LLC Insurance | Business Insurance for LLC

Running a limited liability company (LLC) is a great way to protect your personal assets from damage or liability by keeping them separate from your business. But even if your assets aren't on the line, your business failing or being sued are still possibilities. That's why it's so important to know all about the different types of LLC insurance available.

Fortunately, a local independent insurance agent can help you get equipped with all the protection you need for your LLC, including liability insurance. They'll make sure your unique business gets matched to all the coverage necessary to protect against financial losses from multiple potential threats, including lawsuits. But first, here's a deep dive into LLC insurance and what it's all about.

What Is LLC Insurance?

LLC insurance policies can be customized but typically include a combination of general liability insurance and professional liability insurance policies designed to help protect your company against claims of third-party bodily injury caused by your business, employees, faulty products, or a professional error.

This coverage can reimburse your business for lawsuit expenses if you are sued for related claims. As with other policies, your liability insurance can be customized to fit the needs of your LLC specifically, and an independent insurance agent can help you.

Don't LLCs Already Have Enough Protection?

The short answer is no. Being registered with the state as a limited liability company means your personal assets are off-limits when it comes to accidents and lawsuits, but your business is considered a separate entity and needs its own insurance policy. Having liability insurance is especially important, even for LLCs.

If your business causes harm to a client or another third party or hurts another company, you could be responsible for resulting medical bills, legal fees, or other damages. But there are exceptions in which a business owner could still be held personally responsible for damages caused by the company, like excessive debt. Having LLC insurance can help a business owner avoid certain hefty out-of-pocket losses.

Why Is LLC Insurance Necessary?

LLC insurance is crucial to protect LLC businesses from various liability risks, including bodily injury or personal property damage to others caused by your products, operations, or employees. Small businesses register as LLCs to help protect the business owner's commercial assets and keep them separate from their personal assets.

However, just being an LLC business doesn't offer bulletproof protection against all disasters. An independent insurance agent can further explain why having LLC insurance is so critical.

Why Do Single-Member LLCs Need Insurance?

In certain states, single-member LLCs, sole proprietorships, franchises, and independent contractors aren't required by law to have insurance. However, there are a few reasons why even a single-member LLC might need a business insurance policy, including the following:

Coverage may be required for the business to sign a lease or a contract.
Proof of coverage may be requested by prospective customers or clients.
Coverage can protect the business from potentially devastating financial losses.
Coverage may actually be required by law.

It's critical to research the laws for business insurance requirements in your specific state. In certain cases, even an LLC with a single member may be required to purchase various types of business insurance, including workers' compensation insurance. Failure to comply with local laws could result in fines or other penalties.

Top Reasons LLCs Need Business Insurance

Your LLC needs special protection against lawsuits and more. LLCs themselves are not exempt from liabilities and other risks, contrary to popular belief. By itself, an LLC is not protected against the following possible disasters:

Your business pays taxes incorrectly
One of your clients or another third party gets injured by your business in some way
An issue arises with your business's loan, or you accrue debt
Your business commits fraud
Your actions damage the company in some way
You commit malicious acts against the company or a third party

While some of these behaviors are optional, your LLC can always be sued, even if you're on your best business behavior. An independent insurance agent can further explain the importance of protecting your LLC with the right insurance.

Risks LLCs Are Not Protected Against

Just being an LLC does not automatically protect your company against all potential costly risks. Here are just a few examples of common disasters that could strike your LLC that you would not be protected from without the right insurance:

Customer slips and falls: You'd be responsible for paying lawsuit costs on top of medical costs if a customer slips and falls on your business premises, which is one of the top reported incidents for all businesses.
Work-related injuries: Without the workers' comp coverage provided by LLC insurance, you'd be responsible for paying for your employees' medical costs after an injury or illness caused by your company.
Employee car accidents: When using your company vehicles, your employees put your LLC at risk of further lawsuits. It's imperative to have commercial auto coverage as part of your LLC insurance if your company ever uses business vehicles.

These are just a few of the most common risks LLCs are not protected against without the proper insurance. Even if you're not legally required to carry LLC insurance, having coverage can help your business avoid catastrophic losses and even potential bankruptcy.

What Does LLC Insurance Cover?

An LLC insurance policy protects the liability-related details of operating a business by covering its owner(s) and employees. The two most important types of coverage are typically general liability and professional liability, but to make sure you cover all your bases, there are a few extra add-ons you may want to consider:

Professional liability insurance: Covers claims of professional errors made by the business.
General liability insurance: Covers claims of bodily injury or personal property damage caused by the business.
Workers' compensation insurance: Covers costs related to employee injury, illness, and death caused by the job or work environment.

Additional coverage to consider:

Business owners policy (BOP): Coverage includes general liability, commercial property coverage, and business income insurance. It protects your merchandise and your company against business interruption expenses and loss of income. BOPs also offer liability protection if someone's hurt on your property.
Commercial auto insurance: Covers any damage to, or theft of, the vehicles you or your employees use on the job.
Inland marine insurance: Protects property, equipment, and tools moving between job sites and the business.
Commercial property insurance: Covers loss, damage, theft, vandalism, or destruction to your physical office building, tools, equipment, and inventory.
Business income insurance: Provides your business with a continuation of income during covered temporary shutdowns. Coverage can pay ongoing expenses during these periods, including rent and employee salaries.

An independent insurance agent can help you create an LLC insurance package that covers all the necessary bases of protection.

