North Carolina has a strong economy, including a robust export economy, that consists primarily of small businesses with fewer than 19 employees. Business insurance in North Carolina plays a very important role in keeping its economy afloat by helping offset the financial loss a business faces when it has a claim. In North Carolina, workers’ compensation and commercial auto are important policies, but so are professional liability and inland marine insurance.
North Carolina Business Insurance Requirements
In the state of North Carolina, employers must offer workers’ compensation, and any business with a vehicle must have commercial auto insurance. Outside of that, there are some industry- and regional-specific requirements for business insurance in North Carolina. Of course, every business owner must keep in mind the significant risk and cost of being uninsured when faced with a loss, liability, or otherwise.
Workers’ Compensation
Workers’ compensation is one of the required coverages for small businesses in North Carolina. The threshold for when it is required is if a business has three or more employees, who can be part- or full-time. This requirement also extends to independent contractors and subcontractors your business may hire.
There are some exceptions and exemptions to this requirement:
- Sole proprietors, limited liability company (LLC) members, and partners are not considered employees. However, while a corporate officer can elect to not be covered by workers’ comp, they are still counted towards the overall total for whether a business has three employees.
- If you employ domestic servants for a household or have a farm with fewer than 10 non-seasonal laborers, workers’ compensation is not required to be offered.
- Executive officers, directors, and committee members for a nonprofit organization do not count as employees—provided all of the North Carolina workers’ compensation requirements are met.
Workers’ compensation is a type of small business insurance that helps workers who become injured or fall ill while on the job. Workers’ compensation insurance will help an employee by paying some form of wage replacement and providing assistance for medical bills and benefits to the family in the event the worker passes away. In North Carolina, workers’ compensation also carries liability protection for the employer.
Commercial Auto
The other required small business insurance coverage in North Carolina is commercial auto. This is required for businesses that own a vehicle used for business operations. The minimum coverage for liability insurance is $25,000 in property damage per loss. You must have $30,000 per person and $60,000 per incident in bodily injury coverage.
The commercial auto requirement applies to liability coverage and uninsured motorists, although the latter is a bit deceiving with the way it is handled in North Carolina. It is required that you carry $30,000 for uninsured motorist coverage. However, in the state, this is bundled with liability. If you purchase $30,000 in liability, you get $30,000 in uninsured motorist coverage automatically.
Commercial auto insurance is a bit odd because you can purchase the minimum, which is liability only, or you can add first-party coverages. These include collision, comprehensive, or even additional insurance endorsements, like towing and roadside assistance.
Providers will often offer hired and nonowned auto coverage as an endorsement for general liability insurance. This is not the same as carrying the required commercial auto insurance in North Carolina.
General Liability
There is no statewide requirement for general liability in North Carolina. That said, there are specific requirements—as well as local requirements—for certain industries, meaning if you work in an industry that has a licensing board or where local municipalities govern your work, ensure you check those requirements.
Sometimes, a surety bond will suffice instead of a general liability policy. For the difference between insurance and surety bonds, see our comparison of bonded vs insured.
Some industry-specific and local examples of required insurance are:
- Heating, ventilation, and air conditioning (HVAC) contractors are required to carry different levels of general liability or surety bonds. Greensboro requires a $2,000 surety bond for HVAC contractors and Winston-Salem requires a bond for $2,500.
- Landscape contractors need to either deposit cash or purchase a $10,000 surety bond.
- General contractors for commercial or residential work must carry a minimum policy of $1 million in general liability.
- If your business is in private security, it is required to maintain general liability with a minimum of $50,000.
It is important to carry general liability because, at any time, an oversight board, government agency, or vendor you are working with may request proof of insurance, formally known as a certificate of insurance (COI). When that happens, you’ll need to be able to prove you are carrying the appropriate amount of insurance.
As in other states, in North Carolina, general liability or commercial general liability insurance has broad coverage for your business from third-party claims and is focused on three areas:
- Bodily injury
- Property damage
- Personal and advertising injury
This insurance usually includes additional coverages like premise liability and product liability insurance.
If you’re looking to save money on insurance, check out our guide to the cheapest general liability insurance companies.
Other Types of Small Business Insurance for North Carolina
While North Carolina business insurance requirements may be similar to other states, that doesn’t mean there aren’t other types of insurance to consider. This is especially true if the coverage in question applies to your business’ nature of operations.
Type of Coverage | What It Is |
|---|---|
Professional Liability | Covers claims of financial harm or loss as a result of advice or failure to perform a contracted service made by a third party |
Commercial Property | First-party coverage for property owned, typically fixed property or contents |
Business Owner’s Policy (BOP) | A combination of general liability, commercial property, and usually business lost income |
Inland Marine | First party covered for tools and equipment |
Commercial Umbrella | Excess liability coverage that provides additional limits |
Cyber Liability | First-party and third-party coverage for losses related to data breaches, hacking, or other cyber-related losses |
Employment Practices Liability Insurance (EPLI) | Protects small business owners from claims of wrongful termination or other harmful employment practices |
Commercial Flood Insurance | Coverage for the building, building’s contents, and business’ income in the event of a flood |
Surety Bond | Financial coverage guaranteeing contractual obligation |
Sometimes called errors and omissions (E&O) insurance, professional liability insurance in North Carolina provides protection for claims of negligence for service businesses that give advice or fail to meet the obligations of a contract. This is a much narrower form of liability than general liability and is important for businesses in the service sector, which is the second-largest employment industry in North Carolina.
