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Does An Llc Need Insurance

Business Owners Policy For Llcs

Do you need insurance if you own a single member LLC?

Think of a business owners policy as a bundled insurance package for small businesses. It can be a great fit for LLCs because it covers some of the most common risks you may face, including property damage and liability.

BOPs typically come bundled with these three policies:

  • General liability insurance. This covers accidental injuries and property damage to others. General liability insurance also pays for legal costs, judgments and settlements if youre sued.

If your LLC has vendors or customersor if you lease or own propertygeneral liability insurance is highly recommended, says Dana Beck, Chief Underwriting Officer, Small Commercial, at Travelers. In fact, vendors and landlords often require it. But there are differences between a standalone general liability insurance and business owners policy.

Average Llc Insurance Costs

While we cant tell you exactly how much to budget for LLC insurance, we can give you a rough idea of what to expect.

The table below shows some typical ranges for different LLC insurance policies.

How much do LLC insurance policies cost?

Insurance type
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As you can see, the average ranges can be pretty big. Thats because, as we said, so many factors go into your business insurance cost. So if you want to know how much LLC insurance will cost your specific small business, your best bet is to get a quote.

Does A Limited Liability Company Act As An Llc Insurance

Forming an LLC does not mean you’re protected from all threats. There is an important concept to understand called “piercing the corporate veil.” An LLC is like a barrier between the member’s personal finances and business operations. Think of it like this: a fire can start and cause damage to the business’ property. The building itself will provide protection, but does not take the place of insurance.

If a limited liability company has a lot of debt, a legal team will hold the business responsible for the debts. However, talking to the company’s attorney and independent agent about any personal risks they might be exposed to is smart. Doing so makes sure both the business and the owners are protected.

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Pros And Cons Of Having Llc Insurance

There are a few pros and cons to having LLC insurance. The main pro is that it can provide some protection for your business if something bad happens. For example, if someone steals money from your LLC, the insurance will cover the losses. The con is that LLC insurance can be expensive, so its important to figure out what coverage you need. Additionally, if your LLC is sued, the insurance may not provide enough coverage to protect you. Finally, its important to make sure you have the right type of LLC insurance. There are different types of LLC insurance, and each one has its own benefits and drawbacks.

What Isnt Covered By General Liability Insurance For Llcs

Small Business Llc Insurance Cost
  • Harm to your employees. General liability insurance doesnt cover bodily injury claims for people you employ. Instead, youll need a workers compensation policy to cover medical costs or other fees associated with workplace injury or illness.
  • Negligence, error or oversight. Youll need professional liability insurance, also called errors and omissions insurance, to protect you if a client sues for erroneous or inaccurate advice or services.
  • Commercial vehicles. If you or your employees get in a road accident in a company vehicle, youll need commercial auto insurance to cover expenses associated with repairing your own or another partys car, or to pay for medical bills in the event of bodily injury.
  • Harm past your maximum limit. Even if a claim falls within the scope of general liability insurance, you could still face a large bill if the claim exceeds your policys coverage amount. To pay that additional amount, youll need excess liability coverage, which kicks in after a general policy limit has been reached.

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Who Can Skip Llc Formation

Forming a business entity like an LLC or corporation is almost never a bad idea, but it isn’t always an absolute necessity for solo business owners.

To decide whether you need an LLC, consider:

  • Whether you plan to have partners, employees, or outside investors.
  • Whether you have significant contracts or creditors that might lead to financial problems or lawsuits. For example, an unpaid creditor or court judgment could easily cause personal financial trouble if you own commercial real estate, but that’s much less likely for most consultants and Etsy sellers.
  • Whether you want to have the additional expenses and obligations of forming and running an LLC. There’s a fee to form an LLC, and in most states, you must file annual reports and pay an annual fee. You will also need a separate LLC bank account.

If you’re trying to limit your business liability, make sure you have adequate business insurance. If you have business partners, employees, or significant risks, an LLC can provide another important layer of protection.

How Llc Insurance Coverage Works

LLCs need insurance to cover the possible losses that could affect the company. These losses can come from many different sources, including:

  • Lawsuits from customers for physical injury or property damage
  • Clients accusations of negligence
  • Damage to expensive business-owned property
  • Medical bills for employees workplace injuries or illnesses

Unfortunately, you cant just buy one policy to get all the necessary protection. A different policy covers each risk, so most LLCs need multiple policies to be protected fully.

