Delaware Small Business Insurance: What the Law Requires and What Is Worth Asking About

If your business has one or more employees working in Delaware, you generally must carry workers' compensation, and part-time employees count, according to the Delaware Office of Workers' Compensation (opens in a new tab). Every vehicle registered in Delaware must carry the state's minimum liability and personal injury protection coverage, according to the Delaware DMV (opens in a new tab). Forming an LLC doesn't replace insurance, and general liability is not workers' compensation. Beyond those legal requirements, contracts, landlords, lenders, customers and licensing boards can add their own insurance or bond requirements. The coverage that fits depends on your employees, vehicles, property, services, contracts and license.

When does a Delaware business have to carry workers' compensation?

The trigger is low. All employers with one or more employees working in Delaware must carry workers' compensation through a licensed carrier or an approved self-insurance program, according to the Office of Workers' Compensation (opens in a new tab). Hiring your first employee changes your legal position, so arrange coverage before that person starts.

Delaware Code Title 19, §2301 (opens in a new tab) defines "employee" broadly: a person serving a corporation, association, firm or person under an express or implied contract of hire, or for payment of some kind, subject to statutory exclusions. Both full-time and part-time employees are covered, according to the Office of Workers' Compensation FAQs (opens in a new tab).

A few groups are treated differently under Chapter 23 (opens in a new tab):

• Casual employment. Certain casual work that lasts no more than two weeks or pays no more than $100 in total is excluded, subject to the statute's wording.
• Farm laborers. Farm laborers and their employers are outside the chapter unless the employer elects coverage under §2307 (opens in a new tab).
• Sole proprietors and partners. They're generally excluded under §2308(b) (opens in a new tab) but may elect coverage.
• Family members. Immediate family members of a sole proprietor or partner are included unless exempted in writing under §2308(c) (opens in a new tab).
• Corporate officers and LLC members. Executive officers of covered employers are included. Up to eight stockholder officers of a corporation, and up to eight LLC members, may be exempted by written agreement under §2308(a) (opens in a new tab).

Any exemption has to be in writing. Before you rely on one, get the current exemption or election form and filing instructions from the Office of Workers' Compensation (opens in a new tab), and keep a copy with your business records.

Subcontractors in construction

Construction businesses carry an added responsibility. A contracting entity must obtain and keep for three years either a notice of exemption for executive officers or LLC members, a certification of workers' compensation insurance from each independent contractor or subcontractor, or both, under §2308 (opens in a new tab). If the contracting entity fails to keep that documentation, Delaware law can treat it as the insurer for workers' compensation claims. A certificate of liability insurance does not count as proof of workers' compensation coverage, according to the Office of Workers' Compensation (opens in a new tab), so ask each subcontractor for the workers' compensation certificate specifically.

Out-of-state employers

If your company is based elsewhere and has employees performing work in Delaware, you must keep workers' compensation insurance that is valid in Delaware, according to the Office of Workers' Compensation's out-of-state employer guidance (opens in a new tab). Delaware must be listed in Section 3A of the policy. "All other states" wording alone doesn't meet the requirement, according to the Office of Workers' Compensation (opens in a new tab). Ask your agent to confirm Delaware appears on the policy by name.

Once covered, employers also have reporting duties. An employer must file an injury report within 10 days of being notified, according to the Office of Workers' Compensation (opens in a new tab).

What happens if a business doesn't carry workers' compensation?

The penalties are steep. Under Delaware Code Title 19, §2378 (opens in a new tab), an employer that refuses or neglects to buy the required insurance faces a civil penalty. For an employer that was insured until it defaulted, the penalty is three times the premium for the insurance not purchased, based on the carrier's last one-year rate. A separate penalty structure applies to employers that were never insured, and the penalty can be assessed for each day uninsured unless the Secretary determines another business entity caused the lapse.

After notice, the employer has 14 days to provide proof of insurance or establish a statutory reason, such as self-insured status or termination of operations. If the default continues for 30 days, the Court of Chancery may stop the employer from carrying on business while it lasts. The Office of Workers' Compensation (opens in a new tab) adds that going without coverage can lead to fines, stop-work orders, legal action and personal responsibility for the costs of a workplace injury or illness.

If carriers turn you down

Delaware's workers' compensation market includes voluntary insurers and a residual, or assigned-risk, market tied to the Delaware Compensation Rating Bureau. The carrier must be authorized by the Delaware Department of Insurance, qualified by the Office of Workers' Compensation and a member of the Rating Bureau, according to the Office of Workers' Compensation (opens in a new tab). If you can't find voluntary coverage, ask a licensed Delaware commercial agent or the Department of Insurance for the current residual-market application and servicing instructions.

Does an LLC need business insurance in Delaware?

An LLC is a legal business structure, not an insurance policy. Forming one through the Delaware Division of Corporations (opens in a new tab) creates an entity that may provide liability separation under applicable law, but it doesn't pay claims. An LLC with employees working in Delaware still has to address workers' compensation. An LLC that registers vehicles still needs Delaware auto coverage. Contracts, licenses, landlords and lenders can still require insurance or bonds.

It helps to separate four questions: what the LLC structure does, what Delaware law requires, what a contract or license requires, and which business risks you want to insure. Choosing a business structure and choosing insurance are separate steps in starting a business, according to the SBA (opens in a new tab).

What insurance do Delaware business vehicles need?

Every vehicle registered in Delaware must carry at least $25,000 per person and $50,000 per accident for bodily injury liability, $10,000 for property damage, and personal injury protection of $15,000 per person and $30,000 per accident, according to the Delaware DMV (opens in a new tab). Those requirements come from Delaware Code Title 21, §2118 (opens in a new tab). Our article on Delaware PIP coverage explains what the PIP portion pays.