Small business insurance in North Carolina is more than just liability and workers’ comp. Small business owners need to protect their property, too, and there are several types of coverage for this, with the most common being commercial property insurance. This is a first-party coverage for a building, building contents, or even a warehouse full of inventory. However, commercial property insurance coverage stays at the listed location on the policy and doesn’t follow mobile equipment to job sites.
A commercial property policy can be written in two ways, which impacts how losses are covered:
- An “all-risk” policy covers any loss that isn’t specifically excluded.
- A “named-peril” policy is the more common type and means the types of losses covered are described in the policy. Typical named-peril losses are fire, theft, and vandalism.
Another type of business insurance in North Carolina for property coverage is a BOP, commonly called a BOP. It is advantageous for a small business because it is a combination of general liability and commercial property and usually lost business income.
When insurers combine policies, they call this “bundling.” A BOP is a good option because it is usually more affordable to bundle the policies than to purchase each one separately, and the BOP offers the convenience of having one policy for multiple types of coverage.
It isn’t necessarily for every small business. Also, keep in mind that most insurers typically only offer a BOP to businesses with revenue under $5 million or fewer than 100 employees.
If your business is one with tools or equipment, like a contractor or a handyperson, then you will want to look into another first-party coverage called inland marine. This insurance “travels” with the tools and equipment and isn’t limited to a specific location.
Some insurers will offer blanket coverage for tools and equipment, and others will have you list or “schedule” each individual item on the policy. To purchase this, you can buy it as a standalone coverage, but many insurers will offer it as an endorsement for general liability insurance.
Believe it or not, sometimes one layer of liability protection isn’t enough. Think about venturing out into a rainstorm. You may just wear a rain jacket if you are going outside, or if it is pouring, you may wear a rain jacket and use an umbrella.
If your business is in a risky industry or you have concerns, the limits for your liability policy are not high enough, a potential solution is to purchase another form of protection known as an umbrella policy, which is an excess liability policy. The limits for an umbrella policy do not come into play until the limits of the other policy are exhausted.
For example, you have a general liability policy with a limit of $2 million and a commercial umbrella policy with a limit of $1 million. Once the general liability policy of $2 million is exhausted, you could file a claim for the additional $1 million in coverage from the umbrella policy.
As cybercrimes and data breaches increase and more businesses are operating online, it is important to ensure that not only is your physical space protected, but your business has coverage for the digital space, too. That’s where cyber liability comes into play. The name for this insurance can be misleading because, despite the “liability” part of the name, cyber liability insurance is similar to a BOP.
Cyber liability usually is divided into first and third-party coverage:
- First-party cyber liability helps with the expenses you face from a data breach, which can include investigating and notifying anyone impacted.
- Third-party coverage is a type of liability that can help protect your business if customers decide to sue you over negligence. In the event of a data breach, your business may be subject to fines and penalties from the government or private entities. This part of the policy can also help with those fines.
EPLI is an important North Carolina small business insurance policy because it offers protection for your business against claims of wrongful termination, hiring, and employment practices. Examples of an EPLI claim include sexual harassment and gender discrimination.
EPLI claims, especially ones that go to court or result in government fines, can be costly. In October 2023, the United States Department of Labor fined US Foods over $721,000 for hiring discrimination practices at its locations in North Carolina and other states.
Commercial property policies do not cover a loss from a flood, and North Carolina, with its miles of coastline, is subject to flooding and damage from hurricanes. If your business is in a designated floodplain or in an area at risk of flooding, your business should consider purchasing flood insurance, which is first-party property coverage for a business’ building, contents, and lost income coverage.
While not technically insurance, a surety bond is often sold and administered by insurance providers and is usually required in conjunction with a general liability policy. It is a financial guarantee that your business will meet the obligations of a contract or maintain compliance with the regulations of a specific industry. Given that North Carolina’s largest small business industry sector is construction, surety bonds will often be required for small businesses.
North Carolina Small Business Insurance Costs
When it comes to how much North Carolina small business insurance costs, commonly known as a premium, the price will vary depending on the industry and size of the company. In our research for this guide, we obtained several sample quotes from a variety of brokers and carriers. All were for companies with three or fewer employees and an annual revenue below $250,000.
