Michigan business owners must navigate a range of insurance requirements to protect their operations, employees, and assets. Understanding what’s required by law and what’s recommended can help you avoid costly penalties and keep your business running smoothly.

Who Needs Business Insurance in Michigan

All Michigan businesses benefit from insurance, but requirements depend on your business structure, size, and activities. Key groups include:

• Employers with at least one full-time employee or three part-time employees (workers’ comp required).

• Businesses that own or use vehicles for work (commercial auto insurance required).

• Professionals providing specialized services or advice (professional liability often required by contract or industry standards).

• Businesses leasing property, working with clients, or seeking licenses (general liability often required by landlords, clients, or licensing bodies).

• Any business seeking to protect assets, data, or income (property, cyber, and business interruption insurance recommended).

Workers’ Comp: When It’s Required

Michigan law requires most employers to carry workers’ compensation insurance:

• Mandatory if you have one or more full-time employees, or three or more part-time employees.

• Applies to corporations, LLCs, partnerships (owners are considered employees), and most public employers.

• Exceptions: Sole proprietors with no employees, some family businesses, and certain agricultural or domestic employers may be exempt but must file the proper exclusion forms.

• Coverage: Pays for medical expenses, lost wages, and disability benefits for employees injured or made ill on the job.

Failure to carry required coverage can result in fines, business closure, and liability for injury claims.

Commercial Auto Insurance Basics

Michigan requires commercial auto insurance for all business-owned vehicles:

• Minimum coverage requirements:

  • Bodily Injury Liability: $50,000 per person / $100,000 per accident

  • Property Damage Liability (out of state): $10,000

  • Personal Injury Protection (PIP): $250,000 (lower limits for those with Medicare/Medicaid)

  • Property Protection Insurance (PPI): $1,000,000 (covers damage to property in Michigan)

• Who needs it: Any business that owns, leases, or uses vehicles for work, including employees using personal vehicles for business tasks.

• Hired and Non-Owned Auto Insurance (HNOA): Recommended for businesses using personal, leased, or rented vehicles for work.

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

Professional Liability for Certain Jobs

Professional liability insurance (errors & omissions/E&O) is not required by Michigan law for most businesses,
but is often needed to sign contracts, get licensed, or work on certain projects.

• Who should consider it: Consultants, IT professionals, healthcare providers (malpractice), architects, engineers, accountants, lawyers, and other professionals.

• Required for:

  • Healthcare workers in some hospitals or facilities

  • Architects/engineers on state or government projects

  • Certain licensed professionals or contractors

• Covers: Claims of negligence, mistakes, missed deadlines, misrepresentation, and more.

Is General Liability Insurance Mandatory?

General liability insurance is not required by Michigan law for most businesses.
However, it is:

• Frequently required by landlords, lenders, clients, or for specific business licenses.

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

Other Useful Coverages for Businesses

Michigan businesses can further protect themselves with these policies:

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

• Commercial Property Insurance: Covers buildings, inventory, equipment, and furniture against fire, theft, and weather.

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

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

• Umbrella Insurance: Increases liability limits above underlying policies.

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