Oddly, this is a question that could be pertinent to businesses already in operation, and one asked of startups with little to no experience. Many business owners don’t realize that some business insurance is mandated by law, and other coverage is elected by those who want those extra layers of protection. However, there is one thing in common to all: the importance of being compliant. After that, it’s up to you as a business owner to determine the level of risk you’d like to mitigate.
One Nation of Individual States
While you would think that insurance like workers comp would be required in all states, there are two states in which it is not the law. Those states are New Jersey and Texas. Therefore, the remaining 46 contiguous states plus Alaska and Hawaii have passed laws to require employers to carry workers comp insurance. However, not all states have exactly the same legal requirements to make matters even more confusing.
If you are uncertain what the requirements such as limits and stipulations are in your state, you could contact your state’s insurance department. You could also talk to an insurer with a long history like The Hartford, which has been in business for more than 211 years. The point here is that just like laws regulating automobile insurance, each state sets its own legislation.
There is one more type of insurance legally required of businesses: unemployment insurance. If you are a startup and unsure if your state has unemployment insurance requirements, contact your state’s insurance department. These would be the two to cause you issues if you don’t carry the required insurance legislated in your state.
Other Common Business Insurance Requirements
With workers comp and unemployment insurance being the most widely required business insurance by law in most states, some states also require businesses to carry disability insurance. Also, several states set insurance regulations by industry so that, for example, a business serving or selling alcohol would be required to carry a specialized policy. Other industry-specific insurance often mandated by law in some states would be pertaining to industries offering legal or medical advice.
Why Only Certain Insurance Is Mandated
If you wonder why some types of coverage are required by law and others aren’t, the answer is straightforward. The ultimate purpose of insurance is for the protection of consumers. So then, as you can see, flood insurance is probably never going to be required and often isn’t even easy to get in flood plain areas of the country. Some insurers refuse to issue flood policies, and in states like Florida with the potential for deadly hurricanes each year, coverage for hurricane damage may be available but sometimes expensive. To sum it up, if you want to ascertain whether or not you are compliant with your state’s insurance laws, start with start with the department of insurance. If they don’t know, no one does!