While the Keystone State played an important part in early American history, small businesses are an important part of its economy. Pennsylvania business insurance is crucial to providing financial help when a business has damage or faces a liability claim. Some key Pennsylvania small business insurance policies are workers’ compensation, general liability, professional liability, and business owner’s policy (BOP).
Pennsylvania Business Insurance Requirements
State law mandates certain types of insurance for small businesses in Pennsylvania, but not every type of coverage is required. There are also industry requirements for coverage. Additionally, locally within the state, requirements can change.
Workers’ Compensation
Workers’ compensation insurance is required in nearly every single state. However, each state has different thresholds for when it must be offered and who is eligible. In Pennsylvania, it is required for all employees and seasonal workers. This mandate applies regardless of whether the employee is full- or part-time. Any business with an employee must offer workers’ comp.
This requirement extends to businesses with employees under a contract of hire that originates in Pennsylvania but the workers may be injured outside of the state. Even if the employee is injured in another state whose workers’ comp laws may not apply.
Pennsylvania also requires employers to post a notice containing the name, address, and telephone number of the party to contact regarding workers’ compensation claims. The notice also has contact information in case the employee wants to request any information. If an employer is found to be out of compliance or suspected of not providing this information, it is subject to fines from the Pennsylvania Bureau of Workers’ Compensation.
Workers’ comp helps businesses when an employee is injured or becomes ill because of their job. The coverage helps the employee with wage replacement while they are not working, paying for medical bills, and return-to-work programs. In Pennsylvania, workers’ comp typically carries liability protection for the employer.
Commercial Auto
Commercial auto insurance is required in the state. However, the limits are relatively low. Vehicles are required to carry the following coverages:
- $15,000 per person and $30,000 maximum per claim for bodily injury
- $5,000 in property damage
- $5,000 in no-fault medical payment coverage
In Pennsylvania, the medical payments coverage works very similarly to personal injury protection in other states and can cover services outside of normal medical payments including wage loss and household services.
General Liability
Commercial general liability insurance, usually shortened to general liability, has broad coverage for your business from third-party claims. It is not required statewide in Pennsylvania; however, there are examples of different industries that require the business to carry general liability for licensure by the state.
As you will see below, some different municipal governments have requirements for general liability.
- Daycares: General liability with a minimum limit of $1 million per occurrence and $3 million general aggregate
- Electricians in Pittsburgh: General liability insurance of no less than $300,000
- Electricians in Philadelphia: General liability insurance coverage of $500,000
- Heating, ventilation, and air conditioning (HVAC) technicians: They must submit proof of insurance; personal injury/liability of a minimum of $50,000 and property damage of a minimum of $50,000
- General contractors: At least $50,000 of personal injury liability coverage and $50,000 of property damage coverage
- Painters: They are required to carry general liability insurance but the amount is unspecified
While not a government requirement, another situation where you can expect to need general liability insurance for a small business in Pennsylvania is when you are bidding on a project, renting a space, or participating in an event. In any of those situations, you will usually need a certificate of insurance (COI) showing you have general liability in the state.
General liability insurance coverage is focused on three areas:
- Bodily injury.
- Property damage.
- Personal and advertising injury.
Pennsylvania general liability insurance often includes additional coverages. Some examples are product liability for losses from a product you manufactured or helped distribute and insurance for the damage caused to a premise that your business rents.
The costs of not carrying insurance are such a risk that it makes sense—whether it is required or not—to carry liability insurance for your business in Pennsylvania. While past year premiums continue to rise, you can still save some money. See our roundup of the cheapest general liability insurance companies for options.
Other Types of Small Business Insurance in Pennsylvania
Since Pennsylvania only requires two types of business insurance, workers’ comp and commercial auto, it may seem like no other types are important. However, that doesn’t mean other types of insurance shouldn’t be considered, especially if the coverage in question applies to your business’ nature of operations.
| Type of Coverage | What It Covers |
|---|---|
| Professional Liability | 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 |
| BOP | Liability protection, first-party protection for your property and, usually, business lost income coverage |
| Inland Marine | First-party for tools and equipment |
| Commercial Umbrella | Excess liability coverage for claims that exceed the limits of your liability policy |
| Cyber Liability | First and third-party coverage for losses related to data breaches, hacking, or other cyber-related losses |
| Employment Practices Liability Insurance (EPLI) | Claims of wrongful termination or other harmful employment practices |
Professional Liability
While general liability is an important coverage, and often required for specific industries, it is not the only type of liability insurance in Pennsylvania. Errors & omissions insurance, (E&O), or more commonly professional liability insurance, is an important type of liability coverage. It is different from general liability by having a narrower focus on what is covered and is for businesses in the service sector.
