What insurance is required before hiring employees?

Required Business Insurance Before Hiring Employees in Colorado

When hiring employees in Colorado, certain insurance coverages are mandatory to ensure compliance and protect both your business and workforce.

Workers' Compensation Insurance

Workers' compensation insurance is required for most employers in Colorado once you hire your first employee. This insurance covers medical expenses and lost wages if an employee is injured or becomes ill due to work-related activities.

• Obtain coverage through private insurers or the state’s workers’ compensation system.
• Maintain accurate injury and claim records as part of compliance and reporting requirements.

Unemployment Insurance

Employers must register with the Colorado Department of Labor and Employment to pay unemployment insurance taxes. This is not an insurance policy you purchase but a tax obligation that funds unemployment benefits for eligible former employees.

• Register promptly after hiring your first employee.
• File quarterly payroll reports to calculate unemployment tax liability.

Additional Considerations

• General liability insurance is not required by law but is recommended to protect against third-party claims.
• Consider employment practices liability insurance (EPLI) to cover claims related to discrimination or wrongful termination.
• Ensure proper employee classification to avoid misclassification issues affecting insurance and tax obligations.

As of 2026, staying current with insurance requirements and payroll tax registrations is essential for smooth business operations and compliance in Colorado.