Alabama’s long been known for its hospitality, beautiful scenery, and quality of life. These factors combined with the state’s low-tax business-friendly environment make the “Heart of Dixie” one of the most inviting places to start a small business in the entire country. 1

Within the state, there are 396,432 small businesses, accounting for 99.4% of all enterprises and nearly half of all employees (47.2%).2 And if you want to count your business among this budding body of entrepreneurs, it’s critical that you have adequate insurance coverage.

In every state, the vast majority of businesses will be legally required to carry two types of insurance:

  • Workers’ compensation
  • Auto liability insurance

While these types of insurance are the only kinds usually required by law, they’re not the only types of coverage you should consider. But before we delve into the recommended types of insurance, let’s first address those that are legally required.

Alabama workers’ compensation insurance

Alabama has some of the more lenient workers’ compensation rules in the country. If you have 5 or more part- or full-time employees operating within the state, you’re obligated to obtain workers’ comp. 3 However, if you have less than 5 employees, you’ll typically be exempt.

But what does workers’ compensation insurance cover?

Workers’ compensation protects your business from financial liability should an employee suffer a job-related injury or sickness. If an employee is injured, disabled, or ill, workers’ compensation can help grant you limited civil liability while helping to cover the costs of:

  • Medical expenses
  • Death benefits
  • Lost wages
  • Permanent disability (total or partial)
  • Rehabilitation and retraining

Failure to obtain workers’ compensation in Alabama can result in penalties, fines, and exposure to civil liability should an incident occur.

Auto liability insurance

Do you use a vehicle for work? If so, you’ll need to make sure it’s insured. And, depending on the size and type of vehicle, who owns it, and how it’s used, your standard personal auto insurance may not be enough. If that’s the case, you may need to obtain commercial auto insurance instead.

If your business is listed as the vehicle owner, you almost always need commercial auto coverage. However, if you use your small van, pickup truck or car to drive to and from job sites your personal auto liability coverage is typically sufficient. (Just like insurance to make things as clear as mud).

We always recommend talking with your auto coverage provider to make sure you have the right coverage.

Other types of Alabama business insurance

Every business faces a wide assortment of risks. Insurance not only mitigates some of the adverse effects of those risks, but it can reduce the costs for when something goes wrong. Knowing that a single accident could jeopardize your future success, it’s usually a smart decision to sign up for several types of insurance coverage, including:

  • General liability insurance
  • Inland marine insurance (aka equipment insurance)
  • Professional liability insurance

General liability insurance in Alabama

Although not legally required, every business in Alabama should have general liability insurance. Why?

Because it can help protect your small business from the potential costs of interacting with third parties (whether that’s customers or strangers). This type of coverage can help provide the investigation, defense, and settlement for third-party claims relating to:

  • Non-employee bodily injury
  • Property damage
  • Personal and advertising injury

For instance, if you’re a plumber in Birmingham, you frequently visit client’s homes for work. Should they accidentally trip over your tools, resulting in an injury, you could be held liable.

Equipment insurance

You likely rely on tools or equipment to perform your daily tasks. If so, it’s important that they’re protected as well. General liability insurance protects against damage to other people’s property, but it doesn’t cover damage to your own gear.

To protect your first-party property, you need a type of coverage known as inland marine insurance. At Thimble we call it what it is, Business Equipment Protection. It provides protection against theft or accidental damage on the job or while traveling to and from jobs. When choosing equipment insurance, make sure to read the policy details and look for coverage offered on a blanket basis, meaning you don’t need to individually list all gear you want covered in your policy.

Professional liability insurance in Alabama

Professional liability insurance is an important type of business insurance, especially for white collar professions. Also known as errors and omissions (E&O) insurance, this type of coverage was made to protect professionals who offer their advice that could potentially result in a client’s financial loss. This coverage can provide investigation, defense, and settlement for claims involving errors and omissions that resulted in a financial loss for the client caused by your professional advice.

How to get Alabama business insurance

In Alabama, there are two types of insurance most businesses need (legally). Those that are required:

  • Auto liability insurance – If your vehicle is integral to your business operations or if it’s owned by the business, you’ll likely need commercial auto insurance. If not, your personal auto coverage may suffice.
  • Workers’ compensation – If your business has more than 5 part- or full-time employees.

Businesses need more than just auto liability insurance and workers’ comp to protect against the various risks that come with the job.

Thimble offers general liability insurance, professional liability insurance, and Business Equipment Protection insurance. With our on-demand policies, you can get insurance that works when you do—whether by the hour, day, week, or month.

It takes less than a minute to get covered. Just download the Thimble mobile app or click “Get a Quote,” enter a few brief details about your business, and we’ll generate an instant quote. Purchase with a click and your policy and Certificates of Insurance (COIs) will be instantly sent to your email inbox.

That’s Alabama business insurance made simple.


  1. Alabama Power. Why Alabama?
  2. Small Business Administration. Alabama Small Business Profile.
  3. Alabama Department of Labor. Insurance Requirement Information.