Business insurance for a new veteran-owned company
Which policies a new firm actually needs, when workers' comp becomes mandatory, what federal contracts require under the FAR, and how certificates of insurance work with primes.
Insurance is usually the last thing a new founder sets up and the first thing a customer asks about. A commercial client wants a certificate before you start. A prime contractor wants one before it adds you to a team. A state wants proof of workers' comp once you hire. None of that waits for you to feel ready.
This guide covers the main policy types, which ones the law forces on you, what federal contracts ask for, and how to buy coverage without overpaying for things you don't need.
The main policy types
The SBA's insurance guide and the National Association of Insurance Commissioners (NAIC) describe the same core set. Most new firms need two or three of these, not all six.
| Policy | What it covers | Who usually needs it |
|---|---|---|
| General liability (GL) | Claims by others for bodily injury, property damage, and personal and advertising injury, plus defense costs | Almost everyone, especially if you meet clients or work at their sites |
| Professional liability (E&O) | Claims that you were negligent or made errors in your professional services | Consultants, IT, engineering, any firm that sells advice or expertise |
| Workers' compensation | Medical costs and lost wages for employees hurt or made ill on the job | Any business with employees, as required by state law |
| Commercial auto | Liability for accidents involving vehicles used for the business | Firms that own, lease or regularly drive vehicles for work |
| Business owner's policy (BOP) | A package of property, business interruption and liability coverage | Firms with equipment, inventory or an office to protect |
| Cyber liability | Losses from breaches, ransomware, phishing and privacy claims | Anyone storing customer data or taking digital payments |
Two gaps catch new owners. Hiscox's own description of its general liability policy lists professional services and vehicle use as not covered, so a consultant with only GL is not covered for a bad recommendation, and a contractor with only GL is not covered for a crash in the work truck. That is what E&O and commercial auto are for.
Workers' comp: set by your state, triggered by your first hires
Workers' compensation is run by each state, not by one federal program. The Department of Labor keeps a list of every state's workers' comp office, which is the right place to start. The threshold for when coverage becomes mandatory differs, and the difference matters if you operate in more than one state.
| State | When coverage is required | Source |
|---|---|---|
| Maryland | Every employer with one or more employees, full or part-time | Maryland Workers' Compensation Commission |
| Virginia | Employers that regularly employ more than two part-time or full-time employees | Virginia Workers' Compensation Commission |
Read the counting rules, not just the number. Virginia counts corporate officers and LLC managers even if they draw no regular salary, family members who work in the business, and temporary, seasonal and part-time workers. It also counts a subcontractor's employees when the sub is helping you fulfill a contract. A two-person LLC that brings in a three-person sub can cross the line without hiring anyone. Maryland requires coverage from the first employee.
What federal contracts require
The Federal Acquisition Regulation treats insurance differently depending on the contract type. Under FAR 28.306, the government "is not ordinarily concerned" with your insurance on a fixed-price contract, though agencies can set requirements in special circumstances. On a fixed-price job, the solicitation itself is where you find out what is required.
The big exception is work on a government installation. FAR 28.310 requires the clause at 52.228-5 in fixed-price contracts expected to exceed the simplified acquisition threshold (currently $350,000 under FAR 2.101) when the work happens on a government installation, unless the on-site work is only a few brief visits a month or is entirely outside the U.S. Contracting officers can also add the clause to smaller jobs. When it applies, the minimums in FAR 28.307 become the floor.
| Coverage | FAR 28.307-2 minimum |
|---|---|
| Workers' compensation | Comply with applicable federal and state workers' comp statutes |
| Employer's liability | $100,000 (except in states with exclusive state funds that bar private carriers) |
| General liability, bodily injury | $500,000 per occurrence |
| General liability, property damage | Only in special circumstances set by the agency |
| Auto liability, bodily injury | $200,000 per person and $500,000 per occurrence |
| Auto liability, property damage | $20,000 per occurrence |
FAR 28.307 is written for cost-reimbursement contracts, and FAR 28.306 borrows it as the floor for fixed-price installation work. A specific contract can ask for more. Read the solicitation's insurance requirements before you price the bid, because higher limits cost money and belong in your price.
Clause 52.228-5 also has three practical requirements. You must notify the contracting officer in writing that the insurance is in place before work starts. Cancellation or a material change that hurts the government is not effective until 30 days after written notice to the contracting officer, or longer if state law says so. And the prime must flow the requirement down to subcontractors working on the installation and keep copies of their proof of insurance.
Certificates of insurance and working with primes
That flow-down is why a prime will ask you for a certificate of insurance (COI) before you set foot on a base. A COI is a one-page summary of your policies, limits and dates, issued by your agent or insurer. The standard industry form for liability coverage is the ACORD 25, Certificate of Liability Insurance.
