Do You Need Business Insurance If You Run a Freelance LLC out of Your Home?

When you run your own business, having an LLC can certainly provide some important protection. However, you may be unsure of exactly how far this protection goes, and whether you need additional business insurance on top of it. So, if you just run a small freelance LLC out of your own home, do you need a business insurance policy?

For questions like these, it’s important to hear the answers straight from the real pros, AKA independent insurance agents. Ask agents anything. They have the answers. Here’s what they’d say about whether the small freelance LLC that you run out of your own home has enough protection already, or if you’d need additional business insurance.

Do I Need Business Insurance If I Run a Small LLC out of My Home?

If you’re concerned about legal protection, then you very well might. People can still sue you by name and you can be held individually liable for business mistakes and other issues, even if you have an LLC. Business insurance is designed to respond for both your organization and the individuals involved in it. If your LLC does not pose much of a legal risk, however, then business insurance might not be necessary. Your independent insurance agent can help you decide this.

What Protection Does Having an LLC Offer?

It’s mainly a tax issue. With an LLC, if the business goes bankrupt, it won’t affect the owners. An LLC saves you a lot of paperwork and provides personal protection if your business goes under. However, an LLC is not a complete liability shield for individuals associated with an organization, and your personal insurance won’t cover your business’s legal expenses at all. Many folks mistakenly think that an LLC will protect them as an individual, but sadly that’s not the case.

How Would a Business Insurance Policy Help Protect Me and My LLC?

The liability coverage included in business insurance would protect you as the LLC’s owner if someone decided to sue you individually. Liability coverage pays for all legal fees, including expenses for hiring an attorney, court fees, and settlements if you lose the lawsuit. But beyond legal coverage, business insurance provides a lot of important protect for all types of businesses, which we’ll explore next.

What Else Does Business Insurance Cover?

Though the liability coverage provided by business insurance is certainly important, these policies provide a lot more protection from multiple standpoints. Standard business insurance policies also include these core protections:

• Worker's compensation: Covers financial losses if you have any employees who become ill, get injured, or die from a work-related incident. Coverage is mandatory in most states, depending on company size and the type of work being performed.  
• Business auto: Covers company vehicles against perils like theft, vandalism, and natural disasters.
• Property insurance: Covers loss of/damage to your physical property, including your office building. Protected mishaps include fires, storms, and more. If you run your business out of your home, however, your homeowners insurance would cover this part.

Talk to your independent insurance agent about your unique business and its operations. They’ll be able to help you determine whether you would benefit from having an additional business insurance policy.

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When Does an LLC Not Need Business Insurance?

If you just run a small business out of your home that’s not too profitable, the cost of additional insurance coverage may not be worth it. To better assess if coverage makes sense for your small LLC business, consider the following:

If your LLC’s exposure is extremely safe and small and your annual profits are relatively low, business insurance may not make sense from an economic standpoint. Again, your independent insurance agent can help you weigh whether business insurance is worth it for your in-home LLC.

Other Risks Worth Considering Coverage for as a Small Business

Even owners of small LLCs need to consider all potential hazards that they may face throughout the life of their business. To address these additional areas of concern, extra coverages can be added to your business insurance policy.

Some optional add-on coverages to business insurance include:

• Crime insurance: Covers losses due to criminal activity such as theft or fraud. Coverage even applies to employees who steal from the company.
• Business income: Covers the financial loss suffered while a business is closed due to fire damage or other disasters.
• Boiler & machinery: AKA "equipment insurance," coverage applies to electric equipment in the building (e.g., AC units and boilers) that breaks down due to power surges, etc.
• Professional liability:  AKA "errors and omissions insurance," this coverage protects against claims made by clients who have suffered financial losses due to your business’s operations.

Your independent insurance agent will work with you to make sure that your LLC is covered from every possible angle.

Protection for Your Digital or Electronic Property and Operations

Even if you just run a small in-home LLC business, you’ve probably got at least some data that needs to be protected against cyberattacks and other virtual incidents. The only way to guarantee coverage for the operations that take place over your computer (and as a freelancer that might be nearly all of them) is to get a cyber liability policy.

Many cyber liability policies include the following protections:

• Legal expenses: Covers lawsuits (including attorney, court, and settlement fees) stemming from customers’ sensitive information such as credit card numbers getting stolen and sold by cybercriminals, or banks suing your business for having to cancel these stolen cards.
• Hired professionals: Covers hired professional help when necessary to repair damage to computer systems or security after a data breach or other virtual attack.
• Loss of income: Covers losses in profits due to suspended or limited operations caused by a data breach or other cyberattack.
• Costs due to damaged reputation: Covers damage suffered to a business’s reputation stemming from media coverage following a data breach or other incident.

The coverage provided by cyber liability insurance is not standard, which means that policies can vary from insurance company to insurance company. Make sure to work closely with your independent insurance agent to assemble a cyber liability insurance package that meets your unique LLC or other business’s needs.

Are There Any Other Coverages I Might Need?

If you live in an area prone to certain natural disasters like floods or earthquakes, you might want to get additional protection for your in-home business. Neither home nor business insurance policies cover flood damage or earthquakes, so separate flood insurance or earthquake insurance policies would be required. Your independent insurance agent can help you find these important coverages to help guard your business against severe natural destruction.

Here’s How an Independent Insurance Agent Would Help

When it comes to protecting you and your small home-based LLC business against lawsuits and other perils, no one’s better equipped to help than an independent insurance agent. These agents search through multiple carriers to find providers who specialize in business insurance and other coverages, deliver quotes from a number of different sources, and help you walk through them all to find the best blend of coverage and cost.