Business Insurance for an LLC

Setting your business up as a limited liability company (LLC) provides an important layer of protection for your personal assets. If the business is sued, your personal assets are protected. 

But, an LLC doesn’t protect your business assets, which could be at significant risk if you lose a lawsuit. And, your LLC insurance should help you cover legal costs so you can keep doing business in spite of a lawsuit.  That’s why it’s vital to carry business insurance for an LLC.

Recommended: Next Insurance offers a range of insurance products including Business insurance for your LLC. They offer free quotes on all products.


Do You Need Business Insurance for an LLC?

If you have an LLC, you may be wondering if you also need business insurance. The answer to that question depends on a few factors, including the type of business you have and the state in which you operate. Generally speaking, most businesses should have some type of business insurance.

For LLCs, there are several types of insurance you may want to consider. These include general liability insurance, product liability insurance, property insurance, and professional liability insurance. Each of these policies can provide protection for your business in the event that something goes wrong.

It's important to speak with an insurance agent to determine which policies are right for your LLC. An agent can help you find the right coverage at the best price.

Important reasons you need business insurance for an LLC include:

1. LLC business insurance should cover legal costs if you lose a lawsuit.

General liability insurance is the most common type of LLC insurance. It protects your business if it’s found liable for negligence in a variety of situations. If a business sues your business and you lose the lawsuit, your general liability insurance should cover your legal costs and pay for damages. 

General liability insurance cost is negligible considering the liability coverage it provides and the business assets it protects.

2. The protection of an LLC doesn’t always protect personal assets.

There is a common misperception that your personal assets are always protected when you form an LLC. Unfortunately, there are situations where your personal assets are not protected. 

For instance, if you mix your personal assets and your business assets completely separately, a court could decide those personal assets are also business assets. Losing a lawsuit could mean losing those personal assets. 

Illegal activities, even if you are performing them without knowing they are illegal, can also put your personal assets at risk. The protections of an LLC might not help in such situations. 

LLC insurance can still provide protection in circumstances where your LLC status doesn’t. 

For example, if you were using the same checking account for your personal expenses and your LLC expenses, a court could decide that the money in that account is a business asset. Losing a lawsuit could put that money at risk. But if you had LLC insurance, the insurance should pay for the damages so that the court doesn’t need to seize the money in your checking account.

3. Losing a single lawsuit is often enough to put LLCs out of business.

Businesses that don’t carry LLC insurance and rely only on their LLC status face substantial risk from potential lawsuits. If your business lost a lawsuit and had to pay $500,000 in damages, would you be able to cover the cost and remain in operation? Most small business owners would say no. 

Business insurance for an LLC is necessary because it covers the unexpected. You hope it never happens to you, but with LLC insurance, if it does happen, your business can still survive.

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How Much Is Business Insurance for an LLC?

Progressive states that its general liability LLC insurance had a median cost of $48/month in 2021. Some businesses pay more and some pay less, but this quote gives an idea of what LLC insurance costs for most businesses. Given the risks of not having LLC insurance, paying around $50 per month isn’t too costly for many small business owners. 

There are multiple factors that dictate the price of LLC insurance, including:

  • Industry: Some industries are more likely to be involved in lawsuits than others. The increased risk means that the price of insurance for those industries tends to be more expensive. For instance, policies for construction companies are likely to be more expensive than for software development businesses. 
  • Size: Bigger businesses tend to pay more for a variety of reasons, including having more customers, more employees, bigger payroll, and more. 
  • Coverage: The more coverage you have for your business, like having a higher maximum payout per incident and/or per year, increases the cost of insurance policies. 
  • Location: Some types of insurance cost more, depending on your location. For example, commercial property insurance will be more expensive in an area where property crimes happen more often.
  • Prior claims: If your business has filed numerous business insurance claims, insurance companies will take notice and are likely to charge you more for your policy. They assume that your company is more likely to file a claim because of your claim history. 

Frequently Asked Questions

Do you need business insurance for an LLC?

Yes. Having business insurance for an LLC ensures that you have help paying for a variety of unexpected legal expenses. Most businesses do their best to avoid being sued, but it still happens frequently. If you were to lose a lawsuit, having LLC insurance could mean the difference between staying in business and going out of business. 

Does the protection of an LLC mean you don’t need LLC insurance?

No. Forming an LLC can help protect your personal assets if your business is sued, but it doesn’t protect your business assets. Losing a lawsuit could mean losing most or all of your business assets. But if you have LLC insurance, the insurance should cover most if not all of the cost of the lawsuit. 

How much does business insurance for an LLC cost?

The cost of LLC insurance varies based on the individual business, but the median price paid by most businesses for general liability is around $50/month. 

How much does General Liability insurance for an LLC cost?

There is no one definitive answer to this question. The cost of liability insurance for an LLC will depend on a number of factors, including the size and nature of the business, the amount of coverage required, and the insurer’s rates. However, most business owners can expect to pay between $500 and $1,000 per year for general liability coverage.

It is important to remember that even if an LLC does not have any employees, it still needs liability insurance. This is because the LLC is liable for any injuries or damages that occur as a result of its operations. In addition, many landlords require proof of liability insurance before they will lease space to a business.

So, how much does general liability insurance for an LLC cost? As mentioned above, the price will vary depending on a number of factors.

What's the difference between professional liability insurance and general liability?

Businesses need insurance to protect themselves from potential risks and liabilities. There are two main types of business liability insurance: professional liability and general liability insurance coverage. Professional liability insurance (also known as Errors and Omissions (E&O) insurance) is designed to protect professionals such as doctors, lawyers, and accountants against malpractice or negligence claims. General liability insurance, on the other hand, provides coverage for any type of business-related accident or incident that may occur, including property damage and bodily injury.

If I carry general liability insurance coverage do I need business property insurance and commercial auto insurance?

If you have general liability insurance coverage, you may not need business property insurance and commercial auto insurance. General liability insurance protects your business from claims of bodily injury or property damage that occur as a result of your business operations. This type of policy typically covers slip and fall accidents, injuries caused by products you sell or distribute, and damage to other people's property.

Business property insurance protects your business assets if they are damaged or destroyed in a covered event. This includes the building where your business is located, its contents, equipment, and inventory. Business property insurance also provides coverage for loss of income resulting from a covered event.

Commercial auto insurance provides protection for your company's vehicles if they are involved in an accident.

What is small business insurance?

Small business insurance is a type of insurance that is designed to protect small businesses from financial losses in the event that something goes wrong. This can include things like property damage, liability claims, or business interruption.

There are a lot of different types of small business insurance policies available, so it's important to work with an agent who can help you find the right policy for your business. Some of the most common types of coverage include property damage, liability, workers' compensation, and business interruption.

It's important to remember that small business insurance is not just for businesses that are just starting out. Even established businesses can benefit from having some form of insurance in place. In fact, many insurers offer discounts to businesses that have been in operation for a certain number of years.

How much does LLC insurance cost?

Small business insurance is a type of insurance that is designed to protect small businesses from financial losses in the event that something goes wrong. This can include things like property damage, liability claims, or business interruption.

There are a lot of different types of small business insurance policies available, so it's important to work with an agent who can help you find the right policy for your business. Some of the most common types of coverage include property damage, liability, workers' compensation, and business interruption.

It's important to remember that small business insurance is not just for businesses that are just starting out. Even established businesses can benefit from having some form of insurance in place. In fact, many insurers offer discounts to businesses that have been in operation for a certain number of years.

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