Whether you’re running a retail shop in Memphis, a restaurant in Nashville, or a construction crew in Chattanooga, the right insurance isn’t just smart—it’s often required. Tennessee small business insurance helps shield your company from lawsuits, property damage, and risks tied to storms, employee claims, and cyber threats.
This guide covers Tennessee’s commercial insurance requirements, common claims, and how to stay compliant.
Who Needs Small Business Insurance in Tennessee?
State law mandates several types of insurance for small businesses.
Legally required coverage includes:
Workers’ Compensation Insurance: Under Tenn. Code Ann. § 50-6-102, required if you have 5 or more employees.
In Tennessee, employers in the construction industry (construction service providers) with one or more employees must secure workers’ compensation insurance coverage, or be specifically exempted. Information about the Workers’ Compensation Exemption Registry is available through the Tennessee Bureau of Workers’ Compensation.
Commercial Auto Insurance: Required for any business-owned vehicle under Tenn. Code Ann. § 55-12-101. Policies must meet or exceed these state minimums:
- Liability: $25,000 per person / $50,000 per accident for bodily injury, and $25,000 for property damage
- Uninsured Motorist (UM) Coverage: Insurers must offer this coverage under Tenn. Code Ann. § 56-7-1201, though it can be rejected in writing
Unemployment Insurance: Required if you pay $1,500 or more in wages in any calendar quarter OR have at least one employee during 20 different weeks in a year.
Best Insurance for Small Businesses in Tennessee
The best insurance plan provides protection when your team, assets, or reputation are at risk.
General Liability Insurance: Protects against customer injuries, third-party property damage, and advertising issues.
Business Owner’s Policy (BOP): Combines general liability and commercial property into one plan, often including business interruption insurance.
Workers’ Compensation Insurance: Legally required based on your employee count under Tenn. Code Ann. § 50-6-102, this covers medical bills and wage replacement. Premium calculations are based on payroll and job classification risk factors.
Contractor Insurance: Combines general liability, inland marine (for tools), and workers’ comp for construction businesses.
Restaurant Insurance: Includes protection for fire, slip-and-falls, and liquor liability claims.
Cyber Liability: Essential for businesses that store customer data or run e-commerce operations.
Common Claims in Tennessee (By Industry)
Retail businesses commonly face slip-and-fall injuries, theft, and storm damage.
Construction companies deal with equipment damage, job site injuries, and third-party lawsuits.
Restaurants encounter kitchen fires, liquor liability issues, and food spoilage claims.
Weather events—tornadoes and flash floods, especially in Middle and West Tennessee—are frequent drivers of commercial property claims.
Discover cost-saving strategies in our guide: Local Business Insurance Solutions to Save You Money.
Cost of Tennessee Small Business Insurance
Premiums vary based on multiple factors that insurers use to assess risk:
Business Risk Factors:
- Industry type and risk classification
- Geographic location within Tennessee
- Number of employees and total payroll
- Annual revenue and business operations
- Claims history and loss experience
Coverage Factors:
- Types of coverage selected
- Policy limits and deductibles chosen
- Bundle discounts for multiple policies
- Safety programs and risk management practices
Premium Calculation Factors:
- Value of business property and equipment
- Safety record and training programs
- Credit history (where legally permitted)
- Years in business and operational experience
Bundling policies, such as a BOP with workers’ comp, can often provide cost savings compared to separate policies.
Claims Process & Legal Compliance
If an incident occurs, you need to act quickly to stay compliant.
Report Incidents Promptly: Notify your insurer immediately after any workplace injury or vehicle accident per policy requirements.
For Workplace Injuries: In Tennessee, employers must file the First Report of Injury (Form C-20) with their insurance carrier or administrator within one working day of learning about an injury.
They must also submit the C-20 to the Tennessee Bureau of Workers’ Compensation within 14 calendar days if the injury requires medical treatment beyond minor first aid, causes lost time, restricted duty, or death.
Document Thoroughly: Photos, witness accounts, and police/fire reports help support the claims process.
Penalties for Noncompliance:
- No workers’ comp: Penalties under Tenn. Code Ann. § 50-6-118 and potential personal liability for employee injuries
- No commercial auto: Vehicle registration issues and potential penalties under applicable statutes
Bottom Line: Why It Matters in 2025
Tennessee’s commercial insurance requirements provide a framework for business protection, while enforcement and digital risks continue to evolve. Getting appropriate insurance doesn’t just protect your finances—it helps protect your business operations, legal standing, and growth potential.
Consider these steps:
- Understand which policies your business is legally required to carry
- Evaluate comprehensive coverage options beyond minimum requirements
- Review your coverage needs annually as your business grows
- Consult with a licensed insurance professional to determine appropriate coverage levels
Proper insurance planning helps ensure compliance with Tennessee requirements while protecting your business assets and operations.
Need a quick quote or policy checkup? Call 855-718-7552 to talk with a licensed advisor today.