Say you own a financial planning or architecture firm in Pennsylvania. You’ll want to consider purchasing E&O insurance because the protection it offers a business is related more to negligence in advice or adhering to a contract, as opposed to the more general liabilities of a CGL. A common example of a professional liability claim is a situation where someone claims you gave them bad financial advice or failed to deliver on a contract. Professional liability is what you would turn to for help.
Commercial Property
Insurance is more than liability. There are also first-party coverages, that is, coverage for property owned by your business. Commercial property is a first-party coverage, meaning it is for your property and not someone else’s.
It is important if you own a building, have a rented office space with furniture, or have a warehouse full of inventory. Depending on how the provider writes the policy, it may have coverage for tools and equipment—or you may need to insure that with a separate policy called inland marine (which we cover later on).
Occasionally, commercial property will be written “all risk.” This means the policy will cover any loss that isn’t specifically excluded in the policy. But usually, losses are handled on a named-peril basis, and coverage is typically limited to the listed location.
A named peril policy simply means the types of losses covered are described in the policy and are only associated with the listed location. For example, the policy may say that fire, theft, or vandalism are covered losses at a specific location, but wear and tear of the office coffee machine and the printer are not covered.
BOP
A BOP is a great option for Pennsylvania small business insurance. It is a combination of general liability and commercial property, and insurers will usually include a third coverage called.
Also, insurers usually offer the BOP at a more affordable price; sometimes they’ll refer to this as “bundling.” The BOP offers the convenience of having one policy for multiple types of coverage. For most insurers in Pennsylvania, businesses with revenue under $5 million or fewer than 100 employees are eligible for a BOP.
Confused? We’ve got you covered. We do a deep dive into the differences between BOP vs general liability insurance.
Inland Marine
Another first-party coverage you may wish to consider is inland marine. This is an important policy for businesses working in an industry with tools or equipment, such as painters, contractors, or handypersons. While it is similar to commercial property, coverage isn’t limited to a listed location—it “travels” with the tools and equipment. Hence, the “inland” part of its name.
Some insurers will provide blanket coverage for tools and equipment, and others will have you list or “schedule” each individual item on the policy. So, let’s say you are working on a job site and an expensive piece of equipment is stolen, you would file a claim on your inland marine policy.
Commercial Umbrella
Unfortunately, sometimes a loss can be so costly that one liability policy isn’t enough—and that’s where a commercial umbrella policy comes in. The policy only functions as excess liability policy, and its limits would not come into play until the limits of the other policy are exhausted.
If you work in a riskier industry and are concerned that the limits on your general or professional liability policy may be insufficient, a commercial umbrella policy can be purchased. For instance, 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.
Cyber Liability
Despite the “liability” part of the name, cyber liability insurance is similar to a BOP and is usually 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
Finally, another important Pennsylvania small business insurance policy to consider is employment practices liability insurance (EPLI). This offers protection for your business against claims of wrongful termination, hiring, and employment practices.
Say an ex-football coach at the Pennsylvania State University was awarded over $7 million for wrongful termination in 2016. Wrongful termination, sexual harassment, age, and gender discrimination are just some of the types of losses that fall under EPLI coverage.
Pennsylvania Business Insurance Costs
Insurance premiums for Pennsylvania small business insurance can vary widely. The industry, size, and claims history are all considered by insurance companies. In our research for this article, we obtained a number of sample quotes from a variety of different brokers and carriers and presented the cheapest and most expensive of them. All were for companies with three employees or fewer and an annual revenue under $250,000.
| Industry | Estimated Annual Premium | Coverage Type | Coverage Amount |
|---|---|---|---|
| Handyperson | $2,766 to $3,878 | BOP | $1 million per occurrence, $2 million aggregate with $30,000 property coverage and a $1,000 deductible |
| Photography | $310 to $409 | General liability | $1 million per occurrence, $2 million aggregate |
| Restaurant | $3,925 to $6,897 | BOP | $1 million per occurrence, $2 million aggregate with $30,000 property coverage and a $1,000 deductible |
| Landscaping | $2,184 to $2,675 | General liability | $1 million per occurrence, $2 million aggregate |
When evaluating the risk of a business, providers take into account a number of factors. Some of these factors are:
- The geographic region within Pennsylvania, including the specific county
- Yearly revenue and payroll
- Claims history
- Risk management and training
- Business experience
- Prior insurance history
Our guide on the ways to save money on business insurance may be of interest to you. The article covers how to get quality coverage at an affordable price.
