If you run a small business in California, you must understand the state’s strict insurance rules. California has comprehensive requirements designed to protect both employers and employees from financial loss.
Who Needs Coverage in California
Required Coverage:
- Workers’ Compensation: You must have workers’ compensation insurance as soon as you hire even one employee—this includes part-time, temporary, or seasonal help. This is a fundamental requirement under California law.
- Commercial Auto Insurance: Effective January 1, 2025, Senate Bill 1107 increases the minimum liability limits for all vehicles. You must now carry $30,000 per person, $60,000 per accident for bodily injury, and $25,000 for property damage (30/60/25).
Special Rules by Industry:
- Construction: Licensed contractors must have a workers’ compensation policy on file with the state, unless they certify that they have no employees and qualify for an exemption.
- Roofing: C-39 Roofing contractors must carry workers’ compensation coverage, even if they have no employees.
- Cannabis: Businesses must meet specific insurance and licensing requirements mandated by state regulators.
- Healthcare: Licensed professionals must carry professional liability (malpractice) coverage.
What This Insurance Covers
The right insurance portfolio protects your California business from a wide range of operational risks.
- Workers’ Compensation: Pays for medical costs, lost wages, vocational rehabilitation, and death benefits for employees injured on the job.
- General Liability: Covers third-party accidents, property damage, and legal fees. It is essential for any customer-facing business.
- Professional Liability: Needed for service providers, this policy protects against claims of professional errors, negligence, or mistakes.
- Cyber Insurance: Helps manage the financial fallout from data breaches and cybersecurity incidents, which is critical for compliance with the California Consumer Privacy Act (CCPA).
- Business Owner’s Policy (BOP): An affordable package that combines property and liability insurance, ideal for many small businesses.
Common Risks and Real Examples
California businesses face unique dangers, from natural disasters to a complex legal environment.
Natural Disaster Risks: California is prone to wildfires, earthquakes, and flooding. It is critical to understand that standard property insurance policies do not cover earthquake or flood damage. These events require separate, specialized policies. Wildfire coverage can also be difficult to obtain in high-risk areas and may require a policy from the California FAIR Plan.
Industry Risks:
- Construction: Falls, tool injuries, and subcontractor disputes.
- Retail: Slip-and-fall claims, theft, and product liability.
- Technology: Data breaches, hacking, and intellectual property disputes.
- Restaurants: Burns, food safety issues, and liquor liability claims.
Discover cost-saving strategies in our guide: Local Business Insurance Solutions to Save You Money.
What It Costs in California
The cost of small business insurance in California depends on several key factors:
- Industry Risk: High-risk jobs like construction and roofing have higher premiums.
- Location: Operating in major cities or designated wildfire zones increases costs.
- Team Size & Payroll: A larger payroll increases workers’ compensation premiums.
- Claims History: A clean safety record results in lower premiums over time.
- Coverage Limits: Higher limits provide more protection at a higher cost.
While costs can be high, California’s large and competitive insurance market provides many options for business owners.
Filing Claims and Staying Compliant
You must follow proper procedures when claims occur and keep your business aligned with California’s insurance requirements.
For Workers’ Compensation Claims:
- Post all required notices about workers’ comp rights at your workplace.
- Provide an injured employee with a DWC-1 claim form within one working day of learning about the injury.
- Ensure timely payment of all undisputed benefits.
- Disputes are handled by the Workers’ Compensation Appeals Board (WCAB).
Failure to comply with workers’ compensation laws can result in fines starting at $10,000, stop-work orders, personal liability for all injury costs, and misdemeanor criminal charges.
Bottom Line and Expert Tips
The right insurance keeps your California business legal and protects everything you have worked to build.
What to Do Now:
- Ensure you meet California’s workers’ compensation requirements (mandatory with one or more employees).
- Update your commercial auto policy to meet the new 30/60/25 minimum limits for 2025.
- Review your property policy for disaster-related exclusions and secure separate earthquake or flood coverage if needed.
- Consider cyber and professional liability insurance to protect against modern business risks.
Need help? Call our Workers’ Compensation Specialists at 855-718-7561
