Colorado Business Insurance
Insure Your Colorado Business
There’s a lot to keep track of when starting a new Colorado business, and while buying business insurance might be the last thing on your mind, it’s a necessary cost when setting up your company here in Colorado.
One benefit of forming an LLC in Colorado is the business entity’s inherent liability protection. However, an LLC designation doesn’t completely protect your business from liability costs. That’s where insurance comes into play.
“Business Insurance” is a general term for different types of coverage your business may need.
The state of Colorado requires businesses to have Workers’ Compensation Insurance and Unemployment Insurance, but the need for other coverage, like Property Insurance or Business Interruption Insurance, varies by business.
Below, we walk you through some of the types of business insurance coverage to consider:
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What insurance does
my colorado business need?
Colorado Workers’ Compensation Insurance
Almost all Colorado businesses are required to get and maintain Workers’ Compensation Insurance. According to state Law (§8-40-102), this applies businesses with one or more employees in Colorado and includes anyone who is working for your business, part time employees and family members included.
The cost of this insurance cannot be deducted from employee wages, and failure to obtain Workers’ Compensation can result in some hefty fines from the state. (Up to $500 a day for every day you are not insured and you risk your business being dissolved–Ouch!)
The Colorado Department of Labor and Employment also requires you to display a Notice to Employer of Injury Poster (WC 50) in your place of business at all times, in case of employee injury.
If an employee is injured at work, you will need to:
- Provide a list of designated providers to the injured employee
- Keep a record of any injuries or occupational diseases in your workplace
- Report the employee’s injury to your insurance provider within 10 days of the incident
- File a Supplemental Report of Return to Work form with your insurer when the employee returns to work
In rare cases, some independent contractors (those with no employees) can reject Workers’ Compensation coverage if they meet certain criteria and file a Rejection of Coverage with the Colorado Department of Labor and Employment.
Why is Workers Compensation Insurance required?
While at first it may seem like an unnecessary expense, purchasing Workers’ Compensation Insurance makes sure that you, your business, and your employees have a plan for any potential injuries on the job, should the time come.
Workers’ Compensation covers the employee’s medical care, after care (like physical therapy), and any wages they may have lost when they were injured. It also protects you financially. Here in Colorado, if you fail to obtain Workers’ Compensation Insurance and an employee is injured on the job, not only will you have to pay for the claim yourself, but the state will also fine you an additional 25% of the injured worker’s benefits.
Unemployment Insurance
In Colorado, most employers are required to pay an unemployment tax to the Colorado Department of Labor and Employment. As a Colorado business owner, you will more than likely have to pay a premium (or premiums) that are then put into the state’s Unemployment Insurance Trust Fund.
Your premium rate is determined annually and depends on a variety of qualifications included, but not limited to, the number of premiums you’ve paid for in previous years and any benefit payments made to former employees. We recommend checking out the CO Department of Labor and Employment website for in-depth information regarding your business’s specific premium rate.
You’ll be required to pay unemployment premiums if you:
- Paid at least one employee $1,500 or more in a calendar quarter (Can be either during the current or the previous calendar year)
- Paid one or more employees any day during a 20 week span this calendar year or the previous calendar year
How can I find my Unemployment Insurance premium rate?
Once registered to do business in Colorado, the state will send you an annual notice (usually in December) that will detail what your rate will be for the next calendar year.
When you hire us as your registered agent, we’ll immediately scan, upload, and notify you when you receive important reminders (like this one) from the state. You’ll be able to access and manage all of your important state paperwork in your online account, making it easy to stay on top of state requirements.
Property Insurance
Property Insurance is not required by the state, but having a policy is a good way to protect your company against losses or damages to the business’s property. This includes company-owned buildings and personal property.
- If you own your place of business: Your policy will include protection against damages to both your company’s commercial property and personal property. For example, say your office was broken into and company property was stolen. Your property insurance policy may cover the damage to your building and the cost of the stolen goods.
- If you rent or lease your place of business: There are still insurance options to protect your business’s property. Most landlords pay to insure their building and property, but often this insurance does not cover the property of their tenants (i.e. you). In order to protect your personal property (like inventory, technology, etc.), you can purchase insurance specifically tailored to renters and lessees.
The specifics of your Property Insurance package will depend on your insurance agency. Most offer a general package the covers typical small business needs, but often commercial insurance agencies let business owners customize their policy so that it better reflects their business’s needs.
Business Interruption Insurance
Essentially, a Business Interruption Insurance policy will cover continuing expenses, like salaries and mortgage payments, and help you maintain your business presence should an “unexpected event” interrupt your normal means of business. Your insurance provider’s policy will cover the specifics of what’s included in this.
But what counts as an “unexpected event?”
Crime: If an act of crime inhibits your company’s ability to operate, it may be covered by Business Interruption Insurance. For example, someone breaks into your place of business, vandalizing and damaging technology and equipment essential to your operations. This insurance would cover rent, utilities, and other essential operations until your equipment has been replaced and your able to continue conducting business.
Building Repair: A big part of building ownership is being responsible for building upkeep. Having a Business Interruption Insurance Policy may cover the cost of business operations while you repair your building, particularly when removing potential toxins like mold, radon, and asbestos.
