How to Get Business Insurance for an LLC

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Limited liability company (LLC) insurance is designed to provide general and professional liability coverage for your business. It may also include commercial property insurance to protect your physical assets. Business owners policies, which bundle multiple types of coverage, are often a convenient way for smaller LLCs to get the business property and liability protection they need.

The cost of business insurance for an LLC will vary depending on the type of business, its location, the number of employees and what other coverage options are needed. Keep reading to see if LLC insurance is required and how you can get coverage for your business.

What Is LLC Insurance?

LLC insurance is a policy that protects your company's assets from liability claims. Once an LLC is established, your personal assets become separate from your business assets, meaning no one can come after your personal belongings if a lawsuit is filed against your business. For people who file an LLC, certain business assets may still be vulnerable.

An LLC insurance policy will provide financial protection in case of a covered loss, so your business assets are protected.

What Does LLC Business Insurance Cover?

LLC insurance coverage can vary by company since different enterprises have different insurance needs but will usually include protection for liability, assets and employees. The base coverage will often include general liability coverage and professional liability for service-based LLCs:

  • General liability: Protects your business in the event it is accused of causing damage to an individual or their property. Coverage will usually include bodily injury, property damage and personal/advertising injury. Additional coverage may include electronic data liability, defense costs, hidden costs and worldwide coverage.
  • Professional liability (errors and omissions): Covers claims of negligence, misrepresentation, inaccurate advice and personal injury such as libel or slander. Typically errors and omissions plans are written as claims-made policies, meaning there is a retroactive date and an extended reporting period. Ideal for those who have to sign a contract that requires such coverage, those who offer direct professional services to customers or those who regularly advise clients.
  • Commercial property: Tangible assets, including its inventory, equipment, and office space are protected if they are harmed or destroyed by a covered event.

What Isn’t Covered by LLC Business Insurance?

LLC insurance will not cover any types of losses not listed in your policy. Since LLC policies are highly customizable based on your business needs, one LLC may have more or less coverage than another, especially if they serve different industries. Here are some examples of exclusions you may face:

  • You will not be covered for accidents in your business car unless you have commercial auto insurance.
  • Equipment and tools will not be covered while in transit unless you have inland marine insurance.
  • Workplace employee injuries will not be covered unless you have workers’ compensation insurance.
  • Building materials and other moveable property that’s being installed or built by a contractor will not be covered unless you have installation floater insurance.

How Much Does Business Insurance for an LLC Cost?

The cost of an LLC business insurance policy is going to vary depending on several factors, such as:

Your business’s industry will affect the amount you pay for insurance coverage. High-risk businesses will face higher premiums. For example, business owners in general contracting and construction may pay higher insurance rates because of the physical nature of the work and the use of dangerous equipment and heavy machinery. Conversely, remote content writers for online companies and financial advisors have a significantly lower risk which means they will likely pay less for coverage. 

LLC insurance rates typically increase when you hire more employees. Every hired individual carries an additional risk of accidents and other events that could result in a claim being filed. Keep in mind that workers’ compensation is required for any business that has employees and will add to your business costs. 

The more coverage your business requires, the more you will pay for insurance. Purchasing an insurance policy with a $3 million limit will cost more than one with a $2 million limit. Similarly, a company that pays for general liability, professional liability, workers comp and commercial property insurance will likely pay more than a smaller enterprise that only needs general liability coverage.

The above factors are the three basics that every business should be familiar with. Other factors that may affect your business insurance costs include:

  • Property
  • Equipment (expensive machinery costs more to insure)
  • Location 
  • Prior claims history (extensive lawsuit histories usually lead to higher rates)

Should My LLC Have Other Insurance?

There are several types of insurance you should consider for your LLC. The table below shows a breakdown of different coverages as well as average costs.

Coverage

Description

Cost Per Month

Business Owners Policy (BOP)

Bundled policy that includes general liability coverage and commercial property coverage.

$261

General Liability Insurance

Protects the LLC from bodily injury or property damage caused by you or an employee.

$25 - $100

Professional Liability Insurance (Errors and Omissions)

Company will be covered for claims of negligence, misrepresentation, inaccurate advice and personal injury such as libel or slander. 

$25 - $100

Workers’ Compensation

Provides benefits to employees that can help them recover from a work-related illness or injury.

$70

Commercial Auto Insurance

Liability coverage in case an employee is at fault for hurting someone or damaging another’s property while driving a company car. Employees will be protected if they are injured while driving a company vehicle.

