Alabama Business Insurance: A Simple Guide (2024)

Deciding to start a business in Alabama is a big decision. You have to take a leap of faith and stay focused to see success. You don’t have to go at it alone, though.

Small businesses make up more than 99% of all Alabama businesses, so there’s an entire community of people who understand what you’re going through.

Simply Business is also here to help you understand business insurance in Alabama. Whether you’re considering a policy before you start your business or want to add protection to your growing company, we can help you understand your options.

Business Insurance in Alabama: The Basics

Most of us have experience with some insurance, whether for our health, home, or vehicle. But unless you’ve previously had a business insurance policy, the details of that type of policy can be fuzzy.

Fortunately, most of what you know about other kinds of insurance transfers to business insurance in Alabama. You’ll select a policy based on your needs and budget, pay a premium to maintain coverage, and then file a claim if your business is involved in an accident. The key differences are the kinds of scenarios where business insurance can come in handy, which we’ll review in a moment.

For now, it’s helpful to understand how business insurance can benefit entrepreneurs like you. Here are some of the upsides to having a business insurance policy:

• Business insurance in Alabama could protect your finances. If your business faces a damages claim or lawsuit, you could be liable for it if you don’t have insurance. This means you’ll need to find the money in your business or personal finances or take out a loan to pay for the damages.

On the other hand, an insured company might be able to use their insurance to cover damages, up to their policy limit.

• Potential customers might prefer to work with insured companies. Your quality work and customer service can create a positive reputation for your company, but how do you build trust when you’re brand new?

  Atlas Alabama points out that having insurance could make it easier to sell to customers on favorable terms.

Showing proof of insurance can also make customers feel more comfortable working with you.

• Loan applications and rental agreements may need proof of insurance. Sometimes, loan applications

  might require proof of insurance.

Since insurance could keep you afloat after an accident, having it might make you a more reliable investment in the lender’s eyes. Letting landlords know you have insurance also could help you secure retail or office space.

General liability insurance in Alabama

Now it’s time to get into the nitty-gritty of different business insurance policies in Alabama. First on the list is general liability insurance, which can help a variety of businesses and scenarios.

General liability insurance in Alabama typically covers:

• Bodily injury

• Medical expenses

• Third-party property damage

• And more

Those terms can still feel a bit vague, so let’s see what they look like in action. Here are a few scenarios where a general liability insurance policy could help a business owner:

• A

  glazier is helping a family install a beautiful new bay window. The contractor steps away for a minute to get a tool from their truck, and the homeowner’s child gets curious and gets injured while playing with one of the tools. Consequently, the family threatens to sue the glazier.

Without insurance, this accident could be enough to send the business under. Medical bills can be expensive, and an uninsured glazier may have to use their business or personal savings to cover the medical bills and lawyer fees. If they had insurance, the policy might be able to help with those expenses.

• A

  manufacturer is hosting a client to let them see the production in person. During the visit, the client slips and breaks their wrist. The client has to have minor surgery and is out of work for several days.

Since those bills are more than a simple strain, the client sues the manufacturer for the medical bills and lost wages. If the manufacturer has insurance, they might be able to use the coverage to pay for bills up to the policy limit.

• A

  property manager checks on an Airbnb property they oversee when they accidentally knock over a bottle of red wine left by the previous guests. The spill leaves a large stain that’s too difficult for carpet cleaners to remove, and the entire room needs a new carpet.

In addition to having to manage the now rocky relationship with the owner of the Airbnb, the property manager has to pay for the damages. If they had insurance, they might be able to use their policy to pay for the carpet replacement.

The specifics of accidents can vary, but the lesson is the same: accidents can happen to anyone. Simply Business works with more than 80 types of businesses.

While insurance can benefit many types of businesses, not everyone has a legal requirement for coverage in Alabama. Atlas Alabama is a government site designed to help business owners understand permits and licenses for their business.

While there may be no statewide requirement for general liability insurance in Alabama, Atlas Alabama suggests purchasing insurance as one of the five steps to launching a business.

The two factors that often impact your licensing and insurance requirement are your occupation and location.

For example, pest management professionals need $150,000 in general liability coverage. Prime contractors also need to show proof of insurance. If you want to start a contracting business in Alabama, we have a guide to licensing and insurance here. Counties and cities, like Huntsville, also may have their own licensing and insurance requirements.

To kick off your search for your business requirements, check this list of licensing agencies and guide to county probate offices. A bit later in this article, we have extra tips to find insurance requirements.

Another way to learn about what insurance might apply to your business is to call Simply Business at 855-559-0304. We have licensed insurance agents who can answer your Alabama business insurance questions.

You also can get free custom quotes in minutes by answering a few questions online.

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Professional liability insurance in Alabama

You’re a committed business owner who gives 100% to every project you do for every client. But you’re human, which means that you can make an error or inadvertently give the wrong advice to a client you’re working with. If that happens, small mistakes could lead to bigger issues, and your clients could sue you for negligence.

• For a software developer, negligence could look like a small mistake in the code after a long workday that leaves an app’s security vulnerable.

• A financial planner could give the best advice they have, but a client thinks they misguided them and caused them to lose out on a higher return on their investment.

• A negligence claim for a graphic designer could stem from a typo that tarnished the client’s reputation.

In all of these scenarios, a client might sue the business owner. The tricky part is that even if you don’t think you acted negligently, you could still face a lawsuit. The best-case scenario is that you only have to pay legal fees to defend yourself in court. If you did make a human error, the damages could be significant.

If the business owners in the above scenarios had professional liability insurance, they might be able to use their policy to cover the damages.

