Most California businesses need workers compensation the day they hire their first employee, general liability that landlords and clients insist on, and property or a package policy for their equipment. Workers comp is the coverage California law actually forces on you, and it starts with employee number one: there is no headcount minimum and no exception for part-time, seasonal, or family staff.
Who this is for: California owners, from a one-van contractor in Fresno to a 20-person shop in Los Angeles, who want to know what the state requires, what their contracts require, and how to buy it without overpaying.
The short version
- Workers comp is required from your first employee. California has no minimum headcount and no part-time exception. Hire one person and you must have a policy (Labor Code section 3700).
- General liability is not a state mandate for most businesses, but nearly every lease, client contract, and general contractor requires it before you can start work.
- Owners are treated by their business type. Sole proprietors, and a corporate officer who is the sole shareholder, are out unless they opt in, while other corporate officers, general partners, and LLC managing members are covered by default and must sign a waiver to opt out.
- Skipping workers comp is costly. A stop order that halts your labor, a penalty of 1,500 dollars per employee, and criminal exposure are all on the table.
- You buy on the open market. Private carriers compete for your business, and the State Compensation Insurance Fund both competes and serves as the insurer of last resort if no one else will take you.
What California actually requires
Only a couple of these are true legal mandates. The rest get required by the people you do business with, which in practice is just as binding.
| Coverage | Required by California law? | Who needs it | What is at stake |
|---|---|---|---|
| Workers compensation | Yes, Labor Code section 3700 | Every employer with one or more employees | Stop order, 1,500 dollars per employee, criminal charges |
| Commercial auto | Yes, if you own or use business vehicles | Any business-owned or leased vehicle | Registration problems, uninsured liability |
| General liability | No state mandate | Required by most leases, clients, and general contractors | Lost contracts, blocked from a job site |
| Professional liability (errors and omissions) | No state mandate | Consultants, tech, design, and accounting firms, often by contract | Uncovered claims, lost contracts |
| Commercial property or a package policy | No state mandate | Anyone with a space, inventory, or equipment; landlords often require it | Out-of-pocket losses, lease default |
What business insurance costs in California
These are illustrative annual ranges for small California businesses, not quotes. Your real price depends on payroll, revenue, claims history, and the exact kind of work. California workers comp prices sit on the higher side nationally, and the advisory benchmark rates behind them rose about 8.7 percent effective September 1, 2025, the first increase since 2015.
| Business type | Workers comp (est.) | General liability (est.) | Package policy (est.) |
|---|---|---|---|
| Office or professional services | 800 to 3,000 dollars | 500 to 2,000 dollars | 1,200 to 4,000 dollars |
| Restaurant or cafe | 3,000 to 12,000 dollars | 1,500 to 5,500 dollars | 4,500 to 16,000 dollars |
| Landscaper or small contractor | 4,000 to 16,000 dollars | 1,200 to 4,500 dollars | Usually separate policies |
| Cleaning or janitorial | 3,500 to 13,000 dollars | 900 to 3,500 dollars | Usually separate policies |
| Retail store | 1,500 to 6,000 dollars | 900 to 3,200 dollars | 2,500 to 9,000 dollars |
The 14 workers comp questions California owners ask
Workers comp is where most of the confusion and most of the risk live, so we wrote a plain-English guide for every common situation. Start with the California workers comp overview, then jump to the one that matches your business:
- I own an LLC
- I am a sole proprietor
- I own a corporation (C-corp or S-corp)
- We are a partnership
- We are a nonprofit
- My workers are 1099 contractors
- I only have part-time or seasonal staff
- I only employ family members
- My team is remote or out of state
- What happens if I do not have it
- How much it costs
- How to get it, even if I have been turned down
- What I need for a contractor license
A Sacramento example
Illustrative, not a quote. Maria runs a four-person landscaping LLC in Sacramento with about 190,000 dollars in payroll. As a managing member she is covered by default, so she decides with her agent whether to stay on the policy or sign a waiver to leave herself off, but her three employees must be covered from their first day. Her workers comp lands in the four to sixteen thousand dollar range because hands-on landscaping is higher-risk work, and she adds general liability so she can sign with the property managers who hire her. When a crew member strains his back lifting a stone bench, comp pays the medical bills and part of his lost wages, and Maria owes nothing out of pocket on the claim. See the trade detail on our workers comp for landscapers page.