$75 - $200

Inland Marine Insurance

Equipment or tools owned by your business will be protected while in transit between job sites.

$62

Commercial Property Insurance

Office space will be covered if it is damaged or destroyed by a covered event.

$84 - $250

How Do You Get Business Insurance for an LLC?

Getting business insurance for an LLC is as simple as finding a provider that meets the needs of your company. Look at the steps below when seeking coverage for your business.

  1. Assess your risks: Part of getting the right coverage is understanding the risks your LLC faces, including accidents, natural disasters or lawsuits. LLCs that utilize company vehicles, for example, will need to purchase commercial auto insurance so their vehicles will be protected as well as their drivers.
  2. Find a licensed agent: Using an agent can make buying insurance for your LLC a painless process. They understand the needs of businesses as well as the language when speaking with insurance companies. Find an agent that understands your profession and who can get you the best coverage for the price you want.
  3. Shop around: An easy way to find insurance for your LLC is to see who provides what at what price. SmartFinancial is designed to do that very thing. You’ll get prices in minutes from several carriers in your area. See below how to get the insurance you need.
  4. Reassess every year: Prices for insurance change over time. The coverage you get one year may be cheaper elsewhere the following year. And as your business needs fluctuate over time, you may want to drop some coverage or purchase new coverage.
Buy coverage for your LLC.

Is LLC Insurance Required?

LLC insurance is not usually required by law, though each state will have its own requirements. Your LLC will, however, be required to carry workers' compensation if you have any employees so your employees are provided benefits that can help them recover from a work-related illness or injury.

What Are the Best Business Insurance Options for an LLC?

There are several insurance types that LLCs should consider in order to get the best protection:

  • Commercial auto insurance: Your vehicles should have auto liability coverage in case an employee is at fault for hurting someone or damaging another’s property while driving a company car. Additionally, your employees will be protected if they are injured while driving a company vehicle.
  • Commercial property insurance: Office space, inventory, equipment and other physical assets owned by your company are covered if it is damaged or destroyed by a covered event.
  • Business interruption insurance: Covers lost revenue and pays for operational costs (e.g., payroll, rent) if your business has to temporarily close due to a covered loss. For example, this coverage may pay for your employee’s paychecks for the next two pay periods if your warehouse burns down in a fire.
  • Inland marine insurance: Any equipment or tools owned by your business will be protected while in transit between job sites. The coverage limits in a standard commercial property policy may not provide enough coverage.
  • Business owners policy (BOP): This is a bundled policy that includes general liability coverage, commercial property coverage and business income insurance. The general liability will protect the LLC from bodily injury or property damage caused by you or an employee while the commercial property will protect gear and inventory, business goods and damage to structures and will provide income if there is a covered event.

FAQs

What does LLC mean in insurance?

LLC is an acronym that stands for limited liability company. When you form an LLC, your personal assets are separated from your business assets, meaning your personal possessions will not be in danger if someone sues your company.

Can my LLC operate without insurance?

An LLC can operate without insurance depending on its location and industry but workers compensation is required if you employ enough workers. SmartFinancial discourages running a business without coverage or you may face large out-of-pocket expenses if you are sued or suffer a physical property loss.

When should I get business insurance for my LLC?

You should buy business insurance when your company is formed and shop around when it’s time to renew your coverage, if you relocate your business, when your business expands and if your revenue experiences a sharp change.

Do you need liability insurance to run an LLC?

Liability insurance may be required if you have an LLC depending on your industry and where your company is located. Generally, liability insurance is always recommended to ensure you have financial protection if you’re ever held liable for another party’s losses.

Does LLC insurance include errors and omissions coverage?

An LLC insurance policy will usually include errors and omissions coverage, meaning your company will be covered for claims of negligence, misrepresentation, inaccurate advice and personal injury such as libel or slander. This coverage is useful for service-based businesses, like those in accounting, marketing or legal services.

Key Takeaways

  • Limited liability company (LLC) insurance is designed to provide general and professional liability coverage for your business.
  • The cost of LLC insurance will vary depending on the type of business, where the business is located and how many employees the business has.
  • Other types of coverages useful for an LLC may include commercial auto insurance, inland marine insurance and commercial property insurance or a business owners policy.
  • LLC insurance is not usually required by law, though each state and industry will have its own requirements.

Protect you and your business by using SmartFinancial. Enter your zip code below or call 855.214.2291 and we’ll send you your free commercial insurance quotes.

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