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Llc Business Insurance Built For Llcs

Our local agent can evaluate your unique situation and advise you about the business insurances you need to protect your assets and the hard work of establishing your company. Various types of insurance are not just a good idea the state may mandate them. Some of the coverages you may need beyond professional liability insurance or general liability insurance include:

  • Workers Compensation Insurance: Depending on the number of employees, you may be required by the state to have workers comp insurance, which will protect you against illnesses or injuries related to your business.
  • Commercial Auto Insurance: If you or an employee are involved in an accident while performing work-related duties, you need to have commercial auto insurance in place.
  • Business Income Insurance: If your business is shuttered due to various types of covered property damage, these policies can replace the income you lost up to the policy limits.
  • Commercial Property Insurance: Your business equipment and the facility where you operate are protected by this type of insurance, whether you rent, lease, or own. If you rent a facility, your landlords policy does not cover your LLCs business equipment.

Set a time to meet with one of our agents. We can guide you to the right policies for your LLC and always seek out the best coverage at the lowest rates.

How Much Does Llc Small Business Insurance Cost

Do I Need Insurance for My LLC? – Counseling Practice Q& A

A business owners policy costs $57 per month on average, with 12% of business owners paying less than $33 per month, according to Insureon.

Your LLC small business insurance costs will vary depending on factors such as:

  • Your type of business
  • The size of your business
  • Location of your business
  • The years of experience of your business
  • The amount of coverage you buy
  • Your insurance deductible amount

Read Also: General Liability Insurance For Llc

Contact Christensen Group Today To Discuss Your Small Business Insurance Needs

At Christensen Group, our team is comprised of specialized business insurance experts who are invested in weaving together solutions that are right for your risks. No matter where you are in your business, we deliver a high-touch experience through dedicated consultants who are here to bring clarity as they find creative ways to address your most pressing challenges. Speak with one of our business insurance professionals today to get started.

Most Popular Llc Insurance Policies

Your business industry, size, and other factors will determine what kinds of insurance you need. But theres a good chance youll want one of more of these popular kinds of business insurance:

LLC insurance types

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When in doubt, check out your local laws. You might find that you need workers compensation or professional liability to stay in the clear.

But remember, you can get plenty of value out of policies that arent legally required. While you might not be required to get general liability insurance in your state, it can protect your business from all kinds of claims, which saves you money in the long run.

Read Also: How Do Insurance Deductibles Work

What Is A Sole Proprietorship

A sole proprietorship is a business thats owned and operated by one person. Its the easiest type of business to form because its unincorporated, meaning you dont have to file any paperwork with your state government.

You might need a business license from your local government, and of course, you would need any professional licenses that are required by your industry.

As a sole proprietor, you could run your business using your personal bank account, although business experts recommend keeping a separate set of books for your business and personal life.

Either way, your business income and your own personal income would be one in the same under the law on a pass-through basis. You wouldnt have to file a separate tax return for your business, and you would likely report your business income on a Schedule C form with your personal tax return.

You would also have to do business under your own legal name. If you want your business name to be something different than your legal name, you would have to register it as a doing business as with your state or local government when you apply for a business license.

Why An Llc Doesnt Limit Your Business Risks

How Much Does Professional Liability Insurance Cost?

Unlike a sole proprietorship, an LLC will protect your personal finances. But an LLC is just like any other business structure when it comes to risk.

Your LLC is at financial risk any time your actions cause a physical or financial injury.

An LLC wont soften the financial blow a business lawsuit could have on your company. Here are some examples of common risks and their potential impact on an LLC:

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Llc Insurance Requirements Vary By State

The state government sets LLC insurance requirements, so it’s important to comply with their insurance laws before starting an LLC. Workers compensation is required in all states, no matter if a business is a limited liability company or not. However, the requirements differ by state. Some states make it mandatory to have workers compensation regardless if a company hires staff members, while others require it based on a certain amount of employees.

Disability insurance is another type of insurance to which some states require businesses to contribute. Workers compensation will cover illnesses and injuries that are work-related, while disability insurance covers incidents and illnesses that are not related to work but prevent an employee from coming back to work.

Some states require unemployment insurance tax while others do not. This helps workers who lose their jobs by covering the costs of unemployment insurance. An LLC may also need to register their company with their state’s workforce agency.

Who Benefits The Most From An Llc

Your business is most likely to benefit from being an LLC if either of these is true:

  • You have co-owners or employees. Without an LLC or other business entity, your personal assets are at risk if your business is sued for something a co-owner or employee does. An LLC’s operating structure also helps to avoid conflict and misunderstandings between you and your business partners.
  • Your business has significant risks. Some types of businesses are at high risk for failure. Others have both financial and liability risks. For example, multiple LLCs are a common strategy for rental property owners to ensure that financial problems with one rental don’t jeopardize the othersor your own life savings.

