Since joining the union in 1796, Tennessee has been known for outsized contributions, hence its nickname as the Volunteer State. So, it is not surprising that small businesses in Tennessee account for almost 100% of employment and contribute to a healthy, growing economy. Tennessee business insurance is essential to the TN economy, protecting businesses from losses and helping keep them afloat during downtimes due to a claim.
Tennessee Business Insurance Requirements
It may surprise you that the property and casualty insurance sector is regulated not by the federal government but by each state. In Tennessee, the Department of Commerce and Insurance oversees Tennessee business insurance, including workers’ compensation insurance.
Tennessee Workers’ Compensation
There are only two types of business insurance that are required in Tennessee. One is workers’ comp. Workers’ comp is required in Tennessee for any business with five or more employees. Family members, part-time employees, and corporate officers are included in this employee count.
Workers’ comp is an essential type of business insurance because it protects a business when an employee gets injured by giving your business liability protection.
If an employee becomes injured or ill because of their work, workers’ comp will pay the medical bills, training, return-to-work therapy, and disability payments (wage replacement). In Tennessee, workers’ comp offers travel reimbursement up to 15 miles one way and pays wage replacement at ⅔ of the employee’s salary.
The small business insurance requirements for workers’ comp in Tennessee differ in a few scenarios. Construction and coal mining employers must get coverage if they have one employee.
Insurance is purchased through the private market. If you can demonstrate financial responsibility, you can opt to self-insure, but it must be approved by the Department of Commerce and Insurance.
Commercial Auto
The other required business insurance in Tennessee is commercial auto insurance. The required minimum limits are as follows:
- $25,000 bodily injury liability per person
- $50,000 bodily injury liability per accident
- $15,000 property damage liability per accident
Having worked as an auto adjuster, I can say that these are low limits. If a severe accident happens and your business is at fault, the other party can forgo insurance and go after the assets if the limits are insufficient for the loss. $15,000 for property damage is very low. This includes repair to the vehicle or property, roadside cleanup, rental car, and the cost of totaling the vehicle if the vehicle is a total loss. If you think about the auto repair cost today, you know $15,000 will quickly be exhausted.
Commercial Vehicle Insurance
For commercial motor vehicles, insurance requirements are in line with federal regulations. For example, your business must carry cargo insurance of $5,000 per vehicle or $10,000 per occurrence and public liability insurance. Your company must also bring proof you have met the financial requirements for federal regulations for commercial motor carriers. You can review the Federal Motor Carrier Safety Administration (FMCSA) requirements for more details on commercial truck requirements.
Tennessee Commercial Liability Insurance
General liability insurance is not required statewide in Tennessee. Of course, nearly every government organization will require proof of general liability insurance to work with it or bid on any job. Additionally, licensing boards have their standards. Some of the industry requirements in Tennessee are:
- Daycare: Daycares in Tennessee must carry a general liability policy with a minimum limit of $500,000.
- General contractors: TN must carry at least $100,000 of general liability insurance.
This list is not exhaustive, but from my research, TN has fewer insurance requirements than other states. Make sure to check with the licensing board for your industry. When bidding on a job, you’ll have to prove what type of insurance you have and how much you have purchased. This is done through a certificate of insurance (COI) document.
Tennessee commercial liability insurance is just like general liability elsewhere. The coverage is broken down into three areas of protection for your small business.
- Bodily injury
- Property damage
- Personal and advertising injury
Most insurance providers in Tennessee will typically include additional coverages like medical payments, premise liability, and product liability insurance in their general liability policy.
Other Types of Small Business Insurance for Tennessee
Tennessee business insurance requirements are straightforward: commercial auto and workers’ comp are required. But just because coverage isn’t required by law doesn’t mean your business doesn’t need it. Here are the most common types of business insurance policies to consider:
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 coverage for tools and equipment |
Commercial Umbrella | Excess liability coverage that provides additional limits |
Cyber Liability | First- 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 |
After general liability, professional liability is the other type of small business liability.
While general liability addresses tangible losses, like a customer slipping and falling in a business, professional liability insurance offers your business protection for negligence related to giving advice or adhering to a contract. Hence, another common name for it is errors and omissions insurance.
Industries in the service sector or that provide advice as a service should consider professional liability. This is especially important for Tennessee since that industry has the most small businesses in the state. If you’re in the service sector, check out our guide to the best professional liability insurance companies to compare your options and their costs, features, and financial ratings.
Unlike general liability, professional liability insurance will usually have a deductible. The deductible will apply each time you file a claim.
Commercial property is for the property that your business owns. There are different types of property policies. Commercial property insurance is a first-party coverage for a business owner who:
- Owns a building
- Rents office space with furniture
- Has a warehouse full of inventory
Remember that when discussing your property coverage, it is almost always limited to the specific listed location on the policy. Please note that commercial property carries an insurance deductible.
Most business owners need more than one type of policy. A business owner’s policy (BOP) combines general liability and commercial property; insurance carriers usually include a third coverage for lost business income.
This is a great option because of its convenience and affordability. Most insurers will charge less for a BOP than if you purchase all three policies separately. A BOP isn’t for every small business. This policy is typically reserved for companies that have $5 million in revenue or less and fewer than 100 employees.
Another type of commercial property policy is inland marine insurance. This important coverage best serves those who work with tools or equipment, such as painting, contracting, or home repairs. Often, when getting a quote, you’ll see it listed as “tools and equipment” coverage.
One significant difference between inland marine and commercial property insurance is that inland marine coverage “travels” with the tools and equipment. In contrast, commercial property insurance only covers fixed property at a listed location.
An umbrella policy is just what it sounds like. It offers protection that extends over your other protection in the form of an excess liability policy. It is an excellent option for businesses that work in riskier fields. It comes into play when the liability policy becomes exhausted. It also can help when bidding on a project by showing that your business has additional liability limits.
The internet has become an essential component of nearly every type of business. Cyber liability insurance helps your company handle the response when it suffers a loss from data breaches, hacking, cybercrimes, and ransomware. But don’t let the name fool you, as cyber liability is divided into first- and third-party coverage.
- First-party cyber liability coverage: Helps with the expenses you face from a data breach, including investigations and notifying anyone impacted.
- Third-party cyber liability coverage: Protects your business if customers decide to sue you for 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.
Perhaps not the best-known business coverage, employment practices liability insurance (EPLI) is important for small businesses to check out. Now, this one would only be important for small businesses with employees. So, in TN, this is a smaller segment of the small businesses. This will apply to fewer businesses, but it is still worth checking out. It handles claims of wrongful termination, hiring, and employment practices and provides coverage for sexual harassment and gender discrimination.
Tennessee Business Insurance Costs
In our research for this guide, we obtained various sample quotes from different brokers and carriers. All the quotes were for companies with three or fewer employees and annual revenue under $250,000.
Industry | Estimated Monthly Premium | Coverage Type | Coverage Amount |
|---|---|---|---|
Restaurant | $55-$250 | General liability | $1 million per occurrence, $2 million aggregate |
Photography Service | $15-$30 | BOP | $1 million per occurrence, $2 million aggregate, and $5,000 in equipment coverage |
Hair Salon | $20-$55 | General liability | $1 million per occurrence, $2 million aggregate |
Landscaping Company | $79-$140 | General liability | $1 million per occurrence, $2 million aggregate |
Insurance is quite simple: it is a contract. The insurer agrees to pay for certain losses, and you agree to pay your premium. How much the premium costs will vary because of several factors. Some of the variables that providers take into account when calculating your premium include the following:
- The geographic region within Tennessee, including the specific county (for example, insurance will be higher in Memphis versus in a business in Nashville)
- Yearly revenue and payroll
- Claims history
- Risk management and training
- Business experience
- Prior insurance history
How to Get Tennessee Business Insurance
Ready to buy? You’ve got three options for purchasing small business insurance in Tennessee. These are a provider, agent, or broker.
Tennessee Small Business Statistics: Why Business Insurance in TN Is Important
There are so many things that make Tennessee great: The Great Smokey Mountains, Grand Ole Opry, Nashville Hot Chicken, and Memphis-style BBQ, to name just a few. And behind each of those is a small business: whether it is a souvenir shop in Pigeon Forge, a restaurant in Memphis, or a musician performing at the Grand Ole Opry, small businesses are at the center of the Tennessee identity.
Let’s take a look at these data from the 2023 Small Business Profile:
- There are 664,681 small businesses in Tennessee. This number represents 99.5% of all businesses there.
- There are 566,444 small businesses without employees.
- These small businesses employ 1.2 million people.
- While small businesses comprise 99.5% of all businesses, they employ 41.9% of all employees.
Tennessee has a healthy economy where small businesses can grow and thrive. Between March 2021 and 2022, small businesses added 100,929 jobs to the economy, representing 71.9% of all new jobs created during that time frame.
The strength of small businesses is also evident in the export economy. Of the total exporting businesses in TN, 82.5% were small, amounting to $5.6 billion.
Like nearly every other state, professional services and construction are the top industries. These categories also lead the category for businesses without employees. This means consultants and contractors are the jobs that fit into this space.
The variety of these businesses shows how small business insurance is not one size fits all. For example, the first industry on this list will need professional liability insurance, while the second one needs commercial property insurance and some form of liability. The most important coverage for the third business is commercial auto insurance. And, of course, depending on the employee count, they will need workers’ comp.
Frequently Asked Questions (FAQs)
Yes, in TN, workers’ compensation is required for any business with five or more employees, including part-time employees and family members. Construction companies must offer it if they have one employee.
No, general liability insurance is not a required coverage in Tennessee. However, any business that works on a government contract or bids for work will likely be required to show proof of general liability insurance.
Yes, commercial auto insurance is required in Tennessee. The limits are $25,000 per person, $50,000 per accident for bodily injury, and $15,000 in property damage per accident. Commercial motor vehicles must follow federal regulations for insurance.
Insurance premiums vary depending on the business, claims history, and location. Still, according to my research, a small photography business can expect to pay between $15 and $30 monthly for general liability coverage. At the same time, a restaurant can spend as much as $250 a month for liability coverage.
In Tennessee, 664,681 small businesses are employing 1.2 million people.
The Department of Commerce and Insurance handles complaints. You can only file a complaint by filling out an online form or by mailing the completed complaint form to the department. There is no hotline to call to file a complaint. However, if you have a question about your policy, you can call 1-800-342-4029.
TN’s population is growing, with projections showing it will hit 8 million in 2040. According to the most recent 2020 US census, TN’s population is 7.1 million.
Bottom Line
It is hard to exaggerate the importance of small businesses to the Tennessee economy. Whether you work in the hospitality industry in Lake Cumberland, sell hiking equipment to thru-hikers on the AT, or run an independent recording studio in Nashville, Tennessee, small businesses are constantly meeting the consumer’s needs. These small businesses contribute to the economy’s growth, and the healthy state employment and Tennessee business insurance are the invisible glue that helps bind all of this together by keeping the businesses open and running when they face a loss.
Simply Business understands the importance of insurance and makes it simple and affordable to purchase online. In 10 minutes or less, you can compare quotes in real time from top providers, modify coverages, buy a policy online, or call to speak to one of its agents.