Industry | Estimated Annual Premium | Coverage Type | Coverage Amount |
|---|---|---|---|
Handyperson Service | $540 to $1,700 | General liability | $1 million per occurrence, $2 million aggregate |
Photography Service | $400 to $600 | BOP | $1 million per occurrence, $2 million aggregate with $10,000 in camera equipment coverage |
Restaurant | $1,900 to $3,700 | BOP | $1 million per occurrence, $2 million aggregate (includes liquor liability) and $40,000 for kitchen equipment |
Landscaping | $575 to $1,000 | BOP | $1 million per occurrence, $2 million aggregate with $10,000 in equipment |
When evaluating the risk of a business, insurers take into account a number of factors. Some of these factors are:
- The geographic region within North Carolina, including the specific county
- Proximity to the coastline or flood regions for flood insurance
- Yearly revenue and payroll
- Claims history
- Risk management and training
- Business experience
- Prior insurance history
Our tips on the ways to save money on business insurance may be of interest to you since insurance costs seem to be rising nationally. Our article goes over how to get affordable yet quality coverage.
How To Get Small Business Insurance in North Carolina
There are different ways to purchase business insurance in North Carolina. There are three main options and, while each one has some overlap, it is worth exploring all three to see if you can save any money without compromising on coverage.
Provider
The first option is to work directly with an insurance provider. A carrier is an insurance company that underwrites and services the insurance policy in different ways including handling a claim. When it comes to purchasing insurance from a carrier, you can do so directly with some while others limit the ways to purchase by working exclusively with agents or brokers.
Agent
An agent works with an insurance company and helps connect the provider with prospective policyholders. There are two types of agents: captive and independent. A captive agent will only sell insurance for one company while an independent agent will work with multiple companies. For example, State Farm is a carrier with many captive agents while Liberty Mutual is a provider that works with independent agents.
Broker
A third option for purchasing small business insurance in North Carolina is by going through a broker. A broker is like an agent, except the broker works on behalf of the customer and not for the insurance company. Usually, a broker will work with many different carriers and provide insurance advice to the client while helping them find the best option for insurance.
Our comparison of insurance carrier vs broker offers more insight into the options and will help you choose which fits your needs best.
North Carolina Small Business Statistics—Why Insurance Is Important
North Carolina’s economy is robust and diversified, with food processing and manufacturing and furniture being some of the leading industries in North Carolina. And in each industry, you will find a number of small businesses playing an important part in the 11th-largest economy in the U.S.
Consider the following North Carolina small business statistics:
- There are 1 million small businesses in North Carolina, which totals 99.6% of the total businesses in the state.
- These small businesses employ 1.8 million people, or 44.5%, of all state employees.
- The economy is growing. Between March 2021 and 2022, 39,539 businesses opened and 26,604 businesses closed, for a net increase of 12,935 new businesses. This translated into 208,143 new jobs during the same period.
- The largest small business industry in North Carolina is construction, with 131,263 employees.
- The next largest industry was professional, scientific, and technical services, with 124,213 employees.
- The largest employment group by far is “without employees,” with 827,713 total employees.
- In 2021, North Carolina’s strong export economy totaled $31.3 billion. Of those, $7.1 billion, or 22.8%, came from small firms.
Business insurance in North Carolina helps make all of these numbers possible. It helps a business from unexpected losses, provides a level of certainty in budgeting, and offers support services to businesses when they have suffered a loss, including helping provide revenue when the business cannot operate.
Frequently Asked Questions (FAQs)
Yes, it is required for all businesses with three or more employees. It doesn’t matter whether the employees are full- or part-time, and officers can count towards the total number of employees.
No, there is no statewide requirement for general liability insurance. However, specific industries are required to carry general liability or a surety bond to obtain a license or get a contract.
Yes, commercial auto insurance is required. Liability is the required type of coverage, with the minimum limits being $25,000 in property damage and $30,000 in bodily injury per person with a maximum of $60,000 per loss.
Prices fluctuate based on industry and other factors. Looking at several providers, the average cost of general liability is around $45 a month, while professional liability average costs can be higher at around $55 monthly. Workers’ comp averages out at $70 per month, and commercial auto is significantly higher than the rest, with an average cost of around $150 monthly.
According to the Small Business Administration (SBA), there are 1 million small businesses in North Carolina. This number represents 99.6% of the total number of businesses in the state and 44.5% of the North Carolina employees.
To file a complaint against an insurance company, you can call the Department of Insurance at (855) 408-1212. You can also initiate a complaint online through the North Carolina Department of Insurance website.
In North Carolina, workers’ compensation and commercial auto are the only required types of insurance for small business owners. However, other coverages may be required in a specific industry or locally to do public work.
Bottom Line
If you’re considering opening a business in the Tar Heel State, then you’ll want to ensure you are properly covered. If you are in construction, a general liability policy will probably be required, along with workers’ comp if you have three or more employees. If you are working in the services industry, then pick up some professional liability. Regardless of your industry, with a strong net gain of new small businesses in recent years, North Carolina has a good environment for small businesses and a strong economy to support various industries.
Simply Business understands the importance of insurance while making it simple and affordable to purchase insurance online. In 10 minutes or less, you can compare quotes in real time from top providers, modify coverages, and purchase a policy online or call to speak to one of its agents.