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Who Sells Llc Insurance

LLC insurance is available from many different insurance companies, and the best way to find the right carrier for you is through working with an independent insurance agent. Independent insurance agents know which insurance companies to recommend to meet your needs, and can provide informed suggestions based on company reliability, rates, and more.

While many insurance companies could offer LLC insurance for you, finding coverage could also depend on the area you live in. Here are a few of our top picks for LLC insurance carriers.

Top LLC Insurance Companies
  • Business income insurance
  • Commercial property insurance

Though several insurance companies offer coverage for LLC’s, The Hartford’s LLC insurance package provides the most comprehensive coverage around. The Hartford also has “A+” ratings from both AM Best and the Better Business Bureau. Overall, The Hartford earns its spot as our top pick for LLC insurance.

What Does Repair Insurance Cover

Do You Need an LLC and Insurance To Start A Lawn Care Business
  • Customer complaint coverage. Repair insurance can help cover costs when customer complaints are investigated and resolved. It can also help pay for associated legal fees.
  • Faulty workmanship coverage. This covers financial liability if customers complain about low-quality repairs. Coverage can help pay for damages and legal fees associated with the case.
  • Breach of contract coverage. This type of coverage protects businesses accused of breaching customer contracts. It can help pay for damages awarded to customers and any associated legal fees.
  • Personal injury coverage. This coverage helps protect businesses from financial liability if customers are injured while on-premise. It can help pay for medical expenses as well as associated legal fees.

Also Check: North Star Mutual Insurance Company

How To Protect Your Llc: Business Insurance

As you can see, LLC status is not a foolproof solution when it comes to protecting all facets of your life. There are many scenarios in which your personal assets and business assets could still be at risk. Thats why most business owners should consider business insurance. There are a few types of insurance for LLCslets take a look!

What’s The Difference Between A Sole Proprietor And An Llc

The IRS defines a sole proprietor as a person who owns an unincorporated business. Any person who has their own business but isnt registered as a corporation, partnership, or a limited liability company is considered a sole proprietor, by default.

A sole proprietor is personally liable for any debt accrued by the business, including lawsuits and other business obligations. Sole proprietorships tend to be low-risk businesses and startups whose owners prefer the simplicity of a sole proprietorship, and who dont need the kind of personal liability protection that an incorporation as an LLC would provide.

So, while sole proprietors would benefit from receiving all of the business profits themselves, they also face all of its liabilities on their own without the legal protections of an LLC.

If a sole proprietor owes money from a debt or lawsuit and the business assets arent enough to cover it, creditors could go after the owners personal assets. If the business was an LLC, the owners assets would be protected from any claims made against the business.

Sole proprietors can make business decisions on their own, whereas decisions made by an LLC must be made by its members, in accordance with its operating agreement. Running an LLC can be especially complicated if the owners have different stakes or ownership amounts.

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Thimble: Best For Llcs That Only Need Temporary Coverage

  • Policies are available by the job, week or month to cover you for specific events.
  • Thimbles certificate manager allows your contractors or subcontractors to buy insurance policies that comply with your requirements.
  • Customer service is only available via live chat and email, not phone.

General Liability Insurance For Llcs

What Kind of Insurance Does an LLC Need?

Small businesses established as an LLC may need general liability insurance, which is very affordable and often the best choice for a startup or smaller business. It covers you should you accidentally damage customer property and a range of other basic risks, including property damage, bodily injury, court fees, legal fees, medical payments, damages associated with advertisements, or accusations of slander, libel, or defamation.

This type of business insurance is usually very affordable and is the first insurance for a smaller business. As the business grows, have your policies reviewed every year, as you may need to increase limits or add professional liability insurance.

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Dont Llcs Already Offer Liability Coverage

Yes, an LLCs structure aims to limit the impact that a claim can have on the business owners personal finances. If youre sued, for example, your personal assets should be safe so long as your business and personal finances are separate and nothing illegal occurred. However, this may not apply to the businesss assets. If your business is sued, then LLC insurance can help.

What Is Property Insurance

If your LLC owns property, either in real estate or physical inventory, you may need insurance to protect you against fire, vandalism, and certain natural disasters. Property, Fire, and Casualty Insurances address these types of hazards and there are many insurers to choose from. A good policy will cover a variety of disasters and comes in 3 different forms , so be sure and choose your policy carefully and note anything it may exclude.

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