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Which business insurance is legally required in the US

Two coverages are compulsory almost everywhere: workers' compensation for private employers in every state except Texas, where it is elective, and South Dakota, where the labor department says no law requires it, and liability insurance on registered vehicles in every state except New Hampshire. Thirteen states and DC add mandatory disability or paid-family-leave programs, federal rules add trucking minimums and, for employers with 50 or more full-time equivalents, health-coverage penalties. For most other lines, including general liability, the duty comes from contracts and leases rather than from statute, though licensing boards add some.

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Key takeaways

  • Workers' comp is compulsory for private employers in every state except Texas, where the Labor Code makes it elective, and South Dakota, whose labor department says no law requires it⁠11. Thresholds and exemptions vary⁠1⁠2⁠10.
  • Liability insurance on registered vehicles is compulsory everywhere except New Hampshire, which requires proof of financial responsibility after an accident instead⁠3.
  • Thirteen states and DC require employers to fund or insure disability or paid-leave programs⁠10.
  • A for-hire interstate carrier of nonhazardous property in vehicles over 10,000 pounds must carry at least $750,000 of liability (49 CFR 387.9)⁠4.
  • General liability, property, cyber and professional liability are mostly contractual. The ACA employer mandate is a tax-style payment, not an insurance purchase rule⁠5.

Quick facts

Workers' compCompulsory in 48 states and DC; elective in Texas; no mandate in South Dakota ⁠1⁠10⁠11
Monopolistic state funds4 states: North Dakota, Ohio, Washington, Wyoming⁠10
Paid leave or disability13 states and DC ⁠10
Federal trucking floor$750,000, for-hire interstate nonhazardous property, 10,001+ lbs⁠4
ACA employer threshold50 full-time employees, including full-time equivalents⁠5

Required by statute in nearly every state

Workers’ compensation. Every state except Texas and South Dakota⁠11 (and DC, which also requires it) requires private employers to cover job injuries, with the details set state by state: the number of employees that triggers the duty, which occupations are exempt, and whether you must buy from a private insurer or a state fund. Texas makes coverage elective for most private employers, but a nonsubscriber loses common-law defenses in injury suits and public contracts can require coverage⁠1⁠2. Four states (North Dakota, Ohio, Washington, Wyoming) are monopolistic: you buy from the state fund, not a private carrier⁠10. The full list is in workers’ comp requirements by state, and the coverage itself is explained under workers’ compensation.

Commercial auto liability. Each state sets minimum liability limits for vehicles registered there. New Hampshire does not compel the purchase but requires drivers to show financial responsibility after an at-fault accident⁠3. The limits for all 51 jurisdictions are in commercial auto minimums. State minimums are floors; they say nothing about what a client or lender will demand.

Required in some states

Disability and paid family leave. Thirteen states and DC run programs employers must fund, insure or collect payroll contributions for: California, Colorado, Connecticut, Delaware, Hawaii, Massachusetts, Maine, Minnesota, New Jersey, New York, Oregon, Rhode Island and Washington, plus DC⁠10. New York is the notable case of two separate mandates, the Disability Benefits Law and Paid Family Leave. Some programs are state-run and charged as a payroll rate; others need a private policy or self-insurance. See disability and paid leave requirements.

License and contract bonds. A surety bond is not insurance, but licensing boards require it before issuing a license. California sets the contractor bond at $25,000⁠6. Washington sets $30,000 for a general contractor and $15,000 for a specialty contractor⁠7. The cost of a bond is the surety’s rate times the bond amount, covered on the surety bonds page.

Liquor liability. Some states tie a retail alcohol license to proof of coverage. Minnesota will not issue or renew a retail license without proof of financial responsibility, met by insurance, a bond or a deposit⁠8. Utah requires evidence of dramshop insurance of at least $1 million per occurrence and $2 million aggregate for a retail license, and $10 million and $20 million for an arena license⁠9. Most states have no such mandate, but dram shop laws can still make a seller liable. See liquor liability.

Required by federal law

Motor carriers. Under 49 CFR 387.9, a for-hire interstate carrier of nonhazardous property in vehicles of 10,001 pounds or more must carry at least $750,000 of liability coverage. Higher floors apply to hazardous materials⁠4. For nonhazardous freight in intrastate commerce, the state’s rules apply. Details are on the trucking page.

The ACA employer mandate. An employer with an average of at least 50 full-time employees, counting full-time equivalents, in the prior year must offer affordable coverage that meets minimum value or may owe an IRS payment⁠5. This is a cost to budget, not a policy every business must buy. See group health insurance.

Contractual requirements: where most business insurance comes from

For most lines no statute applies to a private business. Landlords and clients can write liability, property or professional liability requirements into leases and contracts. These requirements are negotiable, differ from one counterparty to the next, and show up as a certificate of insurance request. The dollar limits are in your contract, so read the insurance clause before you buy. Our coverage pages cite the clauses where a source states them.

Reading the requirement tables

The linked tables list rules by state, each drawn from the state’s statute or agency. Rules change each legislative session, so the pages carry a review date. A rule here sets the minimum you must carry. It does not set your premium, which depends on your class code, exposure base, limits and claims history, as described in how premiums are calculated.

All requirements pages

Sources

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