Washington, appropriately nicknamed the Evergreen State, is beautiful and one of the leading producers of apples and other fruits in the US. It’s famous for being the headquarters for Microsoft and Boeing, but nonetheless, small businesses make up a bulk of the state’s economy and employment. Small business insurance is an important part of helping small businesses, including farms, which contribute to the state’s economy. In this state, workers’ compensation and commercial auto and commercial truck insurance are required.
Washington Business Insurance Requirements
You may not know this, but business insurance is not federally regulated. It is left up to each state to decide what is and is not legally required. However, most states have agreed on some common policies, and Washington is no different from the rest in requiring workers’ compensation and commercial auto insurance. However, its workers’ comp is handled differently from most of the nation.
Beyond those two state-mandated coverages, some industries need to carry general liability to be licensed or to do work with municipalities.
First is workers’ compensation, which is required for any business with one employee: part-time or full-time. This important policy is mutually beneficial to employees and employers.
If an employee becomes injured or ill because of their job, workers’ comp helps them with wage replacement, handling medical expenses, and providing opportunities to return to work—even if it is a different job than the one they had before. Simultaneously, when the affected employee receives compensation, the employer is then given liability protection from any lawsuit by the injured employee.
Unfortunately, people do die on the job. In Washington, if an employee dies from a work-related injury or illness, workers’ comp provides benefits for the family and liability protection for the employer. In 2022, there were a total of 104 fatalities at work, an increase of 31 from the previous year. Transportation incidents had the most fatalities at 32 fatalities or 31%, while the construction industry had the highest rate at 26, with 8 of these coming from falls, slips, or trips.
Fatalities aside, Washington had a higher-than-average rate of injuries or illness on the job. The most recent data shows that in 2022, there were 89,600 nonfatal injuries or illnesses in Washington. This figure averages out to 3.9 per 100 workers, higher than the national average of 2.7 per 100.
Alternatively, if your business has $25 million in assets, it may qualify for self-insurance. There are scenarios where workers’ compensation is not required. These exceptions are as follows:
- Domestic workers are exempt from coverage unless you employ two or more for more than 40 hours a week.
- A person hired for a temporary task, like if you hire a handyman
- A minor employed by a family on a farm
- Volunteer for charities
- Confusingly, jockeys who participate in horse racing are exempt.
If you are a sole proprietor, take a look at our quick guide to workers’ compensation for self-employed individuals, where we explain the costs and best insurance carriers.
Washington requires commercial auto insurance for all vehicles being driven in the state. Its minimum limits take the word minimum seriously. The required minimum limits are as follows:
- $25,000 bodily injury coverage per person
- $50,000 bodily injury coverage per accident
- $25,000 property damage.
This means if your delivery van hits a school bus and is at fault, there is only $50,000 total for all injuries sustained on that bus, including transportation costs, follow-up treatment, and any sort of intangible “pain and suffering” for everyone on the bus. As a former auto claims adjuster, let me tell you that $50,000 can disappear very fast in that situation.
The same goes for property damage. Roadside clean-up (say, a damaged guardrail or road debris), rental vehicle, and any repairs all fall within that $25,000. Since a bumper is essentially a computer and no longer a cheap and quick fix, again, the $25,000 is going to be used quickly.
You should probably consider higher than the minimum for commercial auto insurance.
Alternatively, proof of a $60,000 surety bond from a company authorized to sell in Washington is acceptable auto coverage.
Washington distinguishes coverage between traditional autos (including vans, trucks, and automobiles) and heavier commercial vehicles. A commercial vehicle also carries a minimum limit, but the limit differs based on the carrier permit. For common carriers, the combined single limit is $1 million.
Regardless of the permit, if your business hauls cargo weighing 10,000 lbs or less, you must carry $10,000 in cargo insurance. If your vehicle weighs over 10,000 lbs, the minimum limit is raised to $20,000 in cargo insurance.
General Liability Insurance in Washington
There is no statewide requirement for business liability insurance in Washington. Most public entities will require proof of insurance to work with it or bid on any public job. While there is no state mandate, there are rules by licensing boards for career insurance. There are several industry requirements within the state:
- HVAC technicians in Washington who perform unsupervised work must hold insurance and surety bonds. Specialty contractors, such as those in the HVAC industry, must purchase a $6,000 Washington Continuous Contractor Surety Bond.
