Running a business in Washington means navigating some unique insurance requirements you won't find in most other states. Whether you're launching a tech startup in Seattle, managing a maritime operation in Tacoma, or running a small retail shop in Spokane, understanding Washington's business insurance landscape can save you from costly mistakes and compliance headaches.
Here's what makes Washington different: it's one of only four states where you can't buy workers' compensation insurance from private companies. You're required to go through the state. For tech companies and maritime businesses—two of Washington's dominant industries—there are additional layers of coverage to consider. Let's break down what you actually need, what it costs, and how to make smart decisions about protecting your business in the Evergreen State.
What Business Insurance Is Required in Washington?
Washington state law doesn't mess around when it comes to workers' compensation. If you have even one employee—full-time, part-time, doesn't matter—you need coverage. But here's the catch that surprises most business owners: you can only get it through the state Department of Labor & Industries. Washington is a monopolistic workers' comp state, joining just North Dakota, Ohio, and Wyoming in this exclusive club.
What does this mean for you? No shopping around for the best deal from private insurers. The state sets the rates, which went up an average of 4.9% in 2024—that's about an extra $65 per year for each full-time employee. Workers pay about a quarter of the premium through payroll deductions, and you cover the rest. Unlike most states that charge a percentage of payroll, Washington charges an hourly rate that varies by industry based on claims history.
There's one important exception: if your business has at least $25 million in assets and a solid accident-prevention program, you might qualify for self-insurance. For most small businesses, though, the state fund is your only option.
Beyond workers' comp, Washington requires commercial auto insurance for any business-owned vehicles, unemployment insurance if you pay $1,000 or more in wages in any quarter, and paid family and medical leave insurance through payroll deductions. Licensed contractors must carry general liability insurance to register with the state, and licensed professionals in medical, legal, architectural, or engineering fields need professional liability coverage with minimums that vary by specialty.
Special Considerations for Washington's Tech Industry
Washington's technology sector dominates 22% of the state economy—the highest percentage in the nation. If you're running a tech company in Seattle, Bellevue, or Redmond, you're operating in the shadow of giants like Microsoft and Amazon, and your insurance needs reflect that competitive, high-stakes environment.
Professional liability insurance (also called errors and omissions or E&O) isn't legally required for most tech businesses, but it's practically essential. If your software has a bug that costs a client money, or your consulting advice doesn't pan out, you could face a lawsuit. Washington tech businesses typically pay $75 per month for professional liability coverage, though venture-backed SaaS firms with $5 million in annual revenue might pay $6,000 to $9,000 annually for $1 million in coverage.
Cyber liability insurance deserves special attention. Washington's data breach laws require businesses to report security breaches to affected residents, and a 2022 survey by the Washington Technology Industry Association found that 21% of member companies had faced a breach notification obligation in the previous two years. The costs add up fast—notification expenses, legal fees, regulatory fines, credit monitoring for affected customers. Cyber coverage for the same $5 million SaaS company typically runs $7,500 to $12,000 annually for $2 million in coverage with full ransomware protection.
Maritime Industry Insurance Requirements
Washington's maritime industry adds another layer of complexity to the insurance picture. If your employees work on or over navigable waterways, they might be covered under the federal Longshore and Harbor Workers Compensation Act instead of the state L&I system. Whether you need federal or state coverage depends on the nature of your operations, your location, and other factors—this isn't a DIY determination, and you'll want expert guidance.
Commercial charter operators, fishing guides, and sightseeing boats must meet U.S. Coast Guard regulations and Washington State Department of Labor & Industries requirements. If you're renting a slip at a Port of Seattle marina, expect to show proof of at least $300,000 in protection and indemnity liability coverage—that's standard across most Washington marinas.
Here's an interesting requirement that catches people off guard: if you're buying a vessel more than 35 feet long and more than 40 years old in Washington, you need to provide proof of at least $300,000 in marine insurance coverage before the title can be transferred. Sellers must also provide marine survey inspection information. It's a consumer protection measure aimed at older vessels, but it's created a specific insurance requirement at the point of sale.
Why General Liability Insurance Matters (Even Though It's Not Required)
Washington doesn't require general liability insurance for most businesses, but here's the reality: you probably need it anyway. Nearly every commercial lease in the state requires tenants to carry general liability coverage. If you're working with larger clients or government contracts, they'll demand proof of coverage before signing agreements. And if you're a licensed contractor, you must have it to register with the state.
General liability covers the common third-party risks every business faces: a customer slips and falls in your office, your employee accidentally damages a client's property during a service call, your marketing materials are accused of copyright infringement. The average cost in Washington is about $42 per month, which is a bargain considering a single lawsuit could cost tens of thousands in legal fees alone.
The Stop-Gap Coverage Gap
Here's something most Washington business owners don't realize until it's too late: the state workers' comp fund doesn't include employer's liability insurance. In most states, when you buy workers' comp from a private insurer, it automatically includes employer's liability coverage that protects you if an employee sues you over a workplace injury. Washington's state fund doesn't offer this protection.
This creates a gap in your coverage that you need to fill with what's called stop-gap insurance. It's purchased separately from private insurers and covers situations where an injured employee might sue you—for example, if they claim you intentionally created unsafe working conditions, or if a spouse sues for loss of consortium. It's not legally required, but the potential liability makes it a smart purchase for most businesses with employees.
Getting Started: Your Action Plan
Start with the essentials: if you have employees, open a workers' compensation account through the Department of Labor & Industries website (you'll need your business license first). Make sure you have commercial auto insurance for any business vehicles, and set up unemployment insurance and paid family leave if you meet the requirements.
Next, assess your industry-specific needs. Tech companies should prioritize professional liability and cyber coverage. Maritime businesses need to determine whether they fall under federal or state workers' comp rules and ensure they meet U.S. Coast Guard requirements. Contractors must secure general liability to register with the state.
Finally, consider the gaps. General liability coverage is worth having even if it's not legally required—at $42 per month on average, it's inexpensive protection against common risks. Stop-gap coverage fills the employer's liability gap created by Washington's monopolistic workers' comp system. And depending on your business model, professional liability, cyber insurance, or a business owner's policy (which bundles general liability and property coverage) might make sense.
Washington's unique insurance landscape—especially the monopolistic workers' comp system—means you can't just copy what businesses do in other states. But with nearly 650,000 small businesses thriving in Washington and accounting for half the state's workforce, clearly it's possible to navigate these requirements successfully. Understanding what's required, what's recommended, and what's specific to your industry puts you ahead of the curve and protects your business from costly surprises down the road.
