Alabama is home to Rocket City U.S.A, the University of Alabama and the Crimson Tide, the Civil Rights Museum, many beautiful beaches, and over 323,000 small businesses. If you're just getting started with your business—or you've been in business for years—do you know what insurance you need? In this article, we talk about the business insurance that Alabama requires businesses to get. We also cover business insurance policies you should consider, though they aren't necessarily required (i.e. an Alabama general liability insurance policy).
What Business Insurance is Required in Alabama?
Alabama business insurance requirements include mandating workers' compensation insurance. This is the only insurance coverage that is legally required in Alabama.
Workers' Compensation Insurance
The Alabama insurance department requires that all businesses in Alabama carry workers' compensation insurance. Worker's compensation insurance covers employees if they are injured while on the job by covering their medical expenses, lost wages, and even funeral costs.
Workers' compensation is required for any Alabama business that has five or more employees. Any business that employs domestic employees, farm laborers, or casual employees is exempt from the requirement.
Types of Alabama Business Insurance Offered
What other types of small business insurance do we recommend that businesses in Alabama get?
Alabama General Liability Insurance Coverage
We recommend commercial general liability insurance for all small businesses because the protections and coverage it provides in comparison to costs are extensive. Commercial general liability insurance usually includes coverage for incidents that happen during business operations:
- Third-party bodily injury: This portion of your policy will cover medical costs for injuries from an accident or other event that occurred on your property.
- Third-party property damage: If someone's property is damaged while on your premises, this portion of the policy will pay to repair the damage or replace the item.
- Personal and advertising injury: This will protect you from financial liability claims such as libel, slander, copyright infringement, invasion of property or privacy and false arrest.
General liability insurance will pay for lawyers if someone sues the business because they were injured, their property is damaged, or they feel the business's reputation and finances have been harmed somehow as a result of advertising.
Your insurance company will provide you a legal defense if and when necessary. General liability also includes coverage for defense costs and settlements.
Business Property Insurance
In Alabama, commercial property insurance is recommended for any business that owns, rents, or leases a physical location. Commercial property insurance covers warehouses, restaurants, offices, retail stores, and more. A typical policy usually includes coverage for:
- Physical damage to your building caused by vandalism, theft, fire, windstorm or other forces of nature (e.g. a tornado).
- It covers the contents of your building including furniture, inventory, and equipment—like your store's computers.
Insurance companies commonly exclude damage from war, nuclear hazard risks (e.g., radiation), and natural disasters in their policy coverage. If you're based in a flood zone, it's best to purchase an additional claim-specific insurance for those perils separately.
Business Owners’ Policy
Another commercial insurance policy that we recommend is a business owners' policy (BOP). A BOP is usually offered to small business owners. A business owner's policy is a great way to bundle the insurance you need while getting a discount on the price. A BOP usually includes general liability insurance, business property insurance, and business interruption insurance.
Business interruption insurance pays for your lost business income when a covered event interrupts your business. It may also cover operational expenses that include the costs of maintenance for your building, paying salaries of temporarily laid-off employees (such as for when business is slow), and any other incidental expenses incurred because you are out of the office. Insurance companies may also include insurance options that cover specific risks that are unique to your industry.
Commercial Auto Insurance
Commercial Auto Insurance is required if you use your personal or company vehicles to deliver goods or services. Typically, commercial auto insurance includes the following coverage:
- Bodily injury liability: This coverage will protect your business from a lawsuit if an employee or customer is injured in an accident.
- Property damage liability coverage: This protects your vehicle and other property in case of an accident with another person's car or business.
- General damages for expenses incurred during accidents
You should consider at least $25,000 bodily injury claims coverage per person, $25,000 property damage liability per accident, and $50,000 bodily injury liability per accident.
Cyber Liability Insurance
Cyber liability insurance, also known as data breach insurance, covers financial losses from cyberattacks or data breaches. Cyberattack insurance covers costs related to data protection and restoration, administrative expenses of responding to a cyber attack, and associated legal fees incurred from lawsuits or government investigations stemming from the event.
Professional Liability Insurance
Professional liability insurance—also referred to as errors and omissions insurance—covers the cost of defending a member of your business. That can include things like legal expenses and court costs to defend against lawsuits brought by third parties related to their work with your company. We recommend professional liability for businesses that provide a professional service, such as lawyers or architects.
Employment Practices Liability Insurance
Employment practices liability insurance (EPLI) is designed to cover employers for losses resulting from employment-related practices. It protects the employer against claims of discrimination, wrongful termination and sexual harassment among others. This policy will provide a legal defense and cover court costs and settlements
Additional Business Insurance Links
A small business in Alabama might also want to consider these additional insurance options.
Professions Commonly Insured
Some professions that are commonly insured in Alabama include:
How Much Does General Liability Insurance Cost?
Small business insurance doesn't have to break the bank. The average cost of Alabama general liability insurance coverage for a small business is around $1,300 a year. Some factors that impact premium costs include:
- The industry/sector your business is in
- Where your business is located
- How long your business has been open
- The number of previous claims you've submitted
- The Insurance company that you chose
- Deductibles and policy limits chosen
- The gross sales and annual revenue of your business
- The number of employees you have
These are some of the factors an insurance agent may look into when assessing your business insurance needs. We usually recommend obtaining general liability coverage between $500,000 and $1 million.
Get a Free Quote for Alabama Business Insurance in the Sooner State
We understand how difficult it can be to find the best business liability insurance for your Alabama-based business. Whether you do heating and air conditioning in Birmingham, plumbing in Montgomery, roofing in Huntsville, or are a veterinarian in Tuscaloosa, we can find the best coverage for your specific needs.
Our goal at CommercialInsurance.Net is to get you an affordable small business insurance quote. The process is fast and easy! Complete the form at the top of the page and someone will reach out to you. Or, give us a call at 877-907-5267.