Michigan is home to 886,500 small businesses that employ almost 1.9 million people. If you're a small business owner in the Great Lakes State, you need to make sure you're protecting your business with the right insurance. In this article, we'll talk about required insurance in Michigan as well as business insurance policies you should consider to add even more protection for your business.
What Insurance is Required in Michigan?
The Michigan Insurance Department requires that all businesses with one or more employee that works 35+ hours a week carry workers' compensation insurance. Likewise, if your small business has three or more employees at any given time, you must provide this coverage. To find out whether or not your business is required to get workers' comp, read more at the Michigan Department of Labor. We highly advise anyone who uses vehicles for their job (transporting clients, making deliveries, etc.) to get commercial auto insurance.
Workers' Compensation Insurance
Aside from workers' compensation, Michigan doesn't have stringent small business insurance requirements. Michigan state law only requires that all businesses with one or more employees carry workers' compensation insurance. So how does workers' comp protect them? If an employee is injured at work (or becomes ill due to exposure at work), workers' compensation will cover their medical bills and lost wages until they're healed and able to return to the job. Some Michigan businesses may need to pay for disability insurance for their employees as well. We recommend checking with the Michigan Department of Insurance and Financial Services for all of the legal requirements.
Commercial Auto Insurance
Commercial auto insurance is required in most states if you use personal or company vehicles for business purposes. For example, if you drive a personal vehicle to a client's home to look over an insurance claim, you'll need a commercial auto insurance policy. A commercial auto policy will include some form of property liability coverage, bodily injury liability coverage, and covers general damages incurred during auto accidents.
Minimum requirements for drivers in Michigan include carrying $40,000 in auto insurance coverage to pay for claims if someone is injured in an accident. It must also include $10,000 to cover any property damage that occurs.
Types of Business Insurance in Michigan
There are a few other types of insurance that we recommend for small businesses in Michigan.
Michigan General Liability Insurance
General liability insurance (commonly referred to as business liability insurance, commercial liability insurance, or casualty insurance) isn't required in Michigan but we always recommend it as part of a small business insurance package. Having commercial liability coverage is great for small business owners because the coverage is comprehensive and the price is affordable. Michigan business liability insurance usually covers:
- Third-party bodily injury: This portion of your policy covers associated medical costs if someone is injured on your premises.
- Third-party property damage: If someone's property is damaged while in your building or on your premises, your insurance company will pay to repair or replace the damaged item(s) up to the limits of your policy.
- Personal and advertising injury: This part of your general liability policy will protect your business if you're accused of slander, copyright infringement, or libel. Your insurance company will provide you with a lawyer and cover legal costs if you're accused of any of these things.
Commercial general liability insurance is one of the most affordable ways to protect businesses.
Michigan Commercial Property Insurance
Commercial property insurance (or business property insurance) is recommended for any business that owns, rents, or leases a physical business location. Property insurance will cover physical damage to your building or office space caused by vandalism, theft, fire, and storms. This policy covers the contents of your building, which can include your furniture, inventory, equipment, as well as business personal property.
Most insurance companies exclude all damage caused by flooding (including ground flooding/rising waters). If your business is by a lake or at the bottom of a hill (i.e. in a known flood zone), you may want to consider a separate insurance policy. If you experience flooding without one, you'll have to pay for the repairs out of your own pocket.
Michigan Business Owners’ Policy
A business owners' policy (BOP) is a bundle of coverages that insurance carriers usually offer small businesses. Aside from general liability insurance, a business owners' policy one of the most affordable ways to get coverage you need at a price you can afford. Why? Because it's usually cheaper than purchasing each insurance coverage separately. A standard business owners policy will include commercial property insurance, general liability insurance, and business interruption insurance.
How does business interruption insurance work? If your business is damaged by a recent storm or a fire and you can't operate, this policy helps protect you from financial loss. The policy may cover payroll, your lease, taxes, and some will cover a portion of lost profits. The coverage is usually capped at a specific length of time or until your business is up and running again.
Insurance companies may include other options in a business owner's policy that covers specific risks unique to your industry. That's why it's best to work with an experienced insurance agent to get coverage that is customized for your small business.
Home-Based Business Insurance
If you operate a home-based business, many homeowner's policies cap coverage at a certain dollar amount. If you have clients coming to your home office, any accidents or injuries that occur may not be covered. We suggest checking with your insurance agent to see what your homeowner's coverage is. If it isn't sufficient, speak with them about getting home-based business insurance.
Professional Liability Insurance
Professional liability insurance—i.e. errors and omissions insurance—will protect your business if you're accused of:
- Professional errors
- Professional negligence
- Missing deadlines
- Incomplete work
- Libel or slander
With Professional liability coverage in place, your insurance carrier will pay defense costs for third-party claims and other legal expenses that may arise. Professional liability insurance is usually recommended for lawyers, architects, healthcare professionals, and anyone that offers professional services.
Cyber Liability Insurance
Cyber liability insurance—also referred to as data breach insurance—protects your business if you're the object of a data breach or cyberattack. If customer data is compromised, a cyber liability policy will pay to notify impacted customers and cover the cost of credit monitoring for them. If an impacted client sues your business, this insurance policy will also provide you with a lawyer and pay settlement costs if necessary.
Employment Practices Liability Insurance
Employment practices liability insurance (EPLI) protects you and your business if you're accused of wrongful termination, discrimination, sexual harassment, or other discriminatory workplace practices. EPLI will provide you with a legal defense if such claims arise. It will also cover any legal costs and settlements.
Michigan Small Businesses Commonly Insured
Some professions that are commonly insured in Michigan include:
How Much Does Michigan Business Insurance Cost?
The average cost of general liability insurance coverage for a Michigan small business is typically between $100 to $1000 annually, and averages to be about $27 a month for between $500,000 and $1 million in coverage. Some factors might raise or lower your premium costs, including but not limited to:
- The industry your business is in and the risk it carries
- The location of your MI business (city/county/neighborhood)
- Whether or not you have an extensive claims history
- The deductibles and policy limits you choose
- The number of employees you have
- The insurance company that you choose
- The number of vehicles owned
These are just a few factors an insurance agent will look at when assessing the cost of business insurance for a small or medium-sized businesses in Michigan.
Get a Free Quote for Michigan Small Business Insurance
We know how difficult it can be to find the best commercial insurance for your Michigan business. Whether you own a painting service in Detroit, a cleaning service in Grand Haven, or a roofing business in Traverse City, we can help you find the perfect business insurance coverage for your specific needs.
Our goal at Tivly is to help you get the right insurance coverage at an affordable price. 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.
A small business in Michigan might also want to consider these additional insurance options.