Real questions California owners ask
Do I need workers comp for my California business?
Yes, if you have any employees. California requires workers comp from the first worker under Labor Code section 3700, with no minimum headcount and no exception for part-time or seasonal staff.
I just hired my first employee in California. Do I need it right away?
Yes. California requires workers comp the moment you have even one employee, full or part time, with no waiting period and no minimum headcount. Put a policy in place before that person starts work.
Do I have to cover myself as the owner?
It depends on your business type. As a sole proprietor you are out unless you elect in. As a corporate officer, general partner, or LLC managing member you are covered by default and must sign a written waiver to opt out.
Is general liability insurance required in California?
The state does not make general liability mandatory for most businesses, but landlords, clients, and general contractors almost always require it before they will sign with you, so in practice you usually need it.
What happens if I skip workers comp?
The state can issue a stop order that halts your use of labor, assess a penalty of 1,500 dollars per employee, and pursue criminal charges. An injured worker can also sue you directly.
Does California have a state insurance fund?
Yes. The State Compensation Insurance Fund competes with private carriers and also serves as the insurer of last resort, so coverage is available even if private carriers decline your business.
I'm based out of state with a worker in California. Can I insure them?
Yes. With an employee working in California you generally need California coverage for them, no matter where your company is based. We can add California to your existing policy or write a separate one.
Why California owners choose Morrow
- We shop the right market for you. In California you buy workers' comp on the open market from any licensed private carrier, with the State Compensation Insurance Fund competing alongside them and standing as the insurer of last resort, so we can shop your rate freely and still have a guaranteed fallback for hard-to-place accounts.
- We catch pricing mistakes. Your price depends heavily on the category your work falls into for pricing (the class code). Put people in the wrong category and you overpay for years. We review your payroll and classifications before you buy.
- Proof of coverage, fast. Need a certificate (proof of coverage) for a general contractor or a landlord before Monday? We turn those around the same business day for most carriers.
- We help lower the score that drives your price. Insurers give you a score based on your past claims that raises or lowers your cost (the experience modification rate). We review it each year, flag errors, and connect you with return-to-work and safety resources that bring it down.
- Real people when a claim happens. When someone gets hurt, we stay involved through the life of the claim, not just at renewal.
Related California guides
Every California business is set up a little differently. These companion guides answer the same question for other situations, plus the national explainers behind the terms used here.
- Business insurance in California (start here)
- Workers comp: the owner's overview
- I own an LLC: do I need workers comp?
- I'm a sole proprietor: do I need workers comp?
- I own a corporation (C-corp or S-corp): do I need it?
- We're a partnership: do we need workers comp?
- We're a nonprofit: do we need workers comp?
- My workers are 1099: do I still need it?
- Only part-time or seasonal staff: do I need it?
- I only employ family: do I need workers comp?
- Remote or out-of-state staff: do I need coverage?
- What happens if I don't carry workers comp?
- How much does workers comp cost?
- How do I get workers comp (even if turned down)?
- What insurance do I need for a contractor license?
- Workers compensation insurance, explained
- What workers comp costs (national guide)
- Hiring your first employee: what changes
- What workers comp does not cover
- California landscaper workers comp
This guide is general information, not legal advice. California rules and penalty amounts can change, so verify current requirements with California Division of Workers' Compensation (DWC), a division of the Department of Industrial Relations (DIR) or a licensed advisor before you rely on them. Last updated: July 2026.