Utah Small Business Insurance Requirements: A Guide for 2023

Operating a small business in Utah comes with certain insurance obligations to protect your company, employees, and customers. While business insurance is not mandated in Utah except for workers’ compensation, most small businesses need several types of coverage.

Understanding Utah’s insurance requirements can help you avoid fines for non-compliance. This guide examines the major policies your business may need, plus tips for finding affordable coverage.

Overview of Utah Business Insurance Rules

Utah takes a relatively hands-off approach to regulating small business insurance coverage. The main requirement is:

• Workers’ compensation – Mandatory for employers with 1 or more employees

General liability insurance, commercial auto insurance, and other common policies are not legally required in Utah. However, many small businesses still need coverage to mitigate risk.

Certain professions like contractors may require special licensing that mandates insurance. Cities and counties in Utah can also impose local business license and insurance rules.

When looking at business insurance requirements in Utah, be sure to check for any state, city, or industry-specific regulations that apply to your company.

Workers’ Compensation Insurance

Utah requires all employers with 1 or more employees to carry workers’ compensation insurance. This includes full-time, part-time, family members, and temporary staff.

Workers’ comp covers medical expenses and lost wages for employees injured on the job. It also provides death benefits to surviving dependents.

Importantly, workers’ comp protects employers from lawsuits related to employee injuries. Without coverage, you can be held personally liable for damages.

Workers’ Comp Coverage Options

Utah businesses can secure workers’ comp coverage in two main ways:

• Private insurance – Purchase a policy from an insurance company licensed in Utah. This is the most common option.

• Self-insurance – Large employers can apply to become self-insured after meeting financial requirements. You must have permission from the Utah Labor Commission.

Make sure you have active workers’ comp insurance before hiring any employees. A lapse in coverage can lead to fines and lawsuits.

Utah allows business owners to exempt themselves from workers’ comp insurance. However, this removes your protection from the costs of a workplace injury. It’s usually better to get coverage.

Workers’ Comp Rates

Workers’ comp insurance rates depend on several factors, including:

• Industry risk level – Higher-risk industries pay more

• Payroll – Rates are a percentage of gross annual payroll

• Experience rating – Your claim history affects rates

• Employee class codes – Rates vary based on employee job duties

Expect to pay between $15 to $25 per $100 of payroll for workers’ comp in Utah on average. Higher-risk industries like construction can pay up to $40 per $100 of payroll.

Penalties for No Workers’ Comp Insurance

All Utah employers with employees are required to have active workers’ comp coverage. Violations can lead to:

• Fines – Up to $25,000 in civil penalties from the Utah Labor Commission

• Stop work orders – The Labor Commission can order you to shut down until compliance is met

• Lawsuits – Employees can sue you to recover medical costs and lost wages

Maintaining continuous workers’ comp coverage is critical to avoid headaches and legal issues when operating a business in Utah.

General Liability Insurance

While not mandated by Utah law, general liability insurance is still vitally important for most small businesses. This policy covers costs arising from:

• Customer bodily injuries
• Damage to customer property
• Personal and advertising injuries
• Medical payments

Lawsuits and settlement demands can easily exceed $100,000. General liability insurance protects your finances in the event a customer brings a claim against your business.

It also covers legal defense costs if you’re sued. Defending even a frivolous lawsuit can run tens of thousands of dollars without insurance.

General liability insurance is inexpensive, with average annual premiums of just $600 to $1,200 for small businesses. Given Utah’s litigious legal environment, most companies need this vital protection.

Commercial Auto Insurance

Utah requires all registered business vehicles to comply with minimum liability insurance limits:

• $25,000 bodily injury per person
• $65,000 bodily injury per accident
• $15,000 property damage

These cover costs from at-fault accidents you or employees cause while operating a company vehicle. Failing to carry the state minimum auto insurance can lead to fines and revocation of your vehicle registration.

However, the state-required minimums provide inadequate protection for most small businesses. Just one serious auto accident can exceed $100,000 in damages.

Experts recommend $1 million in total business auto liability coverage. This ensures full protection from vehicle-related lawsuits.

Without commercial auto insurance, you also have no coverage for:

• Damage to your own vehicles
• Theft of cars/trucks
• Employee injuries

Make sure all business vehicles have ample commercial auto coverage beyond Utah’s minimums. Personal auto policies do not extend to business use.

Professional Liability Insurance

Professional liability insurance (PLI), also called errors and omissions (E&O) insurance, provides protection for Utah businesses that offer services or expert advice. This includes:

• Accountants
• Lawyers
• Consultants
• IT professionals
• Coaches
• And more

Professional liability insurance covers the costs to defend and settle lawsuits alleging your services failed to meet the standard of care. For example:

• An accountant sued for an error on a client’s taxes
• A web developer sued for a botched website project
• A business consultant sued for poor advice

These policies pay legal fees, settlements, and judgments related to professional work. Limits of $1 million are recommended for adequate protection.

While Utah does not mandate PLI/E&O insurance, many clients and business partners require it contractually. Plus, coverage is vital to safeguard your company’s finances and reputation.

Cyber Liability Insurance

Cyber attacks target small businesses every day. Hacking incidents and data breaches can cost tens of thousands of dollars or more.

Utah’s data breach notification law requires businesses to notify any residents whose personal data was compromised. You must also notify the Utah Attorney General.

Notifications, computer forensics, stolen funds reimbursement, and legal defense can add up fast without insurance. Cyber liability coverage pays these costs and shields your finances.

While not mandated, cyber insurance is highly recommended for Utah businesses that collect personal customer information. Otherwise you risk major out-of-pocket costs from a breach.

Business Licenses

While Utah has minimal statewide insurance requirements, many cities and counties impose their own rules through business licensing.

Common local license mandates include:

• General liability insurance
• Surety bonds
• Special regulated industry requirements

Check with the clerk’s office in your city or county to learn about any municipal business license insurance obligations. Failing to comply can lead to fines or revocation of your license.

How to Get Required Business Insurance

Don’t wait until after starting your Utah company to get insurance. The coverage you need should be in place from day one.

Follow this checklist when obtaining required policies:

• Get quotes – Compare premiums from multiple insurers to find the best rate. Insureon makes this easy with free online quotes.

• Understand exclusions – Make sure you have the necessary coverages and limits for your specific business needs.

• Provide proof of insurance – Have your insurance agent issue certificate of insurance (COI) forms as required for business licensing.

• Renew on time – Mark your renewal date and make sure policies auto-renew to avoid costly gaps in coverage. Set reminders for renewals and premium payments.

• Adjust as needed – As your business grows and operations change, periodically review that your insurance keeps pace.

Final Tips for Utah Small Business Insurance

While you may not need every type of insurance right away, it pays to understand Utah’s major business insurance requirements as you start and expand. Key takeaways include:

• Carry active workers’ comp coverage at all times when you have employees on payroll.

• Obtain adequate commercial auto liability limits beyond Utah’s minimums.

• Strongly consider general liability and other common policies even if not state-mandated.

• Check for any local licensing insurance rules based on your profession or location.

• Work with an independent agent or broker who can explain your insurance options.

Protecting your hard work pays off when unexpected claims arise down the road. Complying with Utah’s insurance rules also demonstrates your professionalism to vendors, lenders, and customers.

With a properly insured business, you can focus on growth rather than worrying about risks. Utah rewards entrepreneurs who take a proactive approach to insulating their company and finances.