Bob Haegele is a freelance writer specializing in a variety of topics, including credit cards, insurance, banking, and small to medium business (SMB). He has been freelancing since 2018 and become a full-time freelancer in 2020. His work has been published at Yahoo Finance, Newsweek, Business Insider, and several other well-known publications.
Bob has a passion for helping others learn about money but understands there is rarely a one-size-fits-all solution to financial problems. That’s why he enjoys helping people get into the weeds of financial topics, learning as much as possible to make a more informed decision.
5+ years in insurance and personal finance content
Ashley is a seasoned personal finance editor who’s produced a variety of digital content, including insurance, credit cards, mortgages, and consumer lending products.
At Insurify, our goal is to help customers compare insurance products and find the best policy for them. We strive to provide open, honest, and unbiased information about the insurance products and services we review. Our hard-working team of data analysts, insurance experts, insurance agents, editors and writers, has put in thousands of hours of research to create the content found on our site.
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Business insurance for limited liability companies (LLCs) provides liability coverage against potential damages. LLCs provide some protection by separating your business assets from your personal assets, but business insurance takes it a step further. This type of insurance protects you against a hefty lawsuit.[1]
Business insurance isn’t required for all LLCs, but state laws often require specific types of business coverage. For example, if you have employees, most states require workers’ compensation insurance.
If you’re a business owner, here’s what you need to know about protecting your LLC.
Quick Facts
Many business insurance types exist for LLCs, such as general liability and professional liability insurance.
Business insurance policies typically protect your property, customer injuries, or mistakes leading to customers’ financial losses.
General liability policies typically cost between $500 and $1,000 annually.
Do you need business insurance for an LLC?
If you’re a business owner with an LLC, you might think you don’t need additional protection. But forming an LLC only separates your personal assets from your business assets. It doesn’t protect your business assets.
You might have to file a claim for many reasons, such as property damage, bodily injury, or errors when performing a service. Business insurance for LLCs provides coverage to mitigate these risks.
You may need business insurance in several situations. For example, federal law requires businesses with employees to have workers’ compensation, unemployment insurance, and disability insurance. State laws may have additional requirements.[2]
Types of business insurance for LLCs
Most LLCs should consider business insurance to protect them against liability claims, but it’s also required in many situations. In addition, LLCs have many insurance options, which can vary based on industry, size, and risk.
Given the long list of insurance options companies have, it can be challenging to wrap your head around all the different choices. This section breaks down some of the most common types of LLC insurance.
This is the most common type of insurance for LLCs. It provides coverage in various circumstances, such as customer injuries, property damage, and claims against your business. If a customer slips and falls while at your business, a general liability policy may cover any medical expenses.
Also known as errors and omissions (E&O) insurance, businesses providing a service need this coverage. Mistakes can occasionally lead to financial losses or other problems for your customers.
Professional liability insurance can protect you when someone files a claim due to a mistake your business made. This insurance is standard for companies that give advice or provide a professional service.
Commercial auto insurance covers medical expenses and property damage if your business-operated commercial vehicles are involved in an accident. Many types of businesses operate commercial vehicles, and for those businesses, commercial auto insurance may be required.
Property insurance provides coverage for business property, tools, and inventory. If your property or the items it contains are damaged or stolen, property insurance may cover you. Many risks exist for commercial property, such as fire, theft, and vandalism.
This insurance covers medical bills and lost wages for employees who get hurt or sick while on the job. Every state except Texas requires workers’ compensation insurance for businesses with employees.
An umbrella policy provides extra protection beyond the limits of other policies. For example, you may have general liability insurance but face a claim for a higher amount than the policy covers. This policy can cover you against those larger claims.
When business insurance makes sense
You might be reluctant to consider business insurance, especially if you operate with razor-thin margins. But most business insurance policies protect you against things like lawsuits or losses resulting from property damage or client claims.
Despite the added expense, the wide-ranging coverage business insurance provides is often well worth the cost. For example, imagine you’re a general contractor, and one of your workers damages a client’s home during the project. Liability insurance provides coverage in these situations.
Good to Know
While business insurance provides coverage in many situations, it does have exclusions. It’s important to read your policy documents to understand your coverage.
Optional coverage for your LLC
Optional policies aren’t required by law, but they can still be worth considering. Depending on your industry, you might be subject to various risks. These risks can cost you money, whether due to injury, damage, or compromised digital assets.