How To Get Pennsylvania Business Insurance
When shopping for small business insurance in Pennsylvania, you have several options, which are broken down into three different categories.
Provider
The first option is to go directly to an insurance provider, also known as a carrier. Some distribute their products exclusively through agents or brokers, whereas others will work directly with consumers and generate quotes online. Some direct-to-consumer providers are cheaper because they do not pay agent or broker commissions.
Agent
An agent works for the insurance company and helps connect the carrier with prospective policyholders. There are some who are called “captive agents” and only sell insurance for one insurance company. Meanwhile, others are called “independent agents” working with multiple insurance companies. For example, State Farm is a provider with many captive agents, whereas Liberty Mutual is a carrier that works with independent agents.
Broker
Another option for purchasing business insurance in Pennsylvania is by going with 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. For example, Simply Business is a broker that works with multiple top-rated carriers and specializes in helping you find Pennsylvania business insurance.
We’ve put together an article addressing the similarities and differences between an insurance broker vs a carrier.
Pennsylvania Small Business Insurance Statistics—Why Insurance Is Important
By size and population, Pennsylvania is an important state. It is the fifth-most populous state with the sixth-largest economy in America. This economy is driven largely by small businesses.
Consider the following small business statistics in Pennsylvania:
- There are 1.1 million small businesses in Pennsylvania. This number accounts for 99.6% of all businesses in the state.
- The 1.1 million businesses employ 2.6 million workers or 46.2% of all employees in Pennsylvania.
- 13,134 small businesses contribute to Pennsylvania’s export economy. This number is equivalent to 88.2% of all export firms.
- Total value of export by small firms in 2022 total $10.7 billion.
- Most of the Pennsylvania small businesses are owner-operators. The classification employs 872,647 people.
- The largest industries for small businesses are professional, scientific, and technical services, with 125,179 persons employed.
- Construction is the second largest industry for small businesses, with 95,099 employees.
By helping small businesses with coverages like business interruption and injured workers with their wages, Pennsylvania small business insurance is a key part of its strong financial success.
Frequently Asked Questions (FAQs)
What insurance is required in Pennsylvania?
Pennsylvania mandates employers offer workers’ compensation for their employees, and if your business owns a vehicle, it will need commercial auto insurance.
How much is workers’ comp insurance in Pennsylvania?
Workers’ compensation insurance cost is calculated using a formula that includes your industry, claims history, and the number of employees, so the price can vary significantly even within the same industry. In 2022, the average Pennsylvania employer paid $1.19 per $100 of payroll per the National Academy of Social Insurance[1].
Is workers’ comp required in Pennsylvania?
Yes, workers’ compensation is required in Pennsylvania for any business that has an employee, even if it is one part-time employee.
How do I file a business insurance complaint in Pennsylvania?
To file a complaint, contact the Pennsylvania Department of Insurance. You can also file a complaint online or call (877) 881-6388.
What’s the population of Pennsylvania?
Pennsylvania is the fifth-most populous state in the United States with a population of 12,972,008 per the last census.
How many small businesses are in Pennsylvania?
There are 1.1 million small businesses in Pennsylvania. This number represents 99.6% of all businesses in the state.
Bottom Line
As one of the original colonies and the host for constitutional conventions, Pennsylvania is an important part of the American past. With the sixth-largest economy in the country, it continues to play an important role. Small businesses are the backbone of the Pennsylvania economy, which means Pennsylvania business insurance is crucial.
Simply Business understands the importance of insurance and makes it simple and affordable to purchase insurance online. In 10 minutes or less, you can compare quotes in real-time from top companies, modify coverages, and purchase a policy online or call to speak to one of its agents.
FAQs source:
12022-Workers-Compensation-Report-2020-Data.pdf
