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Business Insurance for LLCs: Coverage, Cost, & Providers

Have you set up your small business as a limited liability company (LLC) because you’re risk adverse and want to protect your personal assets against business related lawsuits and other issues? Maybe you’re thinking about structuring your small business as an LLC. Here’s everything you need to know about LLCs and how to use business insurance coverage to add an additional level of protection for your limited liability company.

Before selecting a structure for your business, check with a lawyer who can explore your options with you.

What is LLC business insurance?

Many small businesses register as LLCs. It allows them to separate business assets from personal belongings. Put simply, if you’re sued and someone wins the lawsuit, they would not be able to win any of your personal assets, such as your home, cars or jewelry. 

However, it doesn’t protect your business from all the risks it faces. Depending on your industry, LLC insurance may be necessary.

LLC insurance is more formally known as limited liability company insurance. It helps protect LLCs from different types of liability claims, like bodily injury or property damage caused by your:

  • Business
  • Employees
  • Products
  • And more.

What does LLC business insurance cover?

Limited liability company insurance provides coverages to help protect businesses from financial losses. There are two types of LLC insurance: professional liability and general liability.

Professional liability insurance for LLCs

Mistakes can happen even at the most careful and by-the-book operations. Professional liability insurance (also known as errors and omissions insurance or E&O coverage) protects you and your LLC if a client of customer sues you because you or someone who works for you makes a mistake providing services to them.

Example: Imagine that you’re the owner of an accounting firm. One of your employees makes an accounting error. The mistake leads to a many thousand dollar penalty that your client is forced to pay. They sue your business to recover the penalty. Professional liability insurance can help cover costs related to the claim.

General liability insurance for LLCs

A general liability policy, also known as business liability insurance, helps protect your LLC against claims of bodily injury or property damage.

Example: Imagine that you own a decorating business. A client visits your office and trips on a carpet and breaks an ankle. General liability insurance would help pay his medical costs. Also, if an employee breaks an expensive vase while arranging some furniture at the client’s home, general liability protection will help pay the costs to replace it.

General liability insurance can also help cover claims if you make an mistake in promoting your business or infringe on a copyright. 

Example: If you publish an ad for your business and it features a photo you don’t have permission to use and you’re sued for copyright infringement, a general liability policy can help cover costs that result from the claim.

Other coverages LLCs should consider

Many owners of LLCs purchase these coverages to protect their businesses:

  • Workers’ compensation insurance provides benefits to people who work for you if they’re injured or become ill because of job-related reasons. Most states require this coverage for businesses that have employees.See more in the best workers comp insurance companies
  • Commercial auto insurance covers accidents and injuries that happen when you or your employees are driving a vehicle for business reasons. In most cases, on-the-job incidents aren’t covered by personal policies. See more in the best commercial auto insurance companies
  • Commercial property insurance covers damage and losses to your business location and its contents if they’re damaged by a fire or covered weather event or your company experiences a burglary or theft. See more in the best commercial property insurance companies
  • Business income insurance can replace lost income if your business is unable to operate for covered reasons. See more in the best business income interruption insurance companies

Is business insurance required for an LLC?

If you have employees, it’s likely your state will require you to carry workers’ compensation insurance. Otherwise most coverages are voluntary. Still, LLCs face the same risks most businesses do and it’s a smart idea to get insurance to protect your operation. If you don’t have it, you could be forced to pay for property damage, theft, lawsuits, settlements and more with business assets. This often ruins companies, even ones protected by LLC agreements.

Cost of LLC business insurance 

Many factors impact your LLC insurance premium cost. It depends on the type of small business you run and the risks that it faces. On average, an LLC pays $500 to $1,200 a year for liability insurance coverage, both general liability and professional liability.

Examples: A landscaping business may need commercial auto insurance because it depends on company-owned trucks for the work it does. An accounting firm’s employees may never need to drive for business, so the firm wouldn’t have to pay for this coverage. The landscaping company is also a higher-risk industry than the accounting firm when it comes to worker injuries and potential damage to property. However, the accounting firm may be more at risk professionally because it could be sued if an employee makes a calculation error. All these things and more would go into calculating LLC insurance premium costs. 

Whichever coverage you decide to buy for your LLC, make sure to shop around with a few companies or with digital broker like CoverWallet so that you can compare several quotes to choose the best and the cheapest one for you.

How to find cheap limited liability company insurance coverage

Here are some tips to help you find the coverage you need at a fair price:

  • Shop around for the best value. Get quotes from a few companies or compare the multiple quotes generated by a service like CoverWallet. 
  • Never stop shopping around. Make sure you get new quotes before you renew your LLC business insurance policy.
  • Take advantage of discounts. If they’re not offered to you when getting a quote, ask about them, whether you’re buying online or through an agent.

Taking these steps will help ensure you’re not paying too much for your LLC business coverage.

Top 4 business insurance providers for LLCs

Here are our top four providers of coverage for LLCs, along with what makes each one unique.

