The good news is that your LLC will protect your personal assets from claims against your business. But what about your business assets? That’s where small business insurance for an LLC comes in. You’ll need business insurance to protect your business assets.
The best business insurance for an LLC will provide flexible coverage suitable for small businesses at a good price. We’ll help you understand and choose the best LLC insurance coverage.
Recommended: Next Insurance combines a high level of protection with the best premiums. Get an online quote.
Small Business Insurance for an LLC
Whether you're about to start a business with one employee or you're growing a small business with 100 employees, a small business insurance policy is there to greatly reduce the likelihood that your business will come to an untimely end.
Your business may need several types of insurance policies to be fully protected. The best way to ensure that you’re getting the proper protection is to get a quote.
Does Your LLC Need Business Insurance?
The simple answer to this question is: absolutely, an LLC needs business insurance because your business assets need to be protected. An LLC will only protect your personal assets. The next question is: what type of insurance does your business need?
The types of insurance that your LLC carries are almost totally dependent on the kind of business you operate. For example, an ice cream parlor has very different vulnerabilities and insurance needs than a general contractor. Therefore, the two would carry different policies.
Common small business insurance policies include:
There are many more types of policies for more specific needs. However, for most small business owners, a business owner’s policy will combine the proper coverages into one policy, meaning lower insurance costs and simple management.
When you get a quote for small business insurance, the insurance company will analyze the needs of your unique business and give you coverage recommendations.
Types of Business Insurance for an LLC
There are many different types of insurance policies that LLCs can carry to protect their business assets properly. Below, we’ll cover some of the most common types of business insurance policies.
Business Owner's Policy for LLCs
A business owner’s policy is a collection of coverages wrapped into a single insurance policy to protect an LLC from the most common types of liabilities.
The standard policies wrapped in a BOP policy are general liability insurance, property insurance, and business interruption insurance. Depending on your agent and the insurance company writing the policy, they may be able to add more policies into your BOP based on the type of business you operate.
The major benefits of a business owner’s policy are lower cost and simplified management of your insurance policies. If you’re shopping for insurance for a new business or LLC, a BOP is what you should look for first.
General Liability Insurance
General liability insurance is the most common of all business insurance policies. It protects your LLC from the financial burden of claims arising from bodily injury, personal injury, or property damage.
Businesses are often required to carry a general liability insurance policy to participate in basic operations such as: renting office space, bidding on a contract, performing services on client premises, etc.
Professional Liability Insurance
Professional liability insurance is a common insurance policy for business owners that provide services to their clients, including real estate agents, accountants, and other service-based businesses. Small businesses can benefit from professional liability insurance if clients rely on their expertise to make important financial decisions. It’s also known as “errors and omissions” insurance.
There's also coverage for personal and advertising injury. This type of coverage protects you in claims involving slander, libel, or copyright infringement.
Employee Liability Insurance
If your business has employees, you may need employee liability coverage for any employee-related losses, such as employee liability insurance, unemployment insurance, and workers’ compensation insurance. In most states, employee liability coverage, like unemployment insurance and workers’ compensation, is required by law.
Workers' comp covers lost wages and medical bills due to workplace accidents. This type of coverage protects both businesses and employees in the event of work-related bodily injuries, termination, and other on-the-job incidents.
Business Umbrella Insurance
Much like gap insurance for personal auto loans, business umbrella policies offer financial protection after a customer sues for an amount that exceeds coverage limits for other types of business liability insurance carried.
For this type of coverage, a small business owner should consider the risk of a large claim against the combined umbrella and general liability insurance cost. Larger businesses would likely benefit more as claims against large companies are often filed by plaintiffs looking for much larger payouts.
Cyber Liability Insurance for LLCs
As the name implies, cyber liability policies cover costs incurred due to a cyber-attack or data breach. This type of coverage is becoming necessary in the world of business today as more and more businesses fall prey to hackers and attacks targeted at stealing personal data. Cyber insurance covers costs associated with repairing the breach, public relations efforts associated with the attack, and any claims that form as a result.
Business Income Insurance
Also known as business interruption insurance, this type of policy covers loss of income and revenue due to a covered incident. Business income coverage is often included in a standard business owner's policy and can cover employee pay, mortgage or rental payments, and other costs incurred due to an unavoidable interruption of business.
How Much Does LLC Insurance Cost?
Similar to the question of “which policies” your LLC should have, the answer to “how much” your LLC insurance costs will be totally dependent on your type of business. Other factors that play into the overall cost of LLC insurance include:
- Type of work conducted
- Number of employees
- Number and type of business-owned vehicles
Overall, the average total cost of insurance for an LLC is between $700 and $3,800 per year. This is a large range, but most businesses fall between these totals. Your price will vary depending on the factors mentioned above.
Frequently Asked Questions
Do I need LLC insurance?
Yes. While the LLC business structure protects your personal assets, it’s also necessary to get LLC insurance coverage to protect your business assets.
How much does LLC insurance cost?
The insurance you need for your LLC depends on the type of business you operate. The average cost of LLC insurance typically ranges between $700 and $3,800 per year. However, costs will vary depending on location, type of work, number of employees, type of insurance policy, and more.
Get a free quote to find what insurance will cost for your LLC.
How does LLC insurance work?
An LLC separates your business and personal assets. However, the LLC's limited liability protection doesn't exempt your business from potential risks it may encounter. Getting business insurance protects your LLC against certain liabilities that might put your business at risk, such as accidents or lawsuits.
What does LLC insurance cover?
LLC insurance is actually a combination of the different types of insurance policies that your LLC needs. The most common types of policies are general liability insurance, professional liability insurance, and business property insurance.
You can learn about all of these different types of insurance and more in our Business Insurance article.
What are the benefits of getting LLC insurance?
Different types of LLC insurance can protect you and your business in many ways. Depending on the policy, they can:
- minimize your financial losses
- protect your business if certain claims arise
- protect your business from unexpected events, such as property damage from natural disasters
- cover your employee’s medical care or replace lost wages
- cover the costs for equipment and repairs
- position your business as credible and trustworthy
What are the additional coverages to consider with LLC insurance?
Most states require LLCs to have certain types of coverage. These include workers’ compensation insurance, unemployment insurance tax, and disability insurance, among others.
Additional policies that your business may need include product liability insurance, commercial property insurance, commercial vehicle insurance, cyber liability insurance, and so on.
What happens if I don't have LLC insurance?
Without proper insurance coverage, your LLC is vulnerable to potential business risks and financial losses. Also, most states require that an LLC business gets some type of insurance policy, like workers’ comp coverage. Not having a state-required insurance policy in place gets you penalized. Penalties and fines vary from state to state.