Understand what a COI is not. The ACORD 25 says on its face that it is issued as a matter of information only and confers no rights on the certificate holder. New York's Department of Financial Services has stated that a certificate is evidence of insurance and may not alter the policy. It also may not name someone as an additional insured unless the policy actually includes them.
- What limits do you need for each policy? Ask the prime for its insurance exhibit in writing. A prime can pass along its own contract's requirements, which can be higher than the FAR floor.
- Do you need to be listed as additional insured? If yes, your policy must have additional insured provisions or an endorsement. Adding the prime's name to the certificate alone does not do it.
- Do you need a waiver of subrogation? The ACORD 25 notes that some policies need an endorsement for this. Ask your agent whether yours includes it or what it costs.
- Who should be the certificate holder, and where do I send it? Get the exact legal name and address. A certificate issued to the wrong entity gets rejected and costs you a day.
- How do you want renewals handled? Every policy on the certificate has an expiration date. Send the renewed certificate before the old one lapses, not after the prime notices.
The same applies in reverse. If you become the prime, collect COIs from your subs, check the dates and limits against the contract, and keep copies. Clause 52.228-5 makes that your job. eVeteran lists 38,731 SBA-certified veteran-owned firms, so when you need a sub or teaming partner, start there and ask for their COI at the first serious conversation.
How to shop: independent agent or online
There are two practical routes, and plenty of founders use both: one quote online to learn the market, one agent to compare.
An independent agent. Independent agents represent several insurers and can quote GL, E&O, auto, comp and cyber side by side. That matters once a contract has unusual requirements, an additional insured endorsement, or multi-state work. The SBA notes that agents earn commissions from insurers, so look for a licensed agent who asks about your business before quoting. Trusted Choice has a locator for agencies that belong to the Independent Insurance Agents & Brokers of America.
Buying direct online. Some insurers sell small-business policies directly. Hiscox, for example, offers general liability, professional liability (E&O), business owner's policies, cyber and workers' comp online, with a licensed agent line if you want help choosing. Direct online works well for a simple, low-risk operation such as a solo consulting firm that needs GL and E&O fast. It works less well when a contract has specific endorsements you need to negotiate.
Whichever route you take, the NAIC suggests comparing the cost of equivalent coverage from several insurers. Compare the same limits, deductibles and endorsements, or the comparison is meaningless.
Signs you are underinsured
- GL only, while selling advice or technical services.
- Employees on payroll and no workers' comp policy.
- Driving to client sites in a vehicle the business uses with no commercial auto review.
- Customer data stored with no cyber coverage.
- You signed a subcontract with additional insured terms and never told your agent.
Signs you are set up right
- Policies matched to what you actually do, not a generic bundle.
- Workers' comp in place before the first hire in each state.
- Contract insurance requirements read before you price a bid.
- Endorsements on the policy, not just on the certificate.
- A calendar reminder 60 days before each renewal.
Find partners who are already insured and certified
Every firm on eVeteran is SBA-certified as veteran-owned or service-disabled veteran-owned. Browse by industry to find subcontractors and teaming partners, then ask for their COI the same way a prime will ask you for yours.
Browse veteran-owned firms by industry
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Run a veteran-owned business?
Primes and agencies search eVeteran for certified partners. Make sure your listing shows what you do and where you work.
Get your business listed See listing plansQuestions homeowners actually ask
What insurance does a new veteran-owned business need?
Most new firms start with general liability. Add professional liability (E&O) if you sell advice or technical services, workers' comp once your state requires it, commercial auto if vehicles are part of the work, and cyber if you store customer data.
A business owner's policy bundles property, business interruption and liability if you have equipment or an office to protect.
When do I have to buy workers' compensation?
It depends on your state. Maryland requires it from the first employee. Virginia requires it once you regularly employ more than two people, and it counts officers, LLC managers, family members and part-time workers. Check your state's workers' comp agency through the Department of Labor's state directory.
What insurance does a federal contract require?
On most fixed-price contracts, whatever the solicitation says. When clause 52.228-5 applies (fixed-price work on a government installation above $350,000), FAR 28.307-2 sets the minimums: $100,000 employer's liability, $500,000 per occurrence general liability bodily injury, and $200,000/$500,000 bodily injury plus $20,000 property damage for auto. Contracts can require more.
Does a certificate of insurance make the prime an additional insured?
No. The certificate is evidence of coverage only. Additional insured status has to be in the policy itself, through its provisions or an endorsement. Ask your agent to add the endorsement, then issue the certificate.
Should I use an independent agent or buy online?
Buying direct online from an insurer such as Hiscox is fast for a simple, low-risk firm. An independent agent can compare several insurers and handle contract endorsements and multi-state work. Getting one of each to quote the same limits is a sensible way to check price.
Is this legal or tax advice?
No. It is general information checked against official sources as of the date above. Confirm your requirements with your state, your contracting officer and a licensed insurance agent.