Who Needs Business Insurance in South Dakota

While South Dakota does not require most types of business insurance by law, nearly every business can benefit from coverage:

• Businesses that own or use vehicles for work must carry commercial auto insurance.

• Companies with employees are not required to carry workers’ compensation insurance, but it is strongly recommended to avoid costly lawsuits and protect both the employer and employees.

• Professionals providing specialized services should consider professional liability insurance, often required by contracts or industry standards.

• Businesses leasing property, working with clients, or seeking licenses may be required by landlords or contracts to carry general liability or property insurance.

• All businesses are advised to carry general liability insurance to protect against third-party claims, property damage, and legal costs.

Workers’ Comp: When It’s Required

South Dakota does not require any employer to carry workers’ compensation insurance by law. However, it is highly recommended for all businesses with employees because:

• It covers medical bills, lost wages, and disability benefits for work-related injuries or illnesses.

• It protects employers from civil lawsuits and financial liability if an employee is injured on the job.

• Employers who opt in gain legal protection and peace of mind, and workers’ comp is often required by contracts or for certain jobs.

Exemptions: There are no legal requirements, but some contracts or industries may require coverage. Agricultural and domestic workers, as well as independent contractors, are often excluded from voluntary policies.

Commercial Auto Insurance Basics

Commercial auto insurance is required for all business-owned vehicles in South Dakota. Minimum required coverage:

• Bodily injury liability: $25,000 per person / $50,000 per accident

• Property damage liability: $25,000 per accident

• Uninsured motorist: $25,000 per person / $50,000 per accident

Key points:

• Personal auto policies do not cover business use; Hired and Non-Owned Auto Insurance (HNOA) is recommended for employees using personal, leased, or rented vehicles for work.

• Penalties for non-compliance include fines, license suspension, and possible jail time.

• Additional coverage (collision, comprehensive, medical payments) is available and recommended for broader protection.

Professional Liability for Certain Jobs

Professional liability insurance (errors & omissions/E&O) is not required by law in South Dakota, but is highly recommended for businesses providing professional services or advice:

• Who should consider it: Consultants, architects, engineers, healthcare providers, IT professionals, real estate agents, and more.

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

• Covers: Claims of negligence, errors, omissions, missed deadlines, breach of contract, and related legal defense costs.

• Average cost: About $629 per year in South Dakota.

Is General Liability Insurance Mandatory?

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

• It is often required by landlords, lenders, or contracts.

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

• Some sources state it is required for most business owners, but this is typically due to contract or lease requirements, not state law.

Typical cost: $28–$55 per month for small businesses, depending on industry, size, and coverage limits.

Other Useful Coverages for Businesses

South Dakota businesses should consider these additional policies for comprehensive protection:

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

• Commercial Property Insurance: Covers buildings, inventory, and equipment against fire, theft, and natural disasters.

• Business Interruption Insurance: Replaces lost income after a covered disaster.

• Cyber Liability Insurance: Protects against data breaches and cyberattacks, especially for businesses handling sensitive data.

• Umbrella Insurance: Increases liability limits above existing policies.

• Inland Marine Insurance: Covers tools, equipment, and property in transit.

• Employment Practices Liability: Covers claims of wrongful termination, discrimination, or harassment.