Am I required to have small business insurance in California?

Yes and No. Small business insurance is a catch-all term that can include several different types of coverage, some required by the state of California and some not.

Okay, so if I run a small business in California, what types of small business insurance do I need to have?

First, the state of California requires all employers to carry Workers’ Compensation insurance. That is one type of small business insurance that is absolutely mandatory. If you don’t have it, you can be fined or even sent to jail.

Another type of insurance that you may be required to carry is commercial auto. If any company vehicle, or a vehicle owned by an employee, is used to transport your employees, then it must be covered by commercial auto insurance. If no vehicle is used to transport employees, you may not be required to carry commercial auto for your small business, but it’s a good idea to have it anyway.

The third type of insurance that is usually thought of as essential for a small business insurance package, although not required by law, is general liability insurance. General liability protects a small business from having to pay large amounts out of pocket for bodily injury or property damage from an accident at your place of business or at a work site. Many clients require even the smallest businesses to have general liability coverage in order to do business with them. There is also specialized liability insurance for small businesses in certain industries. For example, California requires companies in the private security and investigation industry to have special liability insurance. There are also specialized liability coverages for janitorial, maintenance, and cleaning firms, as well as for contractors in the construction industry and building trades.

It sounds complicated. Can’t I just order up a standard small business insurance plan?

You don’t want to pay for something you don’t need, and you don’t want to be caught without coverage you do need. There really is no standard one-size-fits-all small business insurance package. The types of coverage you need, and the amount of coverage you need, may not be the same as what another small business, even in the same industry, may need. Therefore, your best bet is to talk to an insurance professional to determine what and how much insurance is tight for your particular small business.

Many insurance providers will bundle two or more different types of coverage in a small business insurance package. It may be more convenient or cost-effective for you to pay one premium for all of your small business insurance than separate premiums for different coverages.

The most commonly bundled coverages are Workers’ Compensation, commercial auto, and general
liability. Some insurance companies refer to this kind of small business insurance plan as a business owner’s policy, or simply small business insurance. Because of the lack of standard names for some insurance products and the wide variety of small business insurance coverages available, just make sure that you re speaking the same language as any insurance professionals you consult in search of the right small business insurance for your company.