneurs may reflect economic uncertainty, an expanding range of business risks including cyber threats, and the availability of digital tools for researching, comparing and purchasing insurance. The report describes these tools as similar to the online services entrepreneurs use to open bank accounts, run payroll and manage finances.
Among all respondents, 25% said they did not have business insurance. Of businesses without insurance, 50% said it was too expensive and 20% said it was too confusing. In the report’s frequently asked questions, 54% of uninsured businesses said coverage was not legally required for their operation.
The findings are based on survey responses from small business owners, founders and sole proprietors about their business risk profiles.
Insurance Coverage Does Not Mean Every Risk Is Covered
Among small businesses that carry insurance, 64% said they were not covered for all major risks they face. Of that group, 14% said they were not sure what their policy covers. Together with the 25% of businesses that reported having no insurance, those results account for the survey’s finding that 73% of small businesses have no insurance or less coverage than they need.
ERGO NEXT defines underinsurance as coverage that does not adequately protect a business against its most significant risks. The report says coverage gaps can leave owners financially responsible for unexpected costs after liability claims, property damage, cyber attacks or other disruptions.
The report identifies compliance requirements, cost pressure and uncertainty about coverage needs as factors behind underinsurance. It says entrepreneurs who are unsure what insurance they need may default to buying the minimums required by law.
Cost Pressure and Coverage Confusion
More than a third of small business owners, 37%, said maintaining steady cash flow was a top source of stress. The report says limited resources can make coverage beyond the minimum required difficult to prioritize alongside expenses that support daily operations and business growth.
84% of small business owners said they had prioritized other expenses over business insurance in the previous six months. The most commonly cited spending priorities were inventory and equipment, at 38%, and marketing efforts, at 36%.
Coverage confusion was also a recurring issue among underinsured respondents. 32% said identifying and addressing coverage gaps was too confusing, 27% said comparing providers was too difficult and 22% said the process was too time-consuming.
The survey says risk exposure can evolve as a business changes, while insurance coverage does not necessarily keep pace. Only 37% of small business owners strongly agreed that they regularly review and update their coverage as their company grows. ERGO NEXT said policies that fit at launch may no longer align with a business’s current risks.
Reviewing Coverage as a Business Changes
ERGO NEXT’s guidance says insurance coverage should be reviewed when a business experiences meaningful growth, adds employees, purchases equipment or expands operations. The report says regular reviews can help prevent coverage gaps from developing over time.
The survey results suggest that owners face both cost constraints and uncertainty about the policies their businesses need. Businesses without coverage most often cited cost and the absence of a legal requirement, while underinsured respondents cited difficulty identifying gaps, comparing providers and finding time to address the issue.
ERGO NEXT also says online insurance options can make it easier for small businesses to research, compare and purchase coverage. The report frames clearer information about what is included in a policy as one way for owners to better understand their options.
Insurance Is More Common Early, but Adequacy Remains the Question
The ERGO NEXT survey provides a benchmark for insurance adoption among recently founded businesses: 82% of businesses in their first year reported having insurance, compared with 67% of businesses operating for one to five years. The comparison is based on a survey of 501 U.S. small business owners, founders and sole proprietors conducted in spring 2026.
At the same time, the survey found that 73% of small businesses had no insurance or less coverage than they needed, and that only 37% strongly agreed they regularly review and update coverage as their company grows. The results point to a difference between purchasing a policy and determining whether it continues to match a business’s risks.
