Important Takeaways:
- Workers’ compensation is a requirement in nearly every state once a business hires employees.
- Commercial auto insurance is needed in nearly every state for business-owned vehicles.
- Cyber liability coverage is essential for retailers that handle customer payment data and must comply with PCI-DSS requirements.
- Most states mandate commercial auto insurance for vehicles owned by a business, making it a core part of operating legally and responsibly.
- State requirements vary dramatically, so take time to verify your state’s mandates with the relevant Department of Insurance.
Retailers have many responsibilities, from managing their inventory and serving their customers to securing that everything they’ve worked so hard for is protected. Unfortunately, many retailers view insurance as a set-it-and-forget-it prospect when the reality is far different. Getting insurance protection right requires staying on top of the business’s evolving needs and the broader insurance environment.
In 2026, retailers will continue to experience both challenges and opportunities in insurance. Although premium increases are continuing across some types of coverage, the highly competitive nature of the insurance market means that savvy business owners should still be able to find good value.
What Workers’ Compensation Covers and Why It’s Mandatory
Almost every state requires businesses to obtain insurance the moment they hire their first employee. Even part-time workers typically count. This varies by state; Texas, for example, makes this coverage optional for most private employers.
This policy covers medical expenses for employees who are injured while performing their job, as well as disability benefits while they recover. It also includes liability protection for the employer. Smaller retail businesses with two employees can generally pay much less than bigger operations.
States such as Florida require retailers to obtain coverage only after they reach four employees, while New York mandates it from the first day. Checking your specific state requirements makes sense given these variations.
Keep in mind that although sole proprietors aren’t usually required to carry workers’ comp, purchasing it can be a wise move, since health insurance often denies coverage for work-related injuries.
Understanding Commercial Auto Insurance Requirements
For retail businesses that own vehicles, commercial auto coverage isn’t optional in most states. This applies whether the business operates delivery vans, uses company cars, or transports inventory by truck.
This coverage protects against property damage and injuries sustained in accidents involving business vehicles. Business owners need to understand that personal auto insurance policies do not cover business use beyond basic commutes. Therefore, if an employee uses their personal vehicle for business tasks, you will need to secure hired and non-owned auto insurance (HNOA) to fill that gap. It may be possible to add HNOA coverage as an endorsement to an existing general liability policy or business owner’s policy.
Why Cyber Liability Coverage Has Become Non-Negotiable
The retail sector is vulnerable to particular cybersecurity pressures. If you process credit card payments, you are responsible for adhering to the Payment Card Industry Data Security Standard (PCI-DSS) requirements, and cyber liability insurance has shifted from a nice-to-have to an absolute imperative.
Retail businesses need to obtain cyber coverage that meets PCI-DSS compliance requirements. When you consider the fact that the global average cost of a data breach reached $4.88 million in 2024, a 10% increase from the prior year, it’s easy to see why this is a worthwhile investment.
These days, most insurers stipulate that retailers must meet specific security controls before they will issue a policy. These include encrypted backups, a thorough incident response plan, endpoint detection and response software, and multi-factor authentication. State data breach laws will also apply.
If customer payment information is compromised, cyber insurance can help cover many of the expenses involved, including regulatory fines and legal fees, notification and credit monitoring service costs, and business interruption expenses.
The General Liability Insurance Baseline
Although general liability insurance may not be legally mandated in most cases, landlords almost universally require retailers to provide proof that they have obtained this type of coverage before they are allowed to open their doors.
This coverage offers protection against customer injuries and property damage claims, such as when a product display falls and injures someone. It can cover medical costs as well as legal fees and settlements.
Most policies will have $1 million per occurrence and $2 million aggregate limits. For many retailers, bundling general liability with commercial property insurance in a Business Owner’s Policy (BOP) can offer better value than purchasing these coverages separately.
How State-Specific Requirements Impact Your Coverage
For example, Insurance is heavily regulated at the state level, which means that mandatory coverage in a state such as New York might be considered optional in Illinois. Some states will be subjected to specific exposures that require additional consideration, such as hurricanes in Florida and earthquakes in California.
The National Association of Insurance Commissioners (NAIC) coordinates insurance standards across states, but each state’s Department of Insurance sets its own rules. Be sure to verify the current regulations for your specific location rather than assuming you know what’s needed.
Coverage Limits Deserve Careful Attention
Although meeting the minimum requirements might keep your business on the right side of the law, it does not assure adequate protection. A basic workers’ comp policy might satisfy legal mandates, but could leave you exposed if a serious injury happens at your workplace.
Carefully assess your actual risk exposure. If you have high-value inventory, you’ll need sufficient commercial property coverage, while retailers that see a heavy amount of foot traffic need higher general liability limits.
Is Your Retail Business Truly Protected?
At John M. Glover Insurance Agency, we specialize in helping retail businesses make sense of complicated coverage requirements, working with multiple carriers to find you the best combination of coverage and price.
Every retail business is different, so let’s have a conversation about what you actually need and how to get the best coverage at the best price. Reach out today to schedule a consultation.
