Business Insurance for an LLC

business insurance for an llc

Business LLC insurance is an essential part of running your small business. It helps protect your organization from claims that can come up in everyday operations. If you have chosen to operate as an LLC, you need to make sure that your business is adequately insured. This guide will discuss the different types of business insurance available to LLCs and why you should consider getting them.

What is LLC Business Insurance?

Many small businesses register as LLCs. This business structure offers professional liability coverage to business owners. This fact means that if the company is sued, the owners are not personally liable for any damages, as forming the LLC separates your business assets from your personal belongings.

However, this does not mean that LLCs are immune to lawsuits. In fact, LLCs can be sued just like any other type of business. Claims can come in the form of lawsuits, property damage, or other unexpected events.

Why You Should Get LLC Business Insurance

There are many reasons to get LLC business insurance, even if you are a small business. Just for starters, business insurance benefits include:

  1. Protecting your personal assets: One of the most crucial reasons for getting business LLC insurance is to protect assets that are separate from those of your business. If your company is sued and you don’t have insurance, you could risk losing your savings, home or other personal assets.
  2. Protecting your business assets: Business LLC insurance can also help protect your company’s assets. If your business loses a lawsuit, the insurance can help pay for any damages awarded to the plaintiff.
  3. Protecting your employees: Another reason to get LLC insurance is to protect your employees. If one of your employees is injured on the job, your insurance can help cover their medical bills.
  4. Covering business expenses: If your company is involved in a lawsuit or other types of litigation, the costs of defending yourself in court can be very high. Business LLC insurance can help you cover these costs.
  5. Staying compliant: Having the proper insurance for your company is often mandatory. In some states, business LLC insurance is required by law.

What is Covered by LLC Insurance?

The types of coverage available to LLCs will depend on the insurer and the policy. However, some common types of business insurance coverage are recommended for all LLCs. We’ve listed the main ones below, starting with business owner’s policy (BOP) insurance.

Business Owner’s Policy (BOP)

A business owner’s policy is a type of insurance that bundles together several different types of coverage, including property damage, liability and business interruption. For instance, A BOP is commonly paired with business property and general liability insurance. It is a good option for small businesses, as they can save money with bundling. Additionally, BOP coverage can protect against many different risks. Home-based businesses can especially benefit from BOPs.

Professional Liability Insurance

Professional liability insurance, also known as Errors and Omissions (E&O) insurance, covers your business for claims of professional negligence. This type of business liability insurance is essential for any company that provides professional services or advice to others, as it can help protect you from the cost of defending yourself in court.

General Liability Insurance

Many small businesses carry general liability insurance to help protect their company from the cost of damages if they are sued for injuring someone or damaging their property. General liability insurance cost is typically based on the size of your business and the industry you’re in. Also, it’s the cheapest corporate liability insurance business owners can buy in most cases.

Commercial Auto Insurance

If you are a business owner who uses a vehicle for business purposes, you’ll need commercial auto insurance. This type of insurance covers the cost of damages if there is a car accident while the vehicle is used for business.

Workers’ Compensation Insurance

If you have employees, the state usually requires that you carry workers’ compensation insurance. This type of corporate insurance covers the cost of medical expenses and income replacement for employees who suffer bodily injuries on the job.

Unemployment Insurance

The labor market is constantly changing, so it’s vital to have unemployment insurance. This type of company insurance can help your company pay the cost of unemployment benefits for laid-off employees.

Business Income Insurance

If your business is interrupted by a covered event, business income insurance can help you cover the cost of lost revenue. This type of insurance is important to all companies, as it can help you stay afloat if your business is forced to close its doors.

Cyber Liability Insurance

As a business owner, it’s important to protect your company from the cost of a cyberattack. Cyber insurance can help cover the cost of damages caused by a cyberattack and the cost of data recovery and identity theft protection.

Personal and Advertising Injury Business Insurance

This type of business LLC insurance can help protect your company from the cost of a lawsuit if you’re accused of personal injury or advertising injury, including defamation, false arrest, and invasion of privacy. This insurance is best for companies with a lot of contact with the public, like retail stores.

