Here's a reality check: the day you hire your first employee is the day your painting business enters an entirely new insurance universe. That helper you just brought on to speed up jobs? They just triggered mandatory insurance requirements in most states, changed your liability exposure, and added a whole new category of risk to your business. But here's the thing—most painting contractors find out about these requirements after they've already hired someone, which puts them in a precarious position both legally and financially.
This guide walks you through exactly what insurance you need when you transition from solo painter to employer, why these coverages matter, and how to navigate the requirements without overpaying or leaving gaps in your protection.
Workers' Compensation: The Non-Negotiable Requirement
In most states, workers' compensation insurance becomes mandatory the moment you hire your first employee. California, Florida, and New Jersey all require coverage even if you have just one part-time worker. The only major exception is Texas, where workers' comp remains optional for most private employers—though opting out means you're personally liable for any workplace injuries, which can be financially catastrophic.
Workers' comp covers medical expenses and lost wages if your employee gets hurt on the job. Falls from ladders, chemical exposure from paint fumes, repetitive strain injuries—all of these are covered. Without this insurance, you're on the hook for every medical bill, every day of lost wages, and potentially legal fees if your employee sues. We're talking tens of thousands of dollars for a single serious injury.
Here's what surprises most painting contractors: your rates are based on your class code and payroll. Painting work typically falls under class code 5474, with a national average rate around $5.57 per $100 of payroll in 2026. That means if you're paying your employee $40,000 annually, you're looking at roughly $2,228 per year for workers' comp. But—and this is critical—if you expand your services to include drywall work or remodeling, your classification changes and your rate can jump to $11 per $100 of payroll. Same employee, same payroll, double the insurance cost.
Employment Practices Liability: Protection You Didn't Know You Needed
Employment Practices Liability Insurance (EPLI) isn't legally required, but it's arguably more important than many mandatory coverages. The moment you become an employer, you're exposed to claims for wrongful termination, discrimination, harassment, retaliation, and wage disputes. Even if you do everything right, a disgruntled employee can file a claim—and defending yourself costs money whether you win or lose.
Small painting businesses are particularly vulnerable because you typically don't have an HR department, employee handbooks, or formal policies for handling workplace issues. You probably don't have a lawyer on retainer. That's exactly why employment claims hit small businesses hardest. The average EPLI claim settlement is around $40,000, but legal defense costs alone can run $10,000 to $50,000 even if you're found not liable.
The good news: EPLI is relatively affordable for small contractors. For a business with one to five employees, you're typically looking at $1,000 to $3,000 annually for a $1 million policy. Many insurers offer it as an add-on to your Business Owner's Policy (BOP) starting around $18 per employee per year. Given what you're protecting against, it's one of the best insurance values available.
Getting Your Payroll Classification Right
Your workers' comp premium isn't just pulled from thin air—it's calculated based on your employee classification and total payroll. This is where many painting contractors either overpay or create compliance problems. If you classify your employee incorrectly or fail to report payroll accurately, you'll face premium adjustments during audits, and those adjustments usually come with penalties.
Keep detailed records of what work your employee actually performs. If they're strictly doing interior and exterior painting, you stay in class code 5474. But if they start doing drywall installation, trim carpentry, or other remodeling work, that changes your classification—and potentially doubles your rates. You can't just guess at this during policy application and hope for the best. Insurance companies audit payroll records, and misclassification gets expensive fast.
Also critical: understand the difference between employees and independent contractors. You can't just call someone a contractor to avoid workers' comp requirements. States have specific tests to determine worker classification, and if you get it wrong, you're liable for unpaid premiums, penalties, and potential fines. When in doubt, classify them as an employee—it's safer legally and easier to defend.
State-Specific Requirements You Can't Ignore
Workers' comp requirements vary dramatically by state, and if you operate across state lines, you need coverage that follows. California requires workers' comp even for licensed contractors with no employees—a 2026 law change means if you hold a contractor's license, you need coverage, period. Florida requires it for any construction business with one employee. New York mandates coverage even for part-time workers.
Some states allow exemptions for sole proprietors or businesses with fewer than a certain number of employees, but those exemptions usually disappear the moment you bring someone on. Don't assume you can operate in a gray area—verify your specific state's requirements with your state's workers' compensation board or a licensed insurance agent who specializes in contractor coverage.
Also worth noting: if you're doing work on government contracts, even in Texas where workers' comp is optional, you're required to carry coverage for employees working on those projects. The contract terms usually specify this explicitly, so read them carefully before bidding.
How to Get Started and What It Actually Costs
Before you hire your first employee, shop for insurance quotes. Don't wait until they're on the payroll—many states impose penalties for operating even a single day without required coverage. Contact at least three insurance carriers or use an independent agent who can compare multiple options. You'll need to provide details about your projected payroll, the type of work you do, your claims history (if any), and your business location.
For a painting contractor hiring one employee at $40,000 annual pay, you're looking at roughly $2,200 to $2,500 for workers' comp, plus another $1,000 to $3,000 for EPLI coverage. That's around $3,200 to $5,500 annually for both policies combined. It feels like a lot when you're used to operating solo, but it's substantially less than what you'd pay out of pocket for a single workplace injury or employment claim.
Consider bundling your coverages into a Business Owner's Policy (BOP) if you don't already have one. BOPs typically include general liability, commercial property coverage, and business interruption insurance, and adding EPLI as an endorsement is often cheaper than buying a standalone policy. Your workers' comp will still be separate, but consolidating everything else simplifies your coverage and often reduces total costs.
Hiring your first employee is a major milestone for your painting business, but it comes with real responsibilities. Getting your insurance right from day one protects your business, keeps you compliant with state laws, and gives you peace of mind so you can focus on growing your company instead of worrying about worst-case scenarios. Talk to an insurance professional who understands contractor needs, get quotes before you hire, and make sure your coverage grows as your business does.