Key Benefits of LLC Insurance

Having LLC insurance offers many benefits. Some of the major benefits include the following:

Protecting your business against costly claims, including lawsuits
Protecting you, the owner, against claims of negligence
Protecting your business's reputation by allowing others to request proof of insurance from your LLC
Protecting you from state penalties in case your LLC is actually required to carry insurance

These are just a few of the key benefits of having the right LLC insurance for your company. An independent insurance agent can provide you with more reasons to insure your LLC.

Is LLC Insurance Mandatory by State Law?

The answer depends on your location. Depending on the laws in your state, the type of business you have, and the type of service you’re offering, you may be required to have coverage.

Workers' compensation is a necessity in nearly every state, along with unemployment insurance, and disability insurance. A local independent insurance agent can help you understand your state's requirements and make sure you are covered in those areas.

Additional Reasons to Consider LLC Insurance

Though your personal assets are off-limits, you’re still liable for any debt and incidents related to the business itself — not to mention the environmental factors you can't predict that could bankrupt your business. LLC insurance coverage exists to ensure that any potential lawsuits can be settled without causing you or your business complete financial ruin. It's also there in case a fire destroys your business.

Top claims for LLC insurance:

Property damage or accident claims
Reputational harm claims (i.e., slander or libel)
Customer injuries like slips and falls

An independent insurance agent can provide more examples of top claims filed through LLC insurance and why it's critical to protect your company with the right coverage.

How Much Does LLC Insurance Cost?

The cost of your policy can depend on your coverage and a number of other factors, such as the size, nature, and location of your business, and the materials you use. If your business offers products, services, or both that are considered to be high-risk, your policy will likely be more expensive. Typically, coverage ranges from a few hundred dollars to a couple thousand per year.

The average cost of the main coverages needed by LLCs:

General liability insurance: $500 per year
BOP insurance: $684 per year
Cyber liability insurance: $1,740 per year
Commercial auto insurance: $1,764 per year
Workers’ comp: $540 per year
Professional liability insurance: $732 per year

An independent insurance agent can help you find exact quotes for LLC insurance and affordable coverage in your area.

Who Sells LLC Insurance?

LLC insurance is available from many different insurance companies, and the best way to find the right carrier for you is through working with an independent insurance agent. Independent insurance agents know which insurance companies to recommend to meet your needs and can provide informed suggestions based on company reliability, rates, and more.

Here are a few of our top picks for LLC insurance carriers.

Top LLC Insurance Companies	Overall Carrier Star Rating
The Hartford	5 Stars
Nationwide	5 Stars
Progressive	5 Stars
Hiscox	4.5 Stars
Allstate	4 Stars

Best overall LLC insurance company: The Hartford

The Hartford offers several important coverages for LLC businesses, including:

Professional liability insurance
General liability insurance
Workers' compensation
Commercial auto insurance
Business income insurance
Commercial property insurance

Though several insurance companies offer coverage for LLCs, The Hartford's LLC insurance package provides the most comprehensive coverage around. The Hartford also has "A+" (superior) ratings from both AM Best and the Better Business Bureau. Overall, The Hartford earns its spot as our top pick for LLC insurance.

General Liability Insurance vs. Professional Liability Insurance

Two essential coverages needed by LLCs are general liability insurance and professional liability insurance. Here's a breakdown of each.

General liability insurance covers:

Bodily injury to third parties
Personal property damage to third parties
Advertising injuries
Medical expenses

General liability insurance usually does not cover:

Your personal property
Damage to business vehicles
Damage to your business operations
Intentional injuries and malicious acts

Professional liability insurance covers:

Negligence on your part
Legal fees
Omissions by you
Copyright infringement charges against you

Professional liability insurance usually does not cover:

Intentional and malicious acts by you
Business property damage
Bodily injury and medical expenses
False advertising by your LLC

An independent insurance agent can help you find all the liability protection your LLC needs.

Can an LLC Pay for the Owner's Health Insurance?

Whether an LLC's owner can deduct the cost of their health insurance premiums depends on how the business is structured. In many cases, if an LLC owner is considered self-employed or to be a partnership as it's taxed, they can write off all or a portion of their health insurance premiums. To understand whether you can deduct your health insurance as the owner of an LLC, look up the local regulations regarding your business's tax structure.

The Benefits of Working With an Independent Insurance Agent

When it comes to helping insurance customers find the absolute best price and quality for LLC coverage, no one’s better equipped to help than an independent insurance agent. Independent insurance agents search multiple carriers to find providers who offer LLC insurance, deliver quotes from a number of different sources, and help you walk through them all to find the best blend of coverage and cost. And down the road, your agent can file business insurance claims for you or help update your coverage as necessary.

Frequently Asked Questions about LLC Insurance

It's possible LLC insurance is required in your area. Depending on the laws in your state, the type of business you have, and the type of service you’re offering, you may be required to have coverage. Workers' compensation is required in most states, along with unemployment insurance and disability insurance.

Yes, if you run a for-profit business, including an LLC, your business expenses are likely tax-deductible. This can include your business's insurance.

The amount of coverage you need depends on several factors, such as the type of company you run. You'll also need to determine which coverages are necessary based on your company's details, such as if you have employees and company vehicles. An independent insurance agent can help you get set up with all the coverage you need.

LLC insurance is crucial to have because your company is not protected from various disasters, including lawsuits, just by being an LLC. Customers and employees alike could press charges against your company, and without the right coverage, you'd be left paying for these hefty expenses out of your own pocket.

There are many benefits of carrying LLC insurance, but the biggest one is protection against potential bankruptcy. LLC insurance can protect your company against expensive lawsuit fees and other expensive claims that you'd otherwise have to pay for yourself. Without LLC insurance, you could bleed your company's funds dry after just one incident.

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