- Specialty contractors also need a minimum of $200,000 in general liability insurance.
- Residential contractors are required to hold a minimum policy of $200,000 per occurrence and $600,000 aggregate.
- Commercial contractors must have a higher policy: minimum coverage of $1,000,000 per occurrence and $2,000,000 aggregate.
- Landscapers must have a general liability policy with a minimum liability limit of $1,000,000 per occurrence and $2,000,000 aggregate.
A key takeaway is to check with the licensing board for your industry. If you plan to do any sort of work with local governments, then make sure you know the Washington insurance business requirements before bidding on the job.
When bidding on a job, you’ll have to prove what type of insurance you have and how much of it you have purchased. This is done through a document called a certificate of insurance (COI).
General liability provides broad coverage for your business from third-party claims and is focused on three areas:
- Bodily injury
- Property damage
- Personal and advertising injury
Typically, most insurance providers in Washington will include additional coverages like medical payments, premise liability, and product liability insurance in their general liability policy.
Other Types of Small Business Insurance for Washington
While requirements for Washington are simple—you must have workers’ comp and commercial auto insurance—that doesn’t mean those are the only coverages you need. 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 |
While general liability is better known and has a broad coverage area, a very important type of liability insurance for Washington is professional liability insurance. Industries in the service sector or that provide advice as a service should consider professional liability, making this important for Washington since that industry has the most small businesses in the state.
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.
If you’re in the service sector, then be sure to check out our guide to the best professional liability insurance companies to compare your options, along with their costs, features, and financial ratings.
Liability insurance only helps you if someone claims that through your negligence, they were harmed. It doesn’t do anything for your property if something were to happen to it, like a volcano erupting and causing damage to your building. That’s why commercial property insurance is so important for your business. It is a first-party coverage for a business owner who:
- Owns a building
- Rents office space with furniture
- Has a warehouse full of inventory
Keep in mind that when discussing coverage for your property, it is almost always limited to the specific listed location on the policy. Please note that commercial property is first-party coverage so it carries an insurance deductible.
Small businesses have access to a special policy that larger businesses usually cannot purchase. It is called a business owner’s policy, or BOP. A BOP is advantageous for a small business because it combines general liability and commercial property, and insurance carriers usually include a third coverage for lost business income.
Beyond convenience, a BOP is more affordable than purchasing each policy separately. This policy is typically reserved for businesses that have $5 million in revenue or less and fewer than 100 employees.
For a deeper dive into the differences, check out our BOP vs general liability insurance comparison, which breaks down their costs and coverages.
Another type of commercial property insurance is inland marine. Despite its name, it is not a boat coverage but is first-party coverage for those who work with tools or equipment, such as painting, contracting, or home repairs. Some providers will provide blanket coverage for tools and equipment, and others will have you list, or “schedule,” each item on the policy with their value.
One major difference between inland marine and commercial property insurance is that inland marine coverage “travels” with the tools and equipment, while commercial property insurance only covers fixed property at a cited location.
It is an excess liability policy that is a good idea for businesses in a risky industry. Umbrella policy limits will not come into play until the limits of other policies are exhausted.
Why would you need this? One example is if you have a general liability policy with a limit of $2 million and a commercial umbrella policy with a limit of $1 million. Your business is faced with a troublesome claim that looks to exceed the limits on your policy. 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.
Listen, everyone understands the threat of a cyberattack, but how seriously are you taking it when it comes to insurance? You cannot underestimate the importance of the only coverage available for losses related to cybercrimes: cyber liability insurance. Don’t let the name fool you, though, 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: Helps 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.
The final coverage worth looking into is employment practices liability insurance or EPLI. Now, this one would only be important for small businesses with employees. Since there are almost 489,000 businesses in Washington without employees, this doesn’t apply to them. However, this small business insurance policy handles claims of wrongful termination, hiring, and employment practices and provides coverage for sexual harassment and gender discrimination.
Washington State Business Insurance Costs
Insurance 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.
In our research for this guide, we obtained various sample quotes from different brokers and carriers. All of the quotes were for companies with three or fewer employees and annual revenue under $250,000.