Some optional business insurance coverages include:
Product liability
For businesses selling physical goods, this protects against claims that your product caused bodily injury or property damage. This may be part of a general liability policy, but it can also be stand-alone coverage.[3]
Employment practices liability insurance
This protects against employee injuries and HR disputes.
Cyber insurance
This coverage protects against financial losses due to cyberattacks and data breaches. These attacks can lead to expenses like data recovery and legal fees.[4]
Another common form of business insurance is a business owners policy (BOP), which combines multiple types of business insurance, such as general liability, property, and business interruption coverage.[5]
What business insurance for an LLC doesn’t cover
While standard business insurance covers many situations, it doesn’t cover everything. It’s important to understand the potential exclusions that may apply to business insurance for an LLC.
Some typical exclusions to business insurance are:[6]
Intentional injury: If someone is injured due to an intentional act, business insurance typically won’t cover it.
Unmet contractual obligations: If another business doesn’t honor the terms of its contract, business insurance usually won’t cover it.
Natural disasters: Business insurance policies usually don’t cover damage or losses due to flooding, earthquakes, or mudslides.
Where to get business insurance for an LLC
If you’re looking for business insurance, you can buy it from a broker or directly from an insurance company.[7] Each of these options has potential pros and cons. For instance, a broker can offer plans from multiple insurance companies. On the other hand, when you buy directly from the insurance company, it may have better information about the granular details of the policy.
When choosing an insurance policy for your LLC, you likely have no shortage of options. Before committing, research premiums, coverage, and insurer reputation to select the best insurance company for your business needs.
Cost of business insurance for an LLC
The cost of business insurance for an LLC can vary widely, but a general liability policy is the most common type and generally ranges from $500 to $1,000 annually. Several other factors can also influence your business insurance cost, such as your industry and risk level, the type of product or service you offer, and your business claim history.
With so many factors affecting the price, getting multiple quotes and comparing policy terms can help ensure you get the best deal.
How to buy business insurance for your LLC
Purchasing business insurance for your LLC is an excellent way to safeguard both you and your business. If you’re ready to start the process, follow these steps:
Evaluate your business risks. Every business is different and faces a unique set of risks. Evaluating your business risks will help you determine how much coverage you need.
Decide on needed coverage types. Numerous types of business insurance are available. Consider your business type and the risks it faces to decide what kinds of coverage you need.
Gather business information for quotes. Request quotes from several insurers to determine which one best fits your needs.
Compare quotes and review policy documents. Compare coverage limits, premiums, and deductibles. Then, review policy documents from each insurer.
Choose your insurance company and pay your premium. Determine which insurer best meets your budget and needs, then pay your first premium.
After purchasing your policy, request a certificate of insurance. This proves you have an active policy.
Business insurance for LLC FAQs
Business insurance is a complex topic, and you may still have questions. Here are answers to some of the most common questions about business insurance for LLCs.
How much does LLC insurance cost?
Business insurance for an LLC typically costs between $500 and $1,000 annually for general liability insurance. Many factors influence insurance costs for a business, such as your business size, risks, and the type of insurance policy you have.
Is business insurance required for an LLC?
Business insurance isn’t always legally required, but it’s always wise to protect yourself and your business assets. Federal or state laws often mandate certain types of business insurance, such as workers’ compensation for companies with employees.
Should you insure yourself or your LLC?
Most businesses should have at least a basic policy, such as general liability insurance. This ensures your business assets won’t be at risk due to a liability claim or a lawsuit.
Is an LLC automatically insured?
No. Establishing an LLC separates your business assets from your personal assets, but it doesn’t provide insurance. Purchasing business insurance is a great way to protect yourself and your business, and federal and state laws often require it.
How long does it take to get business insurance for an LLC?
The timeline varies, and the underwriting process differs for each business. You can sometimes get same-day coverage, but getting business insurance for an LLC can take up to one week in some cases.
Bob Haegele is a freelance writer specializing in a variety of topics, including credit cards, insurance, banking, and small to medium business (SMB). He has been freelancing since 2018 and become a full-time freelancer in 2020. His work has been published at Yahoo Finance, Newsweek, Business Insider, and several other well-known publications.
Bob has a passion for helping others learn about money but understands there is rarely a one-size-fits-all solution to financial problems. That’s why he enjoys helping people get into the weeds of financial topics, learning as much as possible to make a more informed decision.
5+ years in insurance and personal finance content
Ashley is a seasoned personal finance editor who’s produced a variety of digital content, including insurance, credit cards, mortgages, and consumer lending products.
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