Iowa is home to over 272,000 small businesses, employing nearly half the state’s workforce. Understanding Iowa’s business insurance and workers’ compensation requirements is essential for legal compliance and long-term business protection.

Who Needs Business Insurance in Iowa

Nearly all Iowa businesses benefit from insurance, but legal requirements depend on business activities and structure. Key points:

• Any business with employees (full-time or part-time) must carry workers’ compensation insurance.

• Businesses owning or using vehicles for work must have commercial auto insurance.

• Contractors working on public projects, and many other businesses, are often required by clients or contracts to carry general liability insurance.

• Professionals providing services or advice (e.g., consultants, architects, engineers, healthcare providers) may need professional liability insurance, either by law, industry association, or client contract.

• Landlords, lenders, and business partners may require certain coverages as part of leases or agreements.

Workers’ Comp: When It’s Required

Workers’ compensation insurance is mandatory in Iowa for any business with one or more employees, including part-time staff. This covers medical costs and lost wages for work-related injuries and illnesses.

Exemptions include:

• Sole proprietors, partners, and LLC members (unless they opt in)

• Corporate officers with at least 25% ownership (up to four officers may exempt themselves)

• Certain family members, casual employees, and those earning less than $1,500 annually.

Penalties for non-compliance are severe, including fines and potential felony charges.

Commercial Auto Insurance Basics

All business-owned vehicles in Iowa must be covered by commercial auto insurance. This applies whether you own a single vehicle or a fleet.

Minimum required coverage:

• Bodily injury: $20,000 per person / $40,000 per accident

• Property damage: $15,000 per accident

Key notes:

• Personal auto insurance typically does not cover business use; hired and non-owned auto insurance is recommended if employees use personal vehicles for work.

• Higher liability limits or additional coverages (collision, comprehensive) may be needed for certain industries (e.g., trucking).

Professional Liability for Certain Jobs

Professional liability insurance (errors & omissions/E&O) is essential for businesses providing professional services or advice. It covers claims of negligence, mistakes, or failure to deliver services as promised.

• Required by law for some professions (e.g., certified compliance inspectors must carry $1 million per occurrence).

• Often required by industry associations, licensing boards, or client contracts.

• Recommended for architects, engineers, consultants, healthcare providers, and other professionals.

Is General Liability Insurance Mandatory?

General liability insurance is not required by Iowa law for most businesses. However:

• It is often required by landlords, lenders, or contracts (especially for contractors on public projects).

• Strongly recommended for all businesses to protect against third-party bodily injury, property damage, and advertising injury.

Other Useful Coverages for Iowa Businesses

While not always required, these coverages provide essential protection:

• Business Owner’s Policy (BOP): Bundles general liability and commercial property insurance for cost savings.

• Commercial Property Insurance: Covers buildings, equipment, inventory, and business income.

• Cyber Liability Insurance: Protects against data breaches and cyberattacks.

• Inland Marine Insurance: Covers business equipment and tools in transit or offsite.

• Umbrella Insurance: Increases liability limits above existing policies.

• Business Interruption Insurance: Covers lost income and expenses due to covered events.