Insurance at Zero Employees vs. One

Buy general liability insurance this week. For most solo service businesses it runs roughly $40–$90 a month, it covers the category of accident that can actually end a small business (you damage a client’s property, someone gets hurt because of your work), and — the practical clincher — clients and landlords will demand proof of it anyway. You’ll know that’s happening when someone asks for a certificate of insurance (COI): a one-page proof of coverage your insurer issues free, usually same-day. Commercial landlords, general contractors, property managers, and bigger clients ask routinely, and “I’ll get coverage now” reads exactly like what it is. Get the policy before the first ask and the question costs you ten minutes instead of a contract.

The LLC you set up in page 1.1 does not replace this. The LLC protects your personal assets from the business’s debts; insurance is what keeps a $40,000 accident from emptying the business itself. You want both, and they’re cheap relative to what they prevent.

The default stack at zero employees

1. General liability (GL). The default first policy for everyone. Covers third-party bodily injury and property damage — the ladder through the window, the slip over your equipment, the stain that ruins the client’s floor. A $1 million per-occurrence / $2 million aggregate limit is the standard ask on COI requests, so quote that; it’s usually barely more than lower limits.

2. Professional liability / errors & omissions (E&O). Add this if your product is advice or judgment: consultants, bookkeepers, designers, marketers, IT, anyone whose mistake shows up as the client’s financial loss rather than a broken object. GL does not cover “your recommendation cost me money.” If clients act on what you tell them, you need both; if you only ever touch physical things, GL alone is the default.

3. Commercial auto — but only if a vehicle does business work. Driving to client sites with tools and materials, hauling, deliveries: your personal auto policy can deny those claims, and a denied auto claim is the most common way solo operators discover they were “self-insured” all along. The decision rule: if the vehicle is part of doing the job, get commercial auto (or at minimum a business-use endorsement on your personal policy — ask your current agent which your usage requires). If you just commute to a desk, skip it.

The hard line: employee #1

The day you hire your first employee, insurance stops being a judgment call. Workers’ compensation is legally required in nearly every state from the first employee — Texas is the famous exception where private employers can opt out, and a handful of states set thresholds of two to five employees for some employer types. Don’t plan around the exceptions: search “[your state] workers compensation requirements” on your state’s .gov site the week you decide to hire, because the penalties for skipping it are per-day fines and, in some states, personal liability for the injury itself.

Three nuances worth knowing before you call for quotes:

• “Employee” is about the work, not the label. Calling someone a 1099 contractor doesn’t exempt you if the state decides they function as an employee — and states audit exactly this. If you control their hours, tools, and methods, budget for workers’ comp.
• Part-time counts. Most states make no distinction.
• Cost scales with payroll and risk class — office work is cheap per $100 of payroll, roofing is not. Get the quote before you set the wage, so the true cost of employee #1 includes it.

Hiring also means revisiting GL limits and telling your insurer — an undisclosed employee is a gift to a claims adjuster looking for a reason to deny.

What to skip early

Respecting the 5-hour week means naming what not to buy, because every policy is also an annual renewal, an invoice, and a thing to manage:

• Key person life insurance. Solves a problem partnerships and lenders have. At one owner and no debt covenants, skip it.
• Cyber insurance. Skip for most. The flip point: you store customers’ payment data or sensitive records yourself (not via Stripe/Square/your booking software), or a client contract demands it. Until then, decline.
• A BOP (business owner’s policy). A bundle of GL plus commercial property. Sensible the day you have property worth insuring — a shop, a studio, $10K+ of equipment. A laptop-and-phone business should buy plain GL and skip the bundle.
• Umbrella/excess liability. When a contract demands $2M+ limits, not before.

The decision table

Your business looks like…	Buy now	At employee #1	Skip for now
Trades, cleaning, landscaping	GL + commercial auto	Workers’ comp	E&O, cyber
Consultant, bookkeeper, marketer	GL + E&O	Workers’ comp	Commercial auto, BOP
Personal services (hair, fitness, pet care)	GL (often with professional add-on)	Workers’ comp	Cyber, key person
Shop or studio with equipment/inventory	BOP (GL + property)	Workers’ comp	Key person
Anyone driving for the work itself	+ commercial auto	—	—

Getting quotes in two hours

Quote once a year, two hours, calendar it. Get three numbers: one online small-business insurer, one national carrier, and one local independent agent — the agent costs nothing extra (they’re paid by commission) and is the only one of the three who’ll flag your state’s workers’ comp quirks before you hire. Use the same script so the quotes compare cleanly:

I run a [trade] business in [state], sole owner, no employees,
about $[X] expected annual revenue. I need general liability,
$1M/$2M limits[, plus professional liability / commercial auto
for one vehicle]. Clients ask for certificates of insurance, so
I need those issued quickly. What's the annual premium, and
what's excluded that someone in my trade usually assumes is
covered?

That last question earns its place — exclusions (your specific trade, your specific tools, “contractual liability”) are where cheap policies hide their cheapness. Take the answer in writing.

One caveat: premiums swing with state, trade, and claims history, so treat every number on this page as a range and the quotes as the truth. And when a client’s contract demands coverage types you don’t recognize, that’s a 20-minute call with the independent agent, not a guessing game — it’s also exactly the kind of requirement your intake process should surface before you’ve already started the work.

What you’re actually buying

At zero employees: GL this week, E&O if you sell judgment, commercial auto if a vehicle works for you. Total for most solo operators: under $100 a month and two hours a year. At one employee: workers’ comp, no discretion involved. Everything else has a threshold, and you now know each one — so when a policy isn’t on your list, that’s a decision, not an oversight.