What insurance is required before hiring employees?

Required Business Insurance Before Hiring Employees in Tennessee

Before hiring employees in Tennessee, businesses must secure specific insurance coverage to comply with state regulations and protect both the company and its workforce.

Workers' Compensation Insurance

Workers' compensation insurance is mandatory for most Tennessee employers with five or more employees. This insurance covers medical expenses and lost wages if an employee is injured or becomes ill due to work-related activities.

• Required for employers with 5+ employees (full-time, part-time, or seasonal combined).
• Must be in place before employees begin work.
• Failure to maintain coverage can lead to penalties and legal liability.

Unemployment Insurance

Employers must register with the Tennessee Department of Labor and Workforce Development to pay unemployment insurance taxes. While not an insurance policy you purchase externally, this tax funds benefits for employees who lose their jobs through no fault of their own.

• Registration is required before hiring employees.
• Payroll systems should be set up to track and remit these taxes.

Additional Insurance Considerations

While not legally required, consider these insurance types to support your workforce and manage operational risks:

• General liability insurance to protect against third-party claims.
• Employment practices liability insurance (EPLI) to cover claims related to workplace discrimination or wrongful termination.
• Health insurance offerings, especially for businesses with 50 or more full-time employees, to comply with federal Affordable Care Act requirements.

Operational Tips

• Set up proper recordkeeping systems for insurance documentation and employee records.
• Integrate insurance compliance checks into your hiring and onboarding processes.
• Use payroll automation tools to manage unemployment tax payments and workers' compensation reporting.

As of 2026, always verify insurance requirements with the Tennessee Department of Labor and Workforce Development and consult with a licensed insurance agent to ensure full compliance and adequate coverage before hiring employees.