Running a business means taking care of your team, and part of that is providing certain benefits that are required by law. These mandatory benefits help protect your employees and keep your business compliant. Many of these benefits involve some form of commercial insurance, which is a policy businesses purchase to cover specific risks. Here’s the lowdown on what’s required:
Social Security and Medicare
Unemployment Insurance
Workers’ Compensation Insurance
Health Insurance (for larger businesses)
Family and Medical Leave Act (FMLA)
State-Specific Benefits
Employee Benefits Liability Insurance (Optional but Related)
Why Commercial Insurance Matters: Workers’ compensation, health insurance, and sometimes short-term disability are provided through commercial insurance policies. These policies help businesses meet legal requirements, manage risks, and avoid hefty penalties or lawsuits. Plus, offering a solid benefits package (even beyond what’s required) can make your company a magnet for top talent!
Quick Tip: The requirements depend on your business size, location, and industry. For example, California has stricter rules (like workers’ comp for even one employee), and certain industries (like contractors or cannabis businesses) may have extra insurance needs. Always check federal and state laws, and consider chatting with an insurance agent to make sure you’re covered.
Social Security and Medicare
- What is it? These are federal programs that provide retirement, disability, and health benefits for employees. Both you (the employer) and your employees contribute through payroll taxes under the Federal Insurance Contributions Act (FICA).
- Details: Employers and employees each pay 6.2% for Social Security (on earnings up to $176,100 in 2025) and 1.45% for Medicare (no wage cap).
- Commercial Insurance Link: These are government-managed programs, so they don’t directly involve commercial insurance, but they’re Glenn insurance helps cover related costs, like disability benefits, through taxes rather than private policies.
Unemployment Insurance
- What is it? This provides temporary income support for workers who lose their jobs through no fault of their own. It’s funded by employer-paid federal (FUTA) and state (SUTA) unemployment taxes.
- Details: Employers pay 6% on the first $7,000 of each employee’s wages for FUTA, and state rates vary.
- Commercial Insurance Link: Like Social Security, this is a government program, not a commercial insurance policy, but it’s a mandatory cost for businesses to cover potential employee claims.
Workers’ Compensation Insurance
- What is it? This covers medical expenses and lost wages for employees injured or ill due to work-related activities. It’s required in most states (except Texas, where it’s optional for some employers).
- Details: Coverage varies by state, but it typically includes medical bills and partial income replacement. For example, in California, even businesses with one employee need it.
- Commercial Insurance Link: This is a key type of commercial insurance! Businesses buy workers’ comp policies from private insurers or state programs to meet legal requirements and protect against workplace injury claims.
Health Insurance (for larger businesses)
- What is it? Under the Affordable Care Act (ACA), businesses with 50 or more full-time equivalent employees (FTEs) must offer affordable health insurance to at least 95% of full-time employees and their dependents (kids, not spouses).
- Details: The coverage must pay at least 60% of medical costs, and employee premiums can’t exceed 9.02% of their income (2025). Smaller businesses aren’t required to provide it but often do to stay competitive.
- Commercial Insurance Link: Health insurance is typically purchased through commercial group plans from private insurers to meet ACA requirements and avoid penalties (like ~$5,000 per employee per year for non-compliance).
Family and Medical Leave Act (FMLA)
- What is it? For businesses with 50 or more employees, FMLA requires offering up to 12 weeks of unpaid, job-protected leave for things like childbirth, adoption, or serious health conditions.
- Details: Employees need to have worked for you for at least 12 months and 1,250 hours to qualify. You must maintain their health insurance during the leave.
- Commercial Insurance Link: FMLA itself isn’t insurance, but it ties into your commercial health insurance plan since you’re required to continue coverage during the leave.
State-Specific Benefits
- What is it? Some states, like California, Hawaii, New Jersey, New York, and Rhode Island, require additional benefits, such as short-term disability insurance or paid family leave.
- Details: For example, California mandates paid family leave that runs alongside FMLA, and short-term disability covers non-work-related illnesses or injuries.
- Commercial Insurance Link: Short-term disability is often provided through commercial insurance policies, either fully employer-funded or with employee contributions via payroll deductions.
Employee Benefits Liability Insurance (Optional but Related)
- What is it? This isn’t a required benefit, but it’s a type of commercial insurance that protects your business from lawsuits due to errors in managing employee benefits (like enrolling someone in the wrong plan).
- Details: It’s often added as an endorsement to a commercial general liability policy and is super helpful if you manage complex benefits programs.
- Why it matters: It’s a safety net for administrative mistakes, especially for businesses with lots of employees or high turnover.
Why Commercial Insurance Matters: Workers’ compensation, health insurance, and sometimes short-term disability are provided through commercial insurance policies. These policies help businesses meet legal requirements, manage risks, and avoid hefty penalties or lawsuits. Plus, offering a solid benefits package (even beyond what’s required) can make your company a magnet for top talent!
Quick Tip: The requirements depend on your business size, location, and industry. For example, California has stricter rules (like workers’ comp for even one employee), and certain industries (like contractors or cannabis businesses) may have extra insurance needs. Always check federal and state laws, and consider chatting with an insurance agent to make sure you’re covered.