LLC Business Insurance
Do you need LLC Business Insurance for your limited liability company? Read this guide to find out what LLC insurance is and whether or not it's a good addition to your insurance coverage.
If your business structure is an LLC to protect your personal assets from your business’s liabilities, Limited Liability Company Business Insurance is a necessary addition to assist with your company’s risk management.
An LLC (limited liability company) protects a business owner from personal liability in case of a lawsuit, accident, property damage, or a costly mistake. Although this offers some protection for the business owner’s personal assets, operating without the coverage LLC insurance provides is still a dangerous game.
This post will cover which insurance policies LLCs need, where to find them, and how much they cost.
Table of Contents
- What Is LLC Insurance?
- Why LLCs Need Insurance
- How LLC Insurance Policies Work
- What Insurance Does My LLC Need?
- 11 Types Of LLC Insurance Your Business Might Need
- Commercial Property Insurance
- Business Owner's Policy
- Errors & Omissions Liability Insurance
- Directors & Officers Liability Insurance
- Professional Indemnity Insurance
- Product Liability Insurance
- Cyber Risk Insurance
- Workers' Compensation
- Business Interruption Insurance
- Commercial Auto Insurance
- Home-Based Business Insurance
- How Much Does LLC Insurance Cost?
- Getting Started With The Right LLC Insurance For Your Business
- LLC Business Insurance FAQs
What Is LLC Insurance?
LLC business insurance is a collection of business insurance policies designed to protect your LLC from the costly effects of a lawsuit, property damage, or worker mistakes.
There is not a specific LLC insurance policy a business can purchase, but rather several policies bundled together. Most LLC insurance bundles will have a foundation of general liability insurance or a business owners plan (BOP) that contains both general liability and commercial property insurance.
There is no one perfect fit for each company. Different risks require different policies, and only you and an expert can identify the best choices for your business. But this post should give you a good head start.
Why LLCs Need Insurance
Polls conducted by experts have shown that up to 53% of small businesses experience a lawsuit every year, and 90% do eventually go through one. Even worse, two-thirds of startups face financial insecurity, and up to 45% do not survive financial crises. This spells out a great deal of potential danger.
But these sad statistics don’t have to translate to sad endings for businesses. Insurance exists to protect your business, so you don’t have to lose sleep at night thinking about the worst-case scenarios for your LLC.
Accidents are bound to happen in life and in business — while there are things you can do to mitigate business risks, some things are beyond your control. Instead of worrying about the various hazards that could befall you, cover your business with insurance policies specific to your business needs. With the proper coverage, if your business is the subject of a lawsuit, these policies will protect your income and assets from being involved in a business-related accident or mistake.
How LLC Insurance Policies Work
Once you’ve decided to purchase insurance for your LLC, you should sit down with an insurance professional and itemize your business risks. Identifying the risks for your business and its industry can help ensure you get the proper coverage your business needs.
Most policies will start with a general liability policy or a business owners policy (BOP) — that bundles general liability, commercial property, and (sometimes) business interruption insurance.
In addition to the foundational policies, there are business insurance policies for your specific risks as well. With an insurance expert, you’ll build upon a general liability policy to create the perfect insurance plan for your LLC.
What Insurance Does My LLC Need?
Your business is unique, and with that comes specific risks. Numerous types of insurance policies exist to cover liability and operational risks on a business-by-business basis. As a rule of thumb, it’s best to start with basic general liability insurance as your foundation. From there, you should add policies that are tailored to your business’s needs
11 Types Of LLC Insurance Your Business Might Need
You’ll likely need additional coverage on top of general liability, depending on the scope of your business.
Here are 11 types that can give you the best possible range of coverage, each protecting a specific facet of your LLC:
How Much Does LLC Insurance Cost?
It’s hard for many business decisions not to come down to cost.
For general liability insurance, the cost is affordable and within range for even small businesses with current low income.
According to a survey conducted by Hiscox, small business owners pay usually pay $30 a month for general liability insurance, and 95% pay less than $50. So over a year, you’ll likely pay anywhere from $360 to $600 dollars.
Some of the things that may affect that yearly premium are:
- Your specific industry risks
- How much liability insurance you need
- What type of business you run
- The size of your business
- How many employees you have
- The location of your business
For a small business that needs one million dollars of coverage, The Hartford notes that, on average, this will cost a few hundred to $1,000 a year — a small price to pay for protection and peace of mind. Cheap liability insurance is possible and should be a convincing argument to start with a basic plan at a minimum.
Once you’ve acquired the foundational insurance, everything after that is an addition. For a business owners policy (BOP), according to Embroker, a one million dollar policy could cost you between $500-$2,000 a year. Worker’s compensation could add another couple thousand to your yearly costs depending on how many workers you employ.
Getting Started With The Right LLC Insurance For Your Business
The process of finding a great policy is all about research! Knowing the averages for your industry and comparing competing rates will help you make the best decision for your LLC. Start with an idea of the risks your LLC might face. Are you just online? You will have a lower premium than someone with a storefront. Will you need malpractice insurance? Do you need to insure commercial vehicles? By asking and answering these questions, you can come equipped to your first meeting with an insurance company with the knowledge of what you need.
When you meet with your insurance expert, discuss the cost-effectiveness of bundling your policies. Many sites like Coverwallet, Gallagher Business Insurance, and Insureon will comparison shop for you and walk you through the steps required to make an insurance purchase. Reputable insurance providers like The Hartford and Nationwide also offer LLC insurance.
Your business needs protection. Don’t make the mistake of under-insuring your business out of optimism or denial and become a business that can’t recover from financial ruin after a costly mistake or accident. Protect yourself, your business, and your employees today.