A valid Delaware insurance identification card must be in the vehicle or with the driver and shown on request to police or anyone involved in an accident. Insurance from another state isn't accepted to title and register a vehicle in Delaware. Violations carry a $1,500 fine for a first offense, $3,000 for later offenses and registration suspension, and plates must be surrendered before you cancel insurance on a vehicle with an active registration.

Those are registration minimums. Whether your van, truck or car needs commercial auto treatment depends on who owns it, how it's used, who drives it, and whether you make deliveries, carry tools or tow trailers. Ask your agent, too, about rented and non-owned vehicles, such as an employee running errands in a personal car.

Do contractors or licensed professionals need insurance or a bond?

Contractors doing business in Delaware must register with and get a business license from the Delaware Division of Revenue (opens in a new tab). The Division supplies an Industrial Accident Board workers' compensation proof-of-insurance form. Nonresident contractors have bonding options, including a bond, cash bond, irrevocable letter of credit, and a letter for contracts under $20,000. Contact the Division of Revenue for the bonding requirement that applies to you, and see how to get a surety bond for the general process.

Professional licenses are separate. Certain professions and businesses must get a professional license from the Division of Professional Regulation (opens in a new tab) before operating, and that license is distinct from a Division of Revenue business license. Insurance rules vary by board. Delaware home inspectors, for example, or their employers must carry at least $50,000 of errors and omissions insurance and at least $250,000 of liability insurance, according to the DPR home inspector FAQ (opens in a new tab). Applicants for private investigation, private security and armored car agencies must file a surety bond and a certificate of liability insurance in amounts set by their board under Title 24, §1311 (opens in a new tab). Check with your own licensing board rather than assuming another profession's rule applies to you.

What do general liability, professional liability and a BOP cover?

These three cover different risks, and the gaps between them matter.

General liability addresses third-party claims of bodily injury, property damage, personal injury and advertising injury, along with medical expenses and defense costs, subject to the policy's terms, according to the NAIC (opens in a new tab). It doesn't replace workers' compensation for injuries to your own employees.

Professional liability, often called errors and omissions coverage, addresses claims arising from your professional services, such as errors, negligence or failing to meet professional standards. It's separate from general liability. Our comparison of general liability vs professional liability insurance goes through which businesses tend to need each.

A business owner's policy (BOP) typically packages commercial property, business interruption and general liability. A BOP typically does not include commercial auto, workers' compensation, health, disability or professional liability, according to the NAIC (opens in a new tab). Not every business qualifies for one, and businesses with unusual operations may need separate coverage. The NAIC's business interruption and BOP overview (opens in a new tab) explains how the interruption portion works. Tools and equipment that travel to job sites may fall under inland marine insurance instead.

What does small business insurance cost in Delaware?

Price depends on the business. Liability premiums are typically linked to sales and payroll estimates, and the type of business, claims history, financial stability, products, operations, state law and risk-prevention practices all affect how an insurer rates you, according to the NAIC (opens in a new tab). Before asking for a price, gather your operations description, payroll, sales, property and equipment list, vehicle list and claims history, so the agent can price the business you actually run.

How do you verify an agent or file a complaint?

The Delaware Department of Insurance offers a licensee lookup (opens in a new tab) with the NAIC, where you can confirm that an agent or producer holds an active Delaware license for the insurance being discussed.

If a problem with an insurer, agent or adjuster isn't resolved after you contact them directly, you can file a complaint or request help from the Department's Consumer Services Division at 1-800-282-8611 in Delaware, (302) 674-7310, or consumer@delaware.gov, according to its complaint page (opens in a new tab). Suspected insurance fraud goes to the Department's Fraud Prevention Unit (opens in a new tab).

Questions to ask an agent

• Which of my workers count as employees for Delaware workers' compensation, including part-time, seasonal, family and casual workers?
• Are owners, partners, officers or LLC members included, and what written exemption or election would change that?
• If we're based outside Delaware, is Delaware listed in Section 3A?
• How should I collect and keep subcontractor certificates and exemption notices?
• Is each vehicle insured for its actual business use, including employees, deliveries, tools, trailers, and rented or non-owned vehicles?
• What does the general liability policy exclude, and do my services call for professional liability?
• What property, equipment, inventory, interruption, crime, cyber or inland marine exposures fall outside a BOP?
• Does a contract require a certificate, additional insured status, a waiver or a particular bond?
• How are premiums calculated, audited, adjusted and renewed, and how do I report a claim?

For a broader checklist of coverage types, see what insurance does a small business need. Riskado's directory lists insurance agencies across the US, including Delaware agencies by city and by category, such as business insurance and commercial auto.

Frequently asked questions

Does a BOP include workers' compensation?

Typically no. A BOP generally combines property, business interruption and liability coverage, and workers' compensation is a separate policy, according to the NAIC (opens in a new tab).

What can the Department of Insurance do with my complaint?

Consumer Services can obtain information, review compliance with statutes, regulations and policy contracts, explain policy provisions and take corrective action when appropriate, according to its complaint page (opens in a new tab). It cannot act as your lawyer or recommend a specific agent or company.

Is paid family leave part of Delaware business insurance?

Delaware's Paid Leave program has its own rules for employers. Our Delaware paid family leave article covers it separately.

What records should a small business keep?

Keep declarations pages, certificates, endorsements, exemption documents, subcontractor certifications and renewal records. For construction subcontractor documents, §2308 (opens in a new tab) requires a three-year retention period.

Where to start

Count everyone who works for you in Delaware, list every registered vehicle, and check your contracts and license for their own requirements. Those three steps cover what Delaware law requires; the rest is a conversation with an agent about the risks your business actually carries.