When it comes to starting any business, buying insurance should be one of the first to-dos on your list. A common question for new startups is, “Do I need extra insurance if I have an LLC? Doesn’t my LLC offer me some protection already?” Yes, it does offer you some, but not enough.
An LLC (Limited Liability Company) can help protect your personal assets, but it doesn’t cover your business. You’ll need commercial insurance for that.
Do I need business insurance for my LLC?
The intent of an LLC is to separate your business assets from your personal assets. If someone sues your business, your LLC is established to protect exposing your personal assets in the lawsuit. In other words, your home, car, savings, investments, etc. would not be at risk. Many if not all of your business assets, however, could be.
What doesn’t an LLC cover?
Limited Liability Corporations are not intended to offer coverage for the following types of situations:
- If you combine your personal and business expenses (rather than having separate bank accounts for each).
- If you do something illegal (on purpose or accidentally).
- Someone in your business acts irresponsibly, is negligent or engages in fraudulent behavior.
- You personally guarantee a business loan.
- One of the owners accidentally injures someone outside of the scope of the business.
- You fail to pay business taxes properly.
- Someone in your business commits a crime.
While many of the above scenarios are avoidable, accidents can happen. And it doesn’t take much for someone to become unhappy with your company and take you to court. The fees involved in a legal case can be costly, even if you’re innocent, so insurance is crucial.
To secure your business financially and protect your LLC against various risks, you need to take out the right kinds of business insurance policies.
What type of insurance does my LLC need?
Insurance for your LLC will protect your business entity from liability claims brought against you. If you, your employees, or your products or services lead to bodily injury or property damage and someone sues your business, it will be protected—if you have the right insurance.
Most businesses must take out multiple policies for adequate coverage against various risks. Your insurance should protect your business’s property and liability. To determine which types of policies your LLC needs, consider working with an independent insurance agency. They can help you shop for affordable policies from some of the top carriers in the nation.
What kinds of business insurance do I need for my LLC?
If your business has employees and you work from a physical location (versus solely having an online presence), your state may require you to have these common types of insurance:
- Workers’ compensation: If an employee gets hurt on the job, workers’ comp will cover lost wages and medical costs.
- Disability insurance: Coverage for employees should they become disabled and unable to work.
- Unemployment insurance tax: Coverage for an employee if they lose their job and file for unemployment benefits.
Most businesses—no matter the size—need these general types of insurance coverage:
- General liability: Liability insurance is one of the most basic and essential types of business coverage. It will offer your LLC protection from customer injuries and property damage, as well as libel or copyright infringement.
- Cyber liability: If you conduct business online and handle sensitive data, which most companies today do, you’ll need cyber liability insurance to protect you against hackers and viruses.
- Commercial property insurance: If you own or rent a workspace, you’ll need commercial property insurance. If any inventory or equipment is damaged or stolen, your insurance will help replace it.
Other common types of business insurance to consider:
- Professional Liability: Professional liability (errors and omissions/malpractice) insurance offers protection for LLC employees or members who must have a license to work (i.e., lawyers and doctors).
- Product liability: If one of your products is defective and injures someone or damages their property, product liability will have your back.
- Commercial auto insurance: If your business has company vehicles or anyone working for the company uses their car for business purposes, you should have commercial auto insurance.
- Business interruption insurance: If something happens to your workspace and you close down temporarily while repairs are being made, business interruption will help cover lost earnings and extra expenses.
Ask your insurance carrier if you can bundle any or all the policies you need into one business owner’s policy (BOP). It could save you a lot of money. If you have an online business, check out our ecommerce insurance blog post for details catered explicitly to you.
How much does insurance for my LLC cost?
Your business insurance cost will depend on what types of policies you need, the state you live in, the size of your business, your insurance carrier, and other factors. Expect to pay anywhere from around $350 to $3,500 per year for a BOP (combining general liability and commercial property insurance).
If you’d like a business insurance quote for your LLC—whether you’ve been in business for years or you’re just starting up—contact Coverage Direct. We’re an independent insurance agency that can impartially shop multiple carriers to find the right types of coverage for your unique business needs and budget.
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