Product Liability Insurance

If you are a limited liability company that manufactures, distributes, wholesales, or sells a product, you may be liable for how safe it is. Therefore, you’ll need to have product liability insurance. This type of insurance covers the cost of damages from claims arising if a product you sell is defective and causes bodily injury or damage to someone’s property.

Commercial Property Insurance

Commercial property insurance, or business property insurance, covers the cost of damages to your business property, such as your office or store. This type of insurance is important for companies that have a significant amount of physical property and assets, as it helps protect you from the cost of repairing or replacing damaged property.

Home-based Company Insurance

If you run your business out of your home, you’ll need home-based business LLC insurance. This type of insurance covers the cost of damages if your business is sued for injuring someone or damaging their property.

Commercial Umbrella Insurance

Commercial umbrella insurance is a type of insurance safety net that provides extra coverage in case of liabilities that aren’t covered by other business insurance policies. This type of insurance can help protect your business from the cost of a lawsuit if you’re sued for more than your insurance policy limits. Companies find this coverage essential for mitigating financially ruinous lawsuits and claims.

Read More: how much does business insurance cost

What is Not Covered by Business Insurance for LLC?

There are a few things that business insurance for LLCs does not cover. These may include:

  • Damages caused by intentionally illegal acts: If you deliberately damage someone’s property or injure them, your corporate insurance will not cover the cost of repairs or medical bills. Also, fraudulent acts disqualify you from being reimbursed by your insurance company.
  • Damages caused by natural disasters, war and nuclear accidents: Business LLC insurance does not cover damages caused by natural disasters, such as floods or earthquakes. It also does not cover damages caused by war or nuclear accidents.
  • Losses due to poor management or business decisions: If your business makes a bad decision that leads to financial losses, your corporate insurance will not cover the cost of those losses.

How Much is Business Insurance for an LLC?

So, how much does insurance for a company cost? LLC insurance costs depend on a number of factors, such as:

  • The amount and type of coverage needed.
  • The industry and what you do.
  • The size and type of business.
  • The location.
  • Amount of risk your business faces.

There are a few ways you can find out how much you’ll be paying in premiums for your LLC business insurance. One way is to use an online calculator that businesses like Thimble provides.

Using their calculator, you can experiment and feed in your business parameters. For example, you can input the # of employees, the value of equipment, etc., to get a ballpark figure of what you are looking at paying.

Another way to get a good idea of the small business insurance costs is by looking at pricing data that business insurers post online.

Small company insurance provider Insureon recently analyzed the data from 28,000 businesses that have policies with them. When they did their analysis, they found out the median cost their customers were paying was $42/month for their general liability policy.

The median cost of a BOP, on the other hand, where Insureon bundles business property and general liability coverage to give a discount, was $53/month.

The following table illustrates ballpark figures for what a business owner can expect to pay for typical small business insurance policies.

PolicyMdian CostAverage
General liability$42$65
Professional liability $59$97
Workers compensation$47$111
Commercial umbrella$75$129

Source: Insureon

Of course, these are just averages, and your actual LLC insurance cost will depend on many factors. To get an accurate estimate of the cost of business LLC insurance, it’s a good idea to speak with an insurance agent or broker who specializes in small company insurance. It’s also good to do your research and shop around. That way, you’ll get the best rate.

How to Choose the Right Small Business Insurance for LLC

There are a few factors to consider when choosing the right type of insurance for your LLC. First, you need to make sure you’re insured for all the risks your business faces.

For example, if you run a construction company, you’ll want to ensure you have general liability insurance to protect against accidents and property damage. Meanwhile, you’ll want to ensure you have property insurance in case your tools and equipment are damaged or stolen.

Meanwhile, you’ll need workers’ compensation insurance if you have employees. And if you have a fleet of vehicles, you’ll need commercial automobile insurance.

