If you've previously established your firm as an LLC, you might be wondering if that's sufficient. An LLC, after all, divides your personal assets from your business assets. Do you really need to go above and above and purchase LLC insurance as well?
A wise investment is business insurance. No matter if you're a sole proprietor with a fledgling freelance business or the CEO of a construction company, some forms of coverage are necessary for all businesses. Here are the most popular coverage kinds and a closer look at why your LLC might want business insurance (regardless of its size).
What is insurance for a small business LLC?
Small business LLC insurance refers to protection options for the corporate property. Liability insurance is one crucial sort of business insurance, for instance. This protects your LLC from issues such as unintentional property damage and injury to others, like a consumer who slips and falls while making a purchase at your store.
You have a variety of options for small company insurance. Select the coverages that best meet the demands of your LLC. For instance, you can purchase a commercial vehicle insurance policy if you utilize a car for business purposes.
Small business insurance is crucial to have, even with an LLC. This is so that litigation won't harm anything except your own assets thanks to your LLC structure. Unless you obtain LLC small business insurance, it entirely exposes your company's assets.
What Is LLC Small Business Insurance Coverage?
Fundamentally, LLC small business insurance guards your company against monetary damages in the event of an accident. The types of coverage you purchase will determine what is covered.
Here are a few of the most common kinds of insurance for small businesses.
Business owners' LLC policies
Consider a business owner's policy (BOP) as a small business insurance bundle. It can be a fantastic fit for LLCs because it addresses some of the most frequent hazards you might encounter, such as liability and property damage.
BOPs frequently include these three policies:
A general liability policy. This covers unintentional harm to others' property and property damage. If you are sued, general liability insurance also covers any court fees, verdicts, and settlements.
According to Dana Beck, Chief Underwriting Officer at Travelers, "general liability insurance is strongly required if your LLC has vendors or customers—or if you lease or own property." In fact, landlords and suppliers frequently demand it.
Insurance for commercial property. As an LLC, you probably own some commercial real estate, such as inventory, equipment, or office furnishings. Commercial property insurance can assist you with making repairs or replacing the property if it is damaged or destroyed due to an issue covered by your policy (such as a fire).
Insurance against business disruption. If you have to temporarily close your doors because of a situation covered by your policy, this coverage can help your LLC stay alive. Imagine, for instance, that a major storm causes damage to your office, forcing you to close for two weeks while repairs are completed. The cost of rent at a temporary location, employee pay, and other necessary costs can be covered with the aid of business interruption insurance.
Additional business insurance options for LLCs
BOPs are a terrific place to start, but your LLC may also require other kinds of commercial insurance. Depending on your circumstance, you might want to think about one or more of the following coverage types in addition to a BOP:
Commercial auto insurance. Most likely, coverage for use on business is not included in your personal auto insurance policy. If you or any of your workers use your car for business-related purposes, you must have commercial auto insurance.
insurance for workers' compensation. In most states, you must obtain workers' compensation insurance if you have at least one employee. This kind of insurance can assist you in paying for medical expenditures, missed income, and other costs related to diseases or accidents that occur at work.
insurance covering professional liability This kind of insurance also referred to as errors and commissions insurance is essential for any LLC that offers professional services like consulting, accounting, or financial planning. It aids in defraying the expense of claims involving professional errors.
Paige Nelson, Director of Product Development at Acuity Insurance, asserts that mistakes can still be made even when you're following all the appropriate procedures. "Even though installing the incorrect flooring didn't cause any damage, it still needs to be redone if you're a contractor. That error would be covered under this coverage.
Insurance for product liability. Product liability insurance is a useful coverage option to have if your LLC makes, designs, distributes, or sells physical things. In the event that your products lead to property damage or third-party injuries, it may assist you to pay the expense of litigation.
Do You Need Insurance for Your LLC Small Business?
LLC small business insurance may be a requirement in various high-risk industries like manufacturing, construction, and agriculture. However, LLC insurance is still strongly advised, especially in low-risk sectors like freelancing, bookkeeping, and other home-based businesses.
The future is uncertain, and you never know when a criminal will steal your laptop, when an artist will sue you for copyright infringement, or when a client will sue you for breaching a service agreement.
Many companies run successfully for years without being sued, but Nelson warns that the costs associated with legal representation could be disastrous.
Consider it this way: Even if it's simply professional or general liability coverage, you need some kind of LLC small business insurance if you don't have the cash to replace costly equipment or defend yourself in a protracted legal battle.
How Much Does Insurance For LLC Small Business Cost?
According to Insureon, the average monthly cost of a business owner's coverage is $57, with 12% of owners spending less than $33 per month.
Your small company insurance expenses for your LLC will vary based on things like:
number of years of experience
How much insurance you're purchasing
Your insurance deductible sum
Registering claims for insurance
Your type of business
Your job site
Number of Employees
the size of your business