Owners of Limited Liability Companies (LLCs) often have the mistaken impression that the legal structure protects them from lawsuits and other business threats and risks. The truth is that it may protect your personal assets from business lawsuits, but your LLC still faces the same risks as corporations and other types of businesses. That’s why LLCs need general liability insurance.
A general liability policy, also known as business liability insurance or commercial liability coverage, can help protect you from claims alleging you or the employees of your LLC caused bodily injury or property damage or reputational harm. If you run an LLC, you will need to have LLC general liability insurance coverage.
Here’s everything you need to know about general liability insurance for limited liability companies, it’s cost, and how to get it.
- General liability insurance for LLCs: The basics
- Are LLCs required to carry general liability insurance?
- What does general liability insurance for LLCs cover?
- What other coverages do LLCs typically buy?
- How much does general liability insurance for LLCs cost?
- How to find cheap general liability insurance for LLCs
- How to get general liability insurance for LLCs
General liability insurance for LLCs: The basics
General liability insurance for limited liability companies helps protect against claims of damage to other people’s property, bodily injury, and other issues. This coverage is sometimes referred to as business liability insurance or commercial general liability insurance.
Businesses of all types, including LLCs, need this coverage because accidents, injuries, and other types of incidents often happen during the normal process of conducting business.
Some examples of covered incidents include:
- A customer at your shop trips over a wire, breaks a leg, and sues your business for medical costs.
- An electrician unintentionally causes a power surge while fixing wiring at a client’s home, damaging thousands of dollars worth of computers, televisions, and other electronic equipment.
- An employee breaks a client’s valuable vase while making a delivery to their home.
- A worker forgets to place warning cones and post a sign after washing a floor at a client’s business. Because of it, someone slips, falls, and injures her hip when walking over to the copy machine. This results in tens of thousands of dollars in medical and recovery costs.
In all these cases, general liability insurance would help pay replacement, repair, medical, legal and settlement costs resulting from the incident.
Are LLCs required to carry general liability insurance?
In most cases, your LLC is not required by law to carry general liability insurance. (The one coverage that’s typically required by states is workers’ compensation insurance, especially if you have employees.) Some