In addition, you need to make sure you’re not over-insured or under-insured. You don’t want to pay for insurance coverage you don’t need. However, at the same time, you don’t want to be in a situation where you can’t afford to pay for the damages because you didn’t have enough coverage.

Another factor that you, as a small business owner, should consider is whether you want a bundled policy. For instance, if you’re just starting out and your business is low-risk, a BOP that bundles property insurance and general liability insurance might be a good option for you since it’s usually cheaper than buying separate policies.

Finally, you need to make sure you choose an insurance company that’s reputable and has a good financial rating. The best small business insurance companies won’t leave you hanging financially. In other words, they should have the financial resources to pay out claims.

To sum it up, there are a few things you need to consider when choosing the right type of insurance for your LLC:

  • Make sure you’re insured for all the risks your business faces.
  • Make sure you’re not over-insured or under-insured.
  • Consider a bundled policy.
  • Choose a reputable business insurance company with a good financial rating.

How to Get LLC Insurance

Now that you’re familiar with the basics of LLC insurance, it’s time to go about getting yours. The following steps will help you get started on your search for the best business coverage:

  1. Know your coverage. Familiarize yourself with the types of coverage available. Read up on common insurance types. General liability, damage to property, workers’ compensation, and commercial auto insurance are some of the most common options.
  2. Assess the risks your business faces. Think about what is likely to happen at or right outside your facilities, such as potential lawsuits or natural disasters that some insurance companies cover. Then, look for the policies that cover those risks.
  3. Look for a licensed agent. The commercial insurance agent you use should be licensed and have a good reputation. They need to understand what you need and match you to those needs vs. simply earning a commission. Finding a licensed insurer varies by state, so do some research on this before you purchase a policy.
  4. Bundle your policies. These grouped policies can save you money, so be sure that you are able to get a discount by bundling your insurance policies with the same insurer.
  5. Shop around and compare rates and quotes. Once you know what coverage you need, get quotes from multiple insurers to find the best price.
  6. Be sure to read the fine print to understand what is and isn’t included in your policy. You may have to shop for a commercial umbrella policy if you foresee any shortcomings in coverage.
  7. Reassess your needs every year. As your business grows, so do its risks. That’s why it’s critical to review your policies every year and make changes as needed.

Here are a few questions to ask an insurance broker:

  • What is the size of the deductible?
  • How much does the policy cost?
  • What is covered by the policy?
  • What is not covered by the policy?
  • Is there a grace period for late payments?

Read More: best small business insurance companies

Do I need business insurance if I have an LLC?

Over ten years of operation, 40% of corporations will file a claim with their insurance providers. If you own a business, this means that the probability will be very high that having LLC insurance coverage will pay off at some point during your company’s lifespan. So yes, the odds are high that you will need business LLC insurance. You need to protect your business and yourself from damages.

If you don’t have it, you may wind up having to pay expensive claims out of pocket, which can be very expensive and a possible detriment to your company and reputation. Therefore, if you are a business owner, it’s not enough to go without insurance coverage for your company and hope for the best.

After all, wouldn’t you hate to lose out on the benefits of being one of the many proud business owners in the world simply because you didn’t get something like getting inexpensive general liability insurance coverage for your company?

Is LLC insurance tax deductible?

The good news is that the Internal Revenue Service considers insurance for LLCs a cost of doing business. That means your policy premiums are tax-deductible. However, to get this expense deducted from your taxable income, you’ll need to fill out some forms to take advantage of this benefit.

If you are unfamiliar with the process, get the assistance of a tax professional. These experts will work with you to ensure that you fill out the proper paperwork and do it correctly (FYI: their services are tax-deductible for businesses too).

Image: Depositphotos

Joshua Sophy Joshua Sophy is the Editor for Small Business Trends and has been a member of the team for 16 years. A professional journalist with 20 years of experience in traditional media and online media, he attended Waynesburg University and is a member of the Society of Professional Journalists. He has held roles of reporter, editor and publisher, having founded his own local newspaper, the Pottsville Free Press.