New Business Insurance Checklist: What You Need on Day 1
- TSM Insurance
- 3 hours ago
- 5 min read
New business owners tend to buy insurance twice: once badly, in a hurry, because a landlord or a client demanded a certificate — and then again properly, eighteen months later, after discovering what the first policy didn't cover.
This checklist is the version that skips the first round. It's organised by trigger rather than by product, because what you actually need is determined by what you've done: signed a lease, hired someone, bought a vehicle, taken on a client contract.
TIER 1 — Before you open the doors
☐ Entity formed and registered with the California Secretary of State (an LLC or corporation protects personal assets from business liabilities — it does not replace insurance, and it doesn't protect you from your own negligence)
☐ Business licence(s) from your city and county
☐ Seller's permit from CDTFA if you sell tangible goods
☐ EIN from the IRS
☐ Business bank account separate from personal — commingling undermines the liability protection you formed the entity for
☐ Any professional or occupational licence your field requires
☐ Surety or licence bond if your licence requires one (contractors: the CSLB licence bond is $25,000 as of January 1, 2023)
TIER 2 — Day one coverage, for essentially every business
☐ General liability — $1,000,000 per occurrence / $2,000,000 aggregate is the practical floor and what most contracts demand. Covers third-party bodily injury, property damage, and personal & advertising injury.
☐ Business personal property — your equipment, inventory, furniture, and improvements to a leased space. Your landlord's policy covers the building and nothing of yours.
☐ Business income — pays lost income and continuing expenses if covered damage shuts you down. New businesses skip this and it is the coverage most likely to determine whether the business survives a fire.
☐ A BOP where you qualify — a Business Owner's Policy packages general liability and property at a lower combined price than buying them separately. Most small, low-hazard businesses qualify.
TIER 3 — Triggered by what you've done
You signed a lease
☐ Pull the insurance requirements section out of the lease and read it before you buy anything
☐ Landlord named as additional insured, usually required
☐ Limits meet or exceed what the lease specifies
☐ Tenant improvements and betterments covered — anything you built into the space
☐ Waiver of subrogation, if the lease requires it
☐ Certificate issued to the landlord before you take possession
You hired your first employee
☐ Workers' compensation — mandatory in California from the first employee, with no exceptions and no revenue threshold. Going without carries penalties including stop orders and personal liability, and removes the exclusive-remedy protection that prevents an injured employee from suing you directly. See do I need workers' comp insurance in California.
☐ EDD registration for payroll taxes
☐ State disability insurance withholding set up
☐ Employment practices liability (EPLI) — the most under-bought coverage in California small business. Wrongful termination, discrimination, harassment, and wage-and-hour claims. California is the most active employment litigation environment in the country.
☐ Employee benefits decided — see small business insurance
☐ Required workplace postings and an IIPP (Injury and Illness Prevention Program), which Cal/OSHA requires of every California employer
You have vehicles, or employees who drive
☐ Commercial auto for any vehicle titled to the business
☐ Hired and non-owned auto if employees ever drive their own cars for work — including a run to the post office. A personal auto policy generally excludes business use, and the exposure lands on the business.
You signed a client contract
☐ Read its insurance requirements section before signing, not after
☐ Additional insured endorsements as required — see certificate of insurance request template
☐ Professional liability / E&O if you provide advice, design, consulting, or a professional service. General liability excludes professional services — this is the single most common gap in a service business.
☐ Higher limits or an umbrella if the contract demands them
You handle customer data, or take payments online
☐ Cyber liability — covering breach response, notification costs, regulatory defence, ransomware, and business interruption
☐ Social engineering / funds transfer fraud coverage, which is often a separate sublimit and is the loss that actually happens to small businesses
☐ California privacy law obligations understood
You have partners or a board
☐ Directors and officers (D&O) liability
☐ Buy-sell agreement funded with life insurance
☐ Key person life insurance
You store inventory, use tools, or work off-site
☐ Inland marine for equipment and tools away from the premises
☐ Installation floater for materials before they're installed
☐ Crime / employee dishonesty
☐ Equipment breakdown for anything mechanical or electrical you depend on
☐ Spoilage if you hold refrigerated stock
TIER 4 — Set up the habits now, not later
☐ Written contracts with indemnity clauses and insurance requirements for every vendor and subcontractor
☐ Collect certificates from every sub, with additional insured endorsements — and calendar their expiry dates
☐ Photograph the premises and equipment annually; keep a fixed-asset schedule
☐ Keep three years of financials backed up off-site — after a fire, your financial records are your business income claim
☐ Know your agent's direct number, and calendar a review 60 days before renewal
What it costs, honestly
A general liability policy for a low-hazard small business commonly starts in the several-hundred-dollars-a-year range; a BOP packaging liability and property is often less than the two bought separately. Workers' comp is priced off payroll and class code. Professional liability varies widely by field. Anyone quoting a firm number without knowing your revenue, payroll, operations, and contracts is guessing — see what business insurance costs in California.
The more useful question at launch isn't "what's the cheapest policy," it's "what would end this business." Insure that first, then work down the list.
The three mistakes new businesses make
Buying the minimum a contract demanded, and calling it a programme. A landlord's requirement is the landlord's risk tolerance, not yours.
Assuming the LLC is the protection. An entity separates business liabilities from personal assets. It doesn't pay a claim, and it doesn't stop you being sued personally for your own conduct.
Never updating anything. The policy you bought at launch describes a business that no longer exists 18 months later. That's what the annual review is for.
FAQs
What insurance do I need to start a business in California?
General liability and business personal property for essentially everyone; workers' compensation the moment you have your first employee; commercial auto for business vehicles; professional liability if you provide a professional service; plus whatever your lease and client contracts require.
Do I need workers' comp for one employee in California?
Yes. California requires workers' compensation from the first employee, with no revenue or size threshold.
Does an LLC protect me instead of insurance?
No. An LLC separates business liabilities from personal assets; insurance pays claims. You need both.
Do I need business insurance if I work from home?
Almost certainly. Homeowners policies sharply limit or exclude business property and business liability.
When should I buy business insurance?
Before you open, sign a lease, hire anyone, or take on a client.
Starting something? Start with a conversation, not a quote form.
TSM has helped Central Valley businesses launch for 100 years. Tell us what you're building, what you've signed, and who you've hired — we'll build the day-one programme around it and grow it with you.
Modesto (209) 524-6366 · Redding (530) 221-3031 · Talk to a TSM advisor
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