The Bay State is known for its vibrant culture. Home to some of the most decorated sports franchises in the country, as well as some of the most prestigious colleges and universities in the world, Massachusetts is a shining beacon of New England. These factors alone make Massachusetts a great place to be a business owner.
But the state is also an incubator for growing businesses in particular. According to a Small Business Association profile, it boasts over 700,000 small businesses, with over 1.5 million small business employees statewide1. This represents 46.8% of the private workforce, with nearly 35,000 net new jobs added in 2020. And whether they operate in healthcare, food services, retail, or any of the major small business sectors, every business owner is expected to abide by Massachusetts business insurance laws.
This guide will cover those laws and then discuss the other types of insurance small business owners should consider.
Mandatory insurance for Massachusetts businesses
Insurance in Massachusetts is governed by the Division of Insurance (DOI). The DOI’s mission is ensuring fair and equitable insurance coverage for all individuals and businesses in the state. That includes making sure everyone buys the coverages they’re legally obligated to.
As with many other states across the US, the two kinds of business insurance typically required for companies in Massachusetts are:
- Workers’ compensation
- Auto insurance
In the sections below, we’ll break down everything you need to know about these business insurance coverages that you’ll have to operate a company in Massachusetts. We’ll also walk through additional coverages you might consider, beyond what’s required—including a solution to simplify all your business insurance needs.
Massachusetts workers’ compensation insurance
Per DOI requirements, all businesses in Massachusetts with employees (even if it’s just one) must carry workers’ compensation insurance.2 It doesn’t matter how many employees work for your company, nor the amount of hours worked. Even out-of-state employers need to cover employees working within Massachusetts.
There are very few exceptions to these rules.
One exception applies to some owners and non-employee members of LLCs, certain partnerships, and sole proprietorships. Another applies to independent contractors you may hire temporarily. But the only employees who aren’t required to be covered are household workers, such as cleaners, who work fewer than 16 hours per week.
Workers’ comp protects your business from the financial ramifications of an employee incurring a workplace illness or injury. For instance, it can cover:
- Medical bills from hospitals and doctors
- Wages lost due to incapacitation
- Ongoing treatment costs
The Massachusetts requirements for workers’ compensation are relatively strict, with enforcement carried out by the Department of Industrial Accidents (DIA). Failure to carry required coverages can result in a stop work order (SWO) and fines starting at $100 dollars per day, including weekends and holidays. Prolonged or chronic cases can also result in criminal charges and debarment from public contracts.
In addition to workers’ compensation coverage, Massachusetts also requires auto insurance coverage. And like workers’ compensation, this is a standard requirement in most states across the US.
Note: Just because you use your car for work doesn’t necessarily mean you have to take out commercial auto insurance. Some work-related pursuits are covered under a personal auto policy. The key factors come down to who owns the vehicle, the size of your vehicle, and if it’s used to transport people and/or property.
For example, an independent cleaning business uses a small van to travel to and from properties. The core function of their job is to clean houses and offices, not driving or transporting property. In this case, their personal auto policy should suffice. In comparison, an up-and-coming Boston florist depends on their van to deliver centerpieces and arrangements all over the city and the surrounding area. For the florist, delivering goods is key to their job and a commercial auto policy is required.
It can be tricky to figure out if your profession requires a separate commercial auto policy. The best approach is to talk to your auto policy provider to see if you fall under this criteria.
However, the specific minimums and forms of coverage required do vary from state to state. In Massachusetts, the required minimums for commercial auto insurance coverage mirror those for personal auto insurance for private citizens:3
- Bodily injury (to others) – If a company car is in an accident that injures a third party, commercial auto may cover a portion of medical expenses. Minimum coverage required breaks down into:
- $20,000 dollars per person
- $40,000 dollars per accident
- Property damage liability – If a company car is in an accident that damages another party’s property, commercial auto may cover some of the expenses: Minimum coverage required is $5,000 dollars per accident
- Personal injury protection (PIP) – If an accident involving a company car injures the driver, PIP can cover some medical and other associated costs.
- Minimum coverage required $8,000 dollars per person, per accident.
- Uninsured motorist protection (UM) – If a company car is in an accident caused by an uninsured driver, UM can cover medical expenses and other costs incurred by the company driver. Required minimums break down into:
- $20,000 dollars per person
- $40,000 dollars per accident
Across these coverages, commercial auto requirements in Massachusetts are relatively comprehensive—many other states don’t require PIP or UM, for instance.
Other recommended business insurance in Massachusetts
In addition to the required insurance detailed above, businesses in Massachusetts should also consider other baseline coverages. Namely: liability insurance.
The kind of liability coverage you should consider varies depending on the industry you work in and the nature of your work. The two main types are:
General liability insurance – A general liability policy can help provide the investigation, settlement, and defense from third-party claims related to:
- Bodily injury
- Property damage
- Personal and advertising injury
Professional liability insurance – Professional liability insurance can provide the investigation and legal defense for client claims stating you were negligent in your work, therefore causing them financial loss. It helps cover claims for damages arising from wrongful acts because of actual or alleged negligence.
Depending on your industry and the specifics of your business, these forms of liability coverage may be legally required. In many cases, clients may expect or even require you to carry liability insurance in order to work with them. In all cases, it’s wise to cover your business and protect it from potentially debilitating financial burdens.
Get the coverage you need in Massachusetts
Whether you’re looking to start up a new business in Massachusetts or move an existing venture there, you’ll need to secure the required insurance to operate legally. To recap, the specific coverages you’ll probably need to take out are:
- Workers’ compensation insurance
- Auto insurance
While general and professional liability are not legally required, many clients require you also carry liability insurance before they hire you. That’s where we come in.
As a small business we understand your budget is limited and your focus in on growing your business. That’s why we prioritize flexibility and keep costs low, so you can focus on what matters most.
With Thimble, you can buy insurance by the hour, day, or month, so your insurance only ever works when you do. Plus, you can get insured in 60 seconds or less. Just click “Get a Quote” or download the Thimble mobile app, and answer a few simple questions. From there, we’ll generate an instant quote and you can click to purchase. You’ll have your policy and Certificates of Insurance (COI) in your inbox immediately. Yep, protecting your business is that easy.
While every business is unique, many of the risks they face are common. Make sure you’re operating legally and wisely. To do so, take out the right insurance.
Our editorial content is intended for informational purposes only and is not written by a licensed insurance agent. Terms and conditions for rate and coverage may vary by class of business and state.