What insurance is required before hiring employees?

Required Business Insurance Before Hiring Employees in California

Before hiring employees in California, it is essential to secure specific types of insurance to comply with state regulations and protect your business.

Key Insurance Requirements

• Workers' Compensation Insurance: California law mandates that all employers with one or more employees must carry workers' compensation insurance. This coverage protects employees who suffer work-related injuries or illnesses and helps cover medical expenses and lost wages.
• Unemployment Insurance: Employers must register with the California Employment Development Department (EDD) to pay unemployment insurance taxes. While not an insurance policy you purchase externally, it is a required tax contribution that funds unemployment benefits for former employees.
• Disability Insurance: California requires participation in the State Disability Insurance (SDI) program, which provides partial wage replacement to employees unable to work due to non-work-related illness or injury. Employers withhold SDI contributions from employee wages and remit them to the EDD.

Additional Operational Considerations

• Liability Insurance: While not legally required, general liability insurance is recommended to protect your business from claims related to bodily injury, property damage, or personal injury occurring on your premises.
• Employment Practices Liability Insurance (EPLI): Consider this coverage to protect against claims related to wrongful termination, discrimination, or harassment, which can arise in the course of employment.
• Recordkeeping and Reporting: Maintain accurate insurance records and ensure timely reporting to California regulatory agencies to remain compliant and avoid penalties.

As of 2026, securing workers' compensation insurance before the first employee starts work is critical to avoid fines and legal issues. Coordinate with insurance providers and the California EDD to ensure all coverage and tax registrations are in place prior to hiring.