Natural Disasters: Colorado is one of the best states to live and do business in. We bought a building in Denver because we love it here. But this state also has its share of natural disasters. Depending on where your business is located, your property could be at risk of damage from a variety of potential disasters, including:
- Flooding (especially for those located close to any of our state’s rivers)
- Wildfires (even if a fire doesn’t touch your property, there’s always the chance of smoke damage)
- Landslides (particularly common after damage from wildfires)
- Severe Storms (especially in the spring and summer months, these storms can produce hail, strong winds, flash floods, and tornadoes)
- Drought (particularly damaging if your business is involved the agricultural industry)
- Earthquakes (though rare, they do happen occasionally in CO)
The extent of the coverage you need (and how much it costs) depends entirely on where your business is located. For example, if you’re located on the east side, along the Front Range and foothills, severe storms and potential tornadoes are probably more of a concern than if you are located in mountains, where the larger risk lies in avalanches and landslides.
Flood Insurance
You would think that most Property Insurance would include damage caused by flooding, but unfortunately that is not the case. Policies in regards to flood risk are usually separate from general Property Insurance.
Luckily, if flooding is not covered by your Business Interruption Insurance policy (see above) FEMA allows business owners to purchase coverage through the National Flood Insurance Program.
General Liability Insurance
It’s important for your business to have a general, Business Liability Insurance policy. Why? While your LLC’s liability status keeps your personal assets separate from your business’s, it does not cover the cost of the loss of your business’s assets should someone sue you.
Plus, General Liability Service also protects you and your business if a client suffers injury of damages in your place of business or because of any of the products or services sold. Specifically, policies like this:
- Protect your assets
- Protect your business’s assets
- Cover the cost of defending yourself against the client’s claim
This insurance not only protects you and the business, but also your employees (as long as the incident occurred on or with company property).
What if General Liability Insurance isn’t enough?
Sometimes called “Excess Liability,” these secondary policies can cover the cost of the rest of a claim if said claim has maxed out your General Liability Insurance policy.
For example, your business General Liability Insurance Policy covers $500,000. But after a dispute, a disgruntled client wins a claim of $750,000. An Excess Liability Insurance policy would cover that extra $250,000.
Professional Liability Insurance
Professional Liability Insurance is reserved for professionals that offer specific services, like medical care and legal representation. In Colorado, both licensed physicians and realtors are required by law to carry Professional Liability Insurance.
Some other professionals, like Architects, Accountants, Engineers, Doctors, Lawyers, and Insurance Brokers, are required by their licensing board to maintain Professional Liability Insurance.
These policies are tailored to the specific risks and liability in a profession, and often cover the costs to defend a professional in court, as well as any damage caused by that professional’s individual actions and/or negligence.
CO Business Insurance FAQ
Certain types of insurance, like Workers’ Compensation and Unemployment insurance, is required by the state. Other types of coverage is optional. The coverage you need depends on your business’s risks, the industry you’re in, the number of employees you have, whether or not your own, rent, or lease your place of business, as well as other factors.
If you fail to obtain Workers’ Compensation Insurance or pay your company’s Unemployment Insurance Premium, you may face penalties from the state. These include, but are not limited to:
- $500/day fine for every day your business operates without Workers’ Compensation Insurance
- $50 fine for every calendar quarter you fail to submit your Unemployment Insurance Report
- A 1.5% interest rate per month on past-due Unemployment Premiums and penalties
As for other optional coverage, like flood or property insurance, you can run the risk of opting out of coverage, but your business will have to take care the cost. And depending on the damage, this can get very expensive very fast.
The state of Colorado allows business owners to purchase business insurance (including Workers’ Compensation Insurance) through a commercial provider or, if they qualify, purchase Self-Insurance.
Most commercial insurance providers have several general, business insurance packages available, but they also provide their customers the options to customize their insurance to their business’s needs.
If your interested in acquiring Self-Insurance, it’s a little trickier. In order to qualify, your business will have to meet the state’s specific requirements.
Commercial Insurance is insurance purchased through a third-party company (like Progressive or State Farm). Self-Insurance is when an employer (a.k.a. you) take responsibility for any claims or fees that come up.
While Commercial Insurance is easy to purchase, Self-Insurance is more difficult to acquire.
In order to qualify for Self-Insurance with the state, you will need to:
- Have been in business for at least 5 year or be a subsidiary of a company that has been doing business in Colorado for 5 years
- Employ 300 or more full time employees, all of who work in Colorado or have assets of at least $100,000,000 (if you have a parent company with this amount of assets, that counts, too)
If you qualify for, and decide to self-insure, you will need to file a Self-Insurance Annual Permit Renewal to the Colorado Department of Labor and Employment and pay the $2,000 fee.
The price of your company’s business insurance depends on the coverage you choose for your business. This is especially true here in Colorado, as the state allows both commercial insurance coverage and self-insurance.
Generally speaking, it can cost you up to $1,000/year per policy. Again, this price varies depending on what kind of business you own, where it’s located, how much revenue you make, how many employees you have, as well as several other factors.
