California Small Business Insurance Requirements

California Small Business Insurance Requirements

If you are operating a small business, following state laws is vital – particularly when it comes to insurance. Failing to meet California small business insurance requirements could land you in legal trouble and leave your company vulnerable to major financial losses in the event of accident, theft, or injury.

Insurance protects your company from liability and full financial responsibility due to a wide range of unforeseen circumstances. Insurance can be complicated, which is why working with an insurance broker can help you sort out complex information and ensure you are in compliance with all state laws.

Below, we will go over some basic California small business insurance requirements to help you determine what insurance coverage your company needs.

What Is Required In the State Of California?

California only requires two types of insurance: workers’ compensation insurance and commercial auto insurance. However, these policies are only required under specific circumstances and may not apply to every business.

Workers’ Compensation Insurance

Worker’s compensation insurance covers wage replacement and medical bills for workers injured on the job. Almost all businesses are required to provide workers’ compensation insurance in California.

If you have a business with any type of non-owner employee, you are required by the state of California to provide worker’s compensation insurance. This includes both full and part-time employees. 

In other words, unless you have zero non-owner employees, you will be legally responsible for providing workers’ compensation insurance.

Commercial Auto Insurance

If you have any business-owned vehicles, California requires they are covered by commercial auto insurance. If a vehicle you own is titled to your business, you need a commercial auto insurance policy.

Commercial auto insurance provides coverage for any vehicle your business owns and can provide financial compensation for things like property damage and medical payments. It also protects your company from legal liability in the event of bodily injuries caused while driving.

What About Healthcare?

Not all small businesses are required to provide employees with health insurance. The Affordable Care Act stipulates that only businesses with 50 or more full-time employees must provide both health insurance and COBRA insurance.

What Insurance Policies Are Recommended?

While you can legally get by with barebones coverage, it is not recommended. While insurance policies do cost money, they also protect your company’s financial interests in the long run. In the event of accidents, theft, damage, or even lawsuits, having good insurance can save your company from financial loss and even bankruptcy.

General Liability Insurance

This covers common risks associated with operating with a business. This may include property damage, medical expenses, and court cases, judgments, and settlements. The majority of businesses should take out a general liability insurance policy to operate safely.

Business Owner Policy

This is a special type of commercial insurance that offers a range of coverage for business property and casualty exposure. It bundles varying types of insurance coverage into one policy, protecting you from risks ranging from damage to business property to liability due to your location, operations, or products.

Commercial Crime Insurance

Every business is vulnerable to crime, so almost all businesses should have some degree of commercial crime coverage. Commercial crime insurance protects against theft, forgery, embezzlement, burglary, and other common types of criminal activities that can harm your company financially.

Cyber Liability Insurance

As more and more businesses and services go fully remote, cyber liability insurance is becoming increasingly important. Cyber liability insurance helps cover your liability for data breaches in which personal information is exposed or stolen.

Insurance Policies For Specific Industries

Different business types have different risk factors. Depending on your industry, there may be certain hyper-specific types of insurance policies you should consider.

If your business relies on the use of heavy machinery, boiler and machinery insurance is highly recommended as it covers losses and damages covered by malfunctioning boilers and similar equipment. If you frequently transport company property from place to place, consider inland marine insurance. This covers damage or destruction of your business property during transport.

This is one reason it is so important to hire a broker when making decisions about insurance policies. An insurance broker can walk you through the process and help you determine which niche insurance types are necessary for you.

How Much Does Business Insurance Cost?

How much your insurance policies cost depend on myriad factors, such as:

  • Your Industry: Different types of businesses carry different risks. A construction company, for example, will likely have to pay more for workers’ compensation than an accounting firm.
  • Location: If you are in an area with high crime rates or a high risk for natural disasters, this can increase your insurance costs.
  • Claims History: More claims generally mean costs will be higher. If you have claims on any existing insurance policies, expect your premiums to increase.
  • Employees: Obviously, a higher number of employees means higher premiums overall.

As there are so many factors at play, it is hard to give a rough ballpark figure for how much small business owners in California should expect to pay for insurance. This is why hiring a broker can be so helpful. A qualified broker can give you an accurate quote based on your industry, needs, and claim history.

California Small Business Insurance Requirements: The Bottom Line

Only worker’s compensation insurance and commercial auto insurance are required in California. However, it is not recommended you operate a business with the bare minimum in terms of insurance coverage. Accidents, injuries, and lawsuits can potentially bankrupt your company.

Not every business needs every type of insurance on the market. Finding the right coverage means assessing your business’s vulnerabilities and identifying a policy that will protect you in the event of unforeseen circumstances.  Need some help? UBC Insurance Solutions, Inc. works one-on-one with clients to find affordable, effective insurance to meet their unique needs. Reach out here to set up a consultation.

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70% of employees say benefits are a major factor in evaluating job opportunities. Learn how to find the best employee benefits package.