Tuesday, May 21, 2024

What Insurance Is Your Business Legally Required To Have?

Last updated on August 7th, 2023 at 01:43 am

Insurance exists to protect your business from many unforeseen events. However, did you know that many types of insurance are optional? You don’t technically need to have them, but are there types of insurance you must get? The short answer is yes. Primarily, the federal government demands you get certain insurance coverage if you run a business with employees. In this article, we’ll answer the question what insurance is your business legally required to have? 

Workers’ Compensation

Workers’ compensation insurance is there to provide financial compensation to any workers that have been injured or made sick as a result of their job. If an employee slips on a wet floor at work and breaks their leg, this insurance coverage comes in to provide financial aid to cover medical bills, a break in employment, etc. 

The employee will use workers compensation claim lawyers to gain compensation, with the idea being that this prevents other legal action from happening. If your insurance pays out, the employee can’t then try to sue you as well. 


Unemployment insurance is another legal requirement for businesses with full or part-time staff. The concept behind this is to provide short-term support for any workers who lose their job. This could be via illness, or because there are furloughs and layoffs. 

Put simply, if your employees become unemployed for a reason outside of your control that you didn’t see coming, unemployment insurance kicks in to bring some level of financial aid. Of course, if you fire an employee because they’re not doing a good job, they aren’t entitled to make an unemployment insurance claim. 


This is a relatively new addition to the legal requirements for small businesses, but disability insurance is mandatory. It is similar to worker’s comp in that it provides financial benefits to employees who get injured and are unable to work. 

The main difference is that it covers incidents that happen away from work. Obviously, the employee has to prove that they are in some way disabled and unable to perform their job. They cannot make disability insurance claims if they’re off sick for a few days. Keep in mind that employees should also have sick pay anyway, so this normally kicks in when all of their sick days are used up. 

What other types of insurance are worth getting? 

While the following types of insurance aren’t mandatory, they’re still beneficial for small businesses: 

  • General liability insurance – this will protect your company if anyone gets injured on your property or you do damage to someone else’s property while conducting work. It can also cover a range of other things such as lawsuits or libel. 
  • Product liability insurance – if you sell products, this is a necessity as it protects against any claims that your product is defective and caused harm or injuries to customers. 
  • Professional liability insurance – those of you that sell services should get this insurance as it covers you when things go wrong or you make mistakes. 

It is always worth looking into business insurance and seeing the different types available. Yes, it’s an expense, but the protection you gain can save thousands of dollars when an incident happens. 


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