small business insurance South Dakota
South Dakota Business Insurance and Workers’ Comp Requirements
From ranching operations near Rapid City to small businesses in Sioux Falls and service providers in Brookings, South Dakota entrepreneurs face unique risks. Business insurance not only protects your assets and employees—it also ensures you’re compliant with legal requirements.
Below is a guide to help South Dakota business owners understand what insurance coverage is required and which additional policies are strongly recommended based on your industry and operations.
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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.
Insurance Type | Required by Law? | Who Needs It? | Key Notes / Typical Use Case |
---|---|---|---|
Workers’ Compensation | No (optional but recommended) | Any employer with workplace risks | Covers medical bills, lost wages, and liability for job injuries |
Commercial Auto Insurance | Yes | Any business operating vehicles | State minimum 25/50/25 + UM/UIM required |
General Liability Insurance | No (often required by contract) | Businesses with public/customer interaction | Covers injury, property damage, and legal defense costs |
Professional Liability Insurance | Sometimes (job or contract) | Licensed professionals, advisors, consultants | Required for some industries and contracts |
Commercial Property Insurance | No | Businesses with physical assets | Covers damage to buildings, inventory, and equipment |
Cyber Liability Insurance | No | Businesses storing sensitive customer data | Covers cyberattacks, ransomware, and data breaches |
Business Owner’s Policy (BOP) | No | Small to midsize businesses | Bundled coverage for cost-effective protection |
Umbrella Insurance | No | High-risk industries or larger liability concerns | Extends limits of primary policies |
Inland Marine Insurance | No | Contractors, mobile services, and logistics businesses | Covers tools and property while in transit |
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Get DetailsFAQs: South Dakota Business Insurance and Workers' Comp Requirements
Is workers’ compensation insurance required for businesses in South Dakota?
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What does workers’ compensation insurance cover in South Dakota?
What happens if my employer does not have workers’ compensation insurance and I’m injured at work?
How do employers obtain workers’ compensation insurance in South Dakota?
Are there deadlines for reporting a workplace injury in South Dakota?
What types of business insurance are required by law in South Dakota?
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Where can I get more information or assistance about workers’ comp in South Dakota?
Blake Insurance Group
Phone: (888) 387-3687
Email: [email protected]
Hours: Mon-Fri 9:00 am to 5:00 pm
Sat-Sun: Closed

Blake Nwosu
Owner & Principal Agent
Expertise: All personal and commercial line insurance, including auto, home, business, health, and life insurance.
License: 16117464