Businesses with employees must have certain types of insurance: workers' compensation insurance, unemployment insurance, and, depending on where the business is located, disability insurance. It's the law.
The Small Business Administration says businesses with employees are required to carry Workers' Compensation Insurance coverage through a commercial carrier, on a self-insured basis, or through the state Workers' Compensation Insurance program. You can find more about your state's Workers' Compensation Office here.
Businesses with employees are required to pay unemployment insurance taxes under certain conditions. Generally, you must pay both state and federal unemployment taxes if you pay $1500 or more in wages in any quarter of a calendar year; or, you had at least one employee during any day of a week during 20 weeks in a calendar year, regardless of whether or not the weeks were consecutive. Some state laws differ from the federal law.
Some states require employers to provide partial wage replacement insurance coverage to their eligible employees for non-work related sickness or injury. Currently, if your employees are located in any of the following states, you are required to purchase disability insurance:
There are other kinds of insurance you may need, depending on your line of work and your assets. Professional liability coverage, property insurance, health insurance, general liability insurance, auto and fleet insurance, et cetera. Expect at a minimum to have to cover property and general liability insurance. An insurance agent will be helpful here, to figure out what else may need covering. We have partners who can help.
The SBA offers a few things to think about when looking at insurance:
Most small businesses are covered by general liability and “Business Owners Policies," or BOPs. These are catch-all insurance policies which usually cover owned buildings and office structures, business equipment, office stuff, fire, theft, the personal property of nonemployees on the property, liabilities, and business interruption for one year. You need to know what each of these factors is worth to your business. Also, you need to be able to gauge the cost of things this kind of policy doesn't cover, like really expensive equipment, employee fraud and embezzlement, professional liability insurance, vehicles and others.
Automobile and fleet insurance is probably not included in a BOPs. Directors and Officers liability insurance, which insures a company and its leaders against lawsuits directed against its officers, might be included.
You want to find an insurance agent that knows your line of work, if you can. And you want to talk to a few before making a commitment. Always use a reputable, licensed agent. State governments regulate the insurance industry and license insurance brokers. Many states provide a directory of licensed agents. If you are looking for a new agent start with your state's department of insurance.
As your business grows, so do your liabilities. You don't want to be caught underinsured should disaster strike. If you have purchased or replaced equipment or expanded operations, you should contact your insurance broker to discuss changes in your business and how they affect your coverage.
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