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By Sara Anglin - State Farm Insurance Agent
You Hired Your First Employee. Your Policy Just Changed Too. The day you bring on your first employee, your business stops being just you. That's a good...
The day you bring on your first employee, your business stops being just you. That's a good milestone, and it usually means work is steady enough to need another set of hands. It also quietly shifts what your insurance needs to cover, sometimes in ways that aren't obvious until you look.
Most small business policies get set up around a solo operation. The coverage made sense when you were the only person on the job. Add someone to the payroll and a few pieces of that policy need a second look, so let's walk through which ones.
In Tennessee, once you have employees, workers' compensation generally comes into play, and the thresholds depend on your industry and how many people you employ. Construction and coal mining have their own rules, so a contractor hiring their first framer is in a different situation than a bakery hiring a counter person.
Workers' comp covers medical bills and a portion of lost wages if an employee gets hurt on the job. It's not the same as your general liability, which covers injuries to customers and other third parties. Those are two separate protections, and hiring someone is often the moment the second one becomes relevant.
If you're not sure whether your specific headcount and trade require it, that's worth a direct conversation rather than a guess. The rules are specific enough that a general internet answer usually doesn't fit your exact situation.
When you were working alone, you controlled every job yourself. Now someone else represents your business, drives to a client's home in East Nashville, handles a customer's property, or works a register.
More hands doing the work means more moments where something could go wrong, and that's a normal part of growing. Your general liability limits were set for a one-person operation, so it's reasonable to ask whether they still fit the size you've become.
This is a good time to check your policy limit against the value of what your business actually handles now. A limit that felt generous when it was just you can feel thin once your team is out doing the work independently.
If your new employee drives for work, whether it's your company van or their own car running a delivery, your commercial auto coverage needs to account for that. A personal auto policy generally isn't built to cover someone driving on behalf of your business.
Hired and non-owned auto coverage exists for exactly this: an employee using their own vehicle for a work errand. It's easy to overlook because the car isn't yours, but the liability can still land on your business.
Ask yourself whether anyone on your team will ever drive for the business, even occasionally. If the answer is yes, that's a coverage conversation before the first errand, not after.
Once you have an employee, you have an employment relationship, and that opens a door that simply didn't exist before. Claims around hiring, firing, discrimination, or harassment fall under employment practices liability, which is a distinct coverage from your general liability.
You don't need to expect problems to want this protection. Even a claim that goes nowhere costs money to respond to, and a small business often feels that cost more sharply than a large one.
For a business hiring its first one or two people, this is worth understanding early so you can decide whether it belongs in your plan yet. Some owners add it right away, others wait until the team grows, and both are defensible depending on your work.
A larger team often means more equipment, more inventory, or a busier space, especially if you moved from your garage to a leased spot in Germantown or Wedgewood-Houston. The property value your policy insures should reflect what you actually own now.
Business income coverage matters more too. If a covered event shuts you down for a stretch, you're not just covering your own lost income anymore, you have payroll to think about, and that changes the math on how much interruption coverage makes sense.
Walking through these numbers with the value in front of you keeps the coverage matched to reality instead of to the business you had a year ago.
The tricky part about your first hire is that no single change tells the whole story. Workers' comp, liability limits, auto, employment practices, and property can all move at once, and which ones apply depends on your trade, your headcount, and how the person actually works.
That's the kind of thing worth sitting down for. At Sara Anglin State Farm, this is a common reason Nashville owners come in, and a Personal Price Plan review can put all of these pieces on one table so nothing gets missed.
You built the business to the point where you needed help. Making sure the coverage grew with it is a short step, and it's a lot easier to handle before the new person starts than to sort out after something happens.
If you've just hired or you're about to, pull your current policy and note two things: what it covers today, and whether it ever assumed you'd be working alone. Those two facts frame almost every question above.
From there, a quick conversation fills the gaps. You don't have to know which coverage applies to your exact situation walking in, that's the part a good review handles for you.
Congratulations on the hire. Now let the policy catch up to the business you're actually running.