  • CoverWallet: Best for LLCs that want to compare business insurance quotes quickly
  • The Hartford: Best for LLCs looking for a sound and ethical insurer
  • Hiscox: Best for LLCs with unique business insurance needs
  • Next: Best online experience

CoverWallet: Best for LLCs that want to compare business insurance quotes quickly

CoverWallet is a cutting-edge insurance provider. The firm has developed its own state-of-the-art platform, based on its own algorithms, to ensure it is able to connect small businesses, including LLCs, with all the business insurance they need, at the most reasonable price. The platform makes it quick and easy to get quotes from several providers at once, making it possible to compare quotes from highly reputable insurers all on a single screen.

The firm’s experts have used their extensive experience to make sure you only have to input the information needed to generate quick and accurate quotes. The entire process should take less than ten minutes.

You can feel confident knowing that CoverWallet is a part of Aon, an established company that provides advice to businesses on things like risk, health and retirement.

Once you get your quote, CoverWallet makes it easy to purchase business insurance online or through an agent. When you get your LLC  policy through CoverWallet, it’s simple to manage your coverage online, including downloading a certificate of insurance, filing a claim, renewing your insurance and more. 

 Here is a sample LLC business insurance quote from CoverWallet.

The Hartford: Best for LLCs looking for a sound and ethical insurer

The Hartford is one of the oldest companies of any kind in the United States. It’s been offering insurance solutions for 200 plus years and has helped one million plus businesses with their insurance needs. The company takes pride in the fact that the Ethisphere Institute named The Hartford a World’s Most Ethical Company twelve times. The Hartford’s longevity and focus on ethical business practices makes it a company that risk adverse small business owners can feel good about doing business with.

The Hartford’s dedicated and highly experienced small business team is available to help company owners explore their business liability and other commercial insurance options. If you decide to purchase insurance from The Hartford for your limited liability company, you can rest assured knowing you’re entrusting your business to a strong, stable, knowledgeable and ethical provider.

Here is a sample of an LLC quote from The Hartford.

Hiscox: Best for LLCs with unique business insurance needs

Hiscox is a leading player in the small business insurance space. The firm makes it easy to purchase LLC business insurance online, although you may need to speak to a representative to complete your quote. You can also connect with experienced business insurance experts who can help you customize your coverage to meet your unique business needs.

If you choose Hiscox for your business coverage, you can rest assured knowing you’re entrusting your limited liability company to a firm that’s been in operation since 1901. It specializes in small business insurance and more than 400,000 smaller companies choose Hiscox for their insurance needs.

Hiscox is known for tailoring insurance solutions to the individual requirements of small businesses. The company also offers top tier service, provides fast quotes, instant coverage and quick claims processing.

Next: Best online experience

Next is changing how LLCs purchase insurance.

Their operation is focused on delivering the ultimate online insurance experience. Because of this, you’re able to purchase a policy, file a claim or get a certificate of insurance any place, any time, 365 days a year. Even though Next is an online insurer, you can get expert help over the phone when you need it. The firm is also known for being able to make most claims decisions within 48 hours.

Even though Next is a relatively new and innovative company, you can rest assured knowing it has an excellent rating from A.M. Best, an insurance company rating agency. All the company’s policies are backed by MunichRe, an established insurance firm and reinsurer. More than 10,000 business owners have turned to Next for their insurance needs. The firm has earned a solid 4.7 customer rating. 

One caveat about Next: It offers LLC insurance coverage for a limited number of industries.

Here is a sample LLC insurance quote from Next.

What is a limited liability company (or LLC)?

A limited liability company (LLC) is a way a business can be structured for legal, tax, and other purposes. Other options include things like corporations, partnerships and sole proprietorships. LLCs are governed by state, not U.S. government, laws, rules and regulations. You should work with a lawyer in your state if you are thinking about setting up a Limited Liability Company to make sure the rules governing it are aligned with how you want to run your business.

The owners of an LLC are known as members. Most states do not limit what can count as a member, so it could be an individual, corporation, other LLC or a foreign entity. There is no membership cap, so you can have as many as needed. Most states also allow LLCs with a single member, meaning the business owner is the only one.

There are a few types of businesses that usually cannot be LLCs. Examples include banks and insurance companies. There may also be special rules for foreign participation in LLCs. It’s a smart idea to consult with your tax advisor before setting up an LLC to ensure it will provide you with favorable tax status. 

What are the benefits and disadvantages of setting up an LLC?

There are many attractive aspects of an LLC, including:

  • It allows you to run your business how you want to, especially when compared with other business structures.
  • You limit your personal liability and that of your business partners.
  • You avoid double taxation, which is an issue you could face with certain other business structures.
  • It could make it possible for you to avoid certain administrative and paperwork issues.
  • You will likely enjoy greater flexibility in how you can distribute the profits your business earns.

The key benefit of an LLC is that you can enjoy significant freedom in how you run your business, while protecting your personal assets — and those of your members — against business risks. Put simply, no one will be able to sue you and take your home or other personal property if you or someone who works for you makes a workplace error that harms someone and your business is sued over it.

There are two key disadvantages of an LLC :

  1. Cost: An LLC usually costs more to form and maintain than a sole proprietorship or general partnership. Many states charge higher fees to set them up and additional ones to maintain them.
  2. Ownership transfer: Ownership of an LLC is generally more difficult to transfer than with a corporation. It’s relatively simple to buy and sell stock shares in a corporation. Typically, with LLCs, all the members have to agree to any changes in membership.
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