(FORTUNE Small Business) – Kayce Hoover is hoping the flu doesn't infect her company this winter. Hoover, who owns a radiator and muffler shop with her husband in Grand Junction, Colo., has always covered insurance for her five employees, even when her premiums kept rising. But this year they spiked 160%. "I just can't afford it anymore," says Hoover, who had to cancel her plan for now.

Insurance is practically a four-letter word to Hoover and other small business owners these days. And it isn't just the cost of medical plans that has skyrocketed. Everything from workers' comp costs to general liability has risen by 30% to 40%. Even commercial rates are up 30% this year, a hike that insurers attribute to Sept. 11 and its ripple effect through the industry.

But enough of the bad news. Here's how to stay covered and stay solvent.

Minimize your risk. It should be a no-brainer, but if your claims are climbing, run a risk assessment on your business and fix preventable problems--even that loose board on your stairway.

Decide on deductibles. Rather than go without insurance entirely, consider a plan with a higher deductible, advises Robert Hartwig of the Insurance Information Institute. Chances are you'll lower your premiums that way. Just be sure to keep some money in reserve to cover a larger deductible.

Outsource it. Insurance costs became so unmanageable for Frayda Levin, owner of Regent Book in South Hackensack, N.J., that she decided to enlist the help of a professional employer organization (PEO). Giving a small business the insurance advantages of a large company, PEOs (formerly called employee leasing plans) can lower your costs and still offer your employees a wider choice of carriers. The downside? You can't get your insurance questions answered by your on-site HR department anymore.

Ask the IRS. Pam Watson Korbel of SmartGrowth, a Denver business-coaching firm, says more of her clients nowadays are paying for their insurance plans with cafeteria-type benefit plans. From manufacturers to retailers, she notes, "more companies are using Section 125 plans, so their employees can deduct their portion of their medical plan with pretax dollars as opposed to post-tax dollars."

Create coalitions. Sign up with groups like the Cleveland Council of Smaller Enterprises and the New York Business Group on Health, which were formed by small companies trying to boost their purchasing power. "These groups enlarge the pool from which [small business] can bargain with insurance companies," says NFIB Research Foundation economist Bruce Phillips. "Unlike the case in big business, 93% of small firms offer their employees only one health-care plan." Teaming up will reduce your premiums and present you with more options than you'd have on your own.