Requirements for professional liability insurance in Alabama may vary, but some occupations we recommend to consider insurance are:

• Professional organizers

• Accountants

• Project managers

• Photographers

• Consultants

• And more

If you learn that having professional liability insurance for your occupation is optional in Alabama, then getting coverage could be a competitive advantage. Showing potential clients that you’ve gone above and beyond the basic rules to protect both them and your business shows your commitment.

Alabama workers compensation insurance

While some insurance recommendations depend on the type of services you offer, Alabama workers compensation insurance focuses on your employees.

Workers compensation insurance is for employers and typically covers:

• Lost wages

• Rehabilitation costs

• Medical payments

• Death benefits

This means that if an employee gets sick or injured on the job, your Alabama workers comp policy could help cover the costs.

Generally, the requirements for having workers comp insurance in Alabama don’t kick in until the business owner has five or more part-time or full-time employees, so if you have one to four employees, you don’t need the coverage. If you’re an employer of domestic employees, farm laborers, or casual employees you may not be required to have this insurance, however, you can elect to have workers comp coverage for these employees. It’s up to you.

Keep in mind that even though you may not need workers comp insurance for your first few employees, you are legally required to report all new hires to the state.

Other types of Alabama business insurance

The Atlas Alabama website lists nearly 20 types of Alabama business insurance to consider. Some other policies to consider include:

• Commercial auto insurance. Motor vehicles typically have minimum insurance requirements. Suppose you’ll be using your vehicle for business activities. In that case, you should talk to your insurance agent about whether your current policy covers accidents that happen with your vehicle while you’re conducting business.

• Home-based business insurance. Starting a business from home can be one of the easiest ways to get started. Forty-four percent of home-based businesses require just $5,000 or less to get up and running. If you go this route, however, your homeowners or rental insurance might not cover your home office. A home-based business insurance policy can fill in that gap.

• Construction bond. While bonds aren’t insurance, they can act as assurance that a contractor can fulfill the terms of a client’s project. Some contractors in Alabama, like roofers or HVAC installers, need to show proof of a bond when applying for their license.

Alabama Workers Compensation: What You Need to Know

If you need Alabama workers compensation insurance, the state gives you a few options to choose from. The state of Alabama doesn’t sell insurance, so you can either purchase it from an insurance agent or self-insure.

Here’s a brief overview of the coverage options to choose from:

• Voluntary commercial insurance. This is the option that likely comes to mind when you think about buying insurance. You work with an agent to buy a policy through a private insurance company.

• Assigned risk pool commercial insurance. If you’re turned away from at least two insurance carriers because of your claims history or risk exposure, you may be able to buy a plan in an assigned risk pool.

These plans can be more expensive and are administered by the National Council on Compensation Insurance (NCCI) but are purchased through a private insurer.

• Individual self-insurance. Companies have the option of skipping commercial insurance and paying employee benefits themselves. This usually isn’t an option for new businesses, though, because you have to meet criteria such as a company net worth of $5 million minimum to qualify.

• Group self-insurance. If a company wants to self-insure with others, they may be able to pool their funds with other businesses. You can talk to an insurance agent to join this option, but the group fund decides whether or not to let you renew your membership.

How Much Does Alabama Business Insurance Cost?

Every dollar counts in a small business, which means expenses need to be considered carefully. Alabama business insurance may be more affordable than you think, though.

There are ways to save money on your business insurance bill, like bundling policies or choosing a higher premium.

Generally, your Alabama business insurance prices depend on:

• Your location

• The type of work you do

• The size of your business

• Which policies you choose

If you want to get an exact cost breakdown for your business, you can answer a few questions and get free custom quotes in minutes. We also have friendly licensed insurance agents ready to answer your questions at 855-559-0304.

Get Your Quote

How Do I Get Business Insurance in Alabama?

All of the Alabama business insurance options can be overwhelming, but you can take it just one step at a time. Here’s an overview of the steps to find your requirements and to compare quotes:

1. Take a moment to think about your business. What services will you provide or items will you sell? Where will you conduct business, who will help you, and what assets will you need? Write out all of these factors to get a clear understanding of what policies you may need or want.

2. Research requirements for general liability and professional liability insurance. While we recommend that business owners consider an Alabama business insurance policy, you may not need one to legally operate. Look for requirements based on your industry and location in the state.

3. Compare Alabama workers compensation insurance options if you have employees. If you have fewer than five employees, you likely are not required to get workers comp insurance.

4. Get free quotes from Simply Business to find the right policy. You have the final say in which plans you’re comfortable with and should compare your options. It’s easy to shop around and compare coverage and costs using our free quote tool.

Ready to get started? Here are resources to help you find the info you need.

• To understand the steps involved, review the Alabama Department of Revenue’s guide to Starting a New Business.

• Access general business forms through the Secretary of State’s website.

• Use the Atlas Alabama site to find steps to plan, launch, manage, and grow a business in the state.

• Reach out to the licensing agencies and boards that apply to your work to find licensing and insurance requirements.

• Find contact info for your county probate office to check for local licensing, permit, and insurance rules.

• Connect with trade associations to talk to members about the insurance policies they have and can recommend.

• Compare insurance quotes across providers to find the coverage and cost that you’re comfortable with.

• Reach out to Simply Business insurance agents at 855-559-0304 to answer any additional questions.

• Download your Certificate of Insurance (COI) once you have a policy. This proves that you’re covered, and the COI may be needed to get licensed, rent office space, and more.

Getting Insured Is a Small Step with a Big Impact

Comparing Alabama business insurance quotes has never been easier. It takes only a few minutes to start your business insurance journey and protect what you’ve built. Your business insurance policy also can grow alongside your company, so you don’t need to worry about paying for a policy that’s above your needs.

Still have questions about protecting your business? Give us a call at 855-559-0304.

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This content is intended to be used for informational purposes only. It is not intended to provide legal, tax, accounting, investment, or any other form of professional advice.