Operating a business in California comes with specific legal requirements that are necessary for staying protected. Understanding California business insurance law and its implications involves knowing which insurance coverage is required of your business.
Since 2013, total direct premiums in California have increased by 71%, showing significant growth in the local insurance market. Navigating the complexities of California’s business insurance laws can be overwhelming, but it’s vital that business owners inform themselves to stay compliant and help protect their business and its assets. As new legislation is passed, local businesses must adapt to avoid potential compliance issues.
Types of Business Insurance Required By Law in California
According to California law, specific insurance plans are required for various coverages. Each of these different plans serves to protect your company, employees, and various assets. These requirements can differ based on the size of your business and its dealings, but the most common coverage types include:
- Commercial property insurance. This helps protect your company’s physical location, equipment, inventory, and other property. If your business experiences a theft, fire, or other types of unforeseen circumstances, commercial property insurance will help cover the replacement or repair costs.
- Workers’ compensation insurance. In California, workers’ compensation insurance is required for almost all businesses that have employees. Suppose an employee experiences an injury or illness while at work. Workers’ compensation will cover medical expenses and a percentage of lost wages. If your business doesn’t have this coverage, it can lead to hefty fines and penalties.
- Property/renters insurance. If you’re leasing or renting the physical space where your business operates, property/rental insurance can cover the cost of any lost or damaged property. This would include any furniture, equipment, or inventory. It will also protect your business against fires, vandalism, or natural disasters.
- Liability insurance. This is designed to protect your business from claims of property damage caused by your business or bodily injury. It includes general liability insurance, which covers legal and medical expenses as well as damage fees if someone is injured at your business or as a result of your product or service.
How to Know Which Insurance Your Business Needs
With so many types of insurance, it can be confusing to know which ones are necessary for you. At Lobb & Plewe, we work with local California businesses to assess unique needs and help purchase the required coverage for your operations.
We consider a variety of factors, such as:
- The industry your business operates in
- The size of your business
- The number of employees you have
- Any specific risks your business deals with
- Whether you own or lease property space
By working with us, you can have peace of mind that your business is fully protected from any liability and that you’re compliant with California law.
Staying Compliant With California’s Business Insurance Laws
California has specific regulations for business insurance, and staying compliant is not optional for any business. If you fail to maintain your business’s required insurance coverage, it could result in fines, penalties, legal issues, or even the inability to continue your business operations.
For example, any business without workers’ compensation may be subject to heavy fines and penalties. In 2024, California pushed legislation that requires employers to inform employees of their right to legal counsel for any workers’ compensation issues. In addition, if your business is involved in an accident or claim and you don’t have the necessary liability coverage, you could face significant financial consequences.
At Lobb & Plewe, we ensure that your business meets all state-required insurance standards and help you stay informed of any changes in the law. Our ongoing support helps businesses avoid any pitfalls or disruptions, allowing your daily operations to run smoothly.
FAQs
What Are the New Insurance Laws in California in 2025?
A few of the new insurance laws are related to the 2025 California wildfires. If your business was affected by the wildfires, extensions for deadlines to pay for permits or renewed licenses were put into effect in January 2025. If your license certificate was lost in the fires, the replacement fee will be waived. There was also an increase in workers’ compensation benefits. This could require your business to conduct staff training sessions and revise your internal audit procedures.
Can You Legally Run a Business Without Insurance?
It is illegal to own and operate a business without the proper insurance coverage. For example, workers’ compensation insurance is required for almost every employer, with few exceptions. Not carrying your required insurance can lead to fines and penalties. Your business could also face risk if any incidents occur while they are not insured. Be sure to consult with us at Lobb & Plewe to make sure you’re staying compliant with California law.
How Often Must Every Insurer Doing Business in California Report Its Financial Condition?
Insurers in California are required to submit annual financial reports to the California Department of Insurance (CDI). While an annual submission is most common, some businesses also must submit monthly financial statements. This includes any businesses whose net worth is below 150% of the statutory minimum or if their current operating trend shows they cannot stay in compliance with financial requirements.
How Can Small Businesses in California Afford the Necessary Coverage?
There are several strategies your business can use to manage insurance costs. Consulting our experienced Insurance lawyer team at Lobb & Plewe will help you avoid purchasing unnecessary coverage plans. You can also implement plans such as group health insurance and use state resources. If you stay vigilant, your small business can navigate insurance while staying within your means.
Speak With an Experienced Business Insurance Lawyer Today
Navigating California’s business insurance laws is vital for any local business owner. By staying informed and updated about any changes, businesses can protect their assets and be prepared for the unexpected. This can be a complex process that requires careful planning and an understanding of your specific business needs.
At Lobb & Plewe, we can help your business stay protected. We work with businesses at all levels to create custom solutions that safeguard your business from risk. The world of insurance can be daunting, but with our knowledge we can help you navigate any challenges and help you prepare for the future of your business. Contact our office today for more information.