Industry | Estimated Monthly Premium | Coverage Type | Coverage Amount |
|---|---|---|---|
Handyperson Service | $20-$115 | General liability | $1 million per occurrence, $2 million aggregate |
Photography Service | $18-$50 | General liability | $1 million per occurrence, $2 million aggregate |
Painting Company | $130-$400 | General liability | $1 million per occurrence, $2 million aggregate |
Retail Store | $25-$37 | General liability | $1 million per occurrence, $2 million aggregate |
Some of the variables that providers take into account when calculating your premium include the following:
- The geographic region within Washington, including the specific county (for example, insurance will be higher in Seattle versus in a business in Walla Walla)
- Yearly revenue and payroll
- Claims history
- Risk management and training
- Business experience
- Prior insurance history
If you find the cost of business insurance is too high, there are steps you can take to save some money. Learn the ways to save money on business insurance.
How to Get Washington State Business Insurance
If you’re ready to purchase small business insurance in Washington, there are multiple ways to do so. The three most common are to go through a provider, agent, or broker.
Confused? Check out our insurance carrier vs broker comparison to learn more about these options.
Washington Small Business Statistics: Why Insurance Is Important
The Everest State, known for its natural beauty, has a robust economy built on multiple industries—from manufacturing to technology. While it is known for being the headquarters of global companies like Boeing and Microsoft, small businesses contribute significantly to employment and the export economy.
Let’s take a look at these data from the 2023 Small Business Profile:
- There are 644,686 small businesses in Washington. This number represents 99.5% of all businesses in the Everest State.
- Those 644,686 businesses provide employment to 1.4 million employees.
- While small businesses comprise 99.5% of all businesses, they provide employment to 49% of all employees.
Statistics like these help paint a picture of the importance a small business plays in Washington, but there is more to it. The state’s economy is healthy, and so between March 2021 and March 2022, there was a net increase in small businesses of 21,414.
The US Small Business Administration defines a small business as having zero employees to 499 employees. In Washington, the majority of small businesses have no employees. Of the 644,868 small businesses, 488,871 have no employees.
This makes it pretty surprising that these businesses have such impressive export power. In 2021, 11,652 businesses exported $49.1 billion in goods from Washington, and 89.4%, or 10,412, of those were small businesses. These small businesses exported $15.4 billion in goods.
The largest industries without employees are classified as professional, scientific, and technical businesses. Transportation is the second largest. Real estate and rental property come in third, and the construction industry is fourth.
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 auto. The fourth largest will want to purchase general liability insurance.
An analysis of the data results in a simple conclusion: small businesses in Washington are a significant part of the state’s strong national and global economy.
Frequently Asked Questions (FAQs)
Yes. Workers’ compensation is required by law for any business with one employee. There are some exemptions, but it is required for most businesses.
The state of Washington is one of four monopolistic states. This term means that workers’ compensation is run entirely through the government rather than a private company offering coverage, servicing the policy, and resolving claims.
No, there is no statewide requirement for general liability in the state of Washington. However, some state license boards do require general liability to be licensed. For example, commercial contractors are required to carry a general liability policy.
Yes, commercial auto insurance is required in Washington. Coverage is also required for commercial vehicles, with the required limit varying depending on the type of carrier permit. The state minimum for commercial auto liability is $25,000 per injury for an accident and $50,000 maximum per accident. It also requires $10,000 for property damage per loss.
The cost of business insurance varies depending on the industry. A handyperson can expect to pay almost $1,400 annually for general liability, while a photographer’s cost will be less, at around $600 annually.
There are 644,686 in Washington. Small businesses contribute to 99.6% of all businesses in the state of Washington.
Insurance complaints are handled by the office of insurance commissioner. Online, you can file a complaint or check the status of one. Or you can call Monday through Friday from 8 a.m. to 5 p.m. The number is 1-800-0562-6900.
Per the most recent census by the US Census Bureau in 2020, Washington has a population of 7.7 million people.
Bottom Line
Whether you’re supplying hiking and camping supplies for hikers exploring the Naches Loop Trail or roasting coffee for a patron in your new coffee shop in downtown Seattle, small businesses are an integral part of the economy of Washington State.
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, and purchase a policy online or call to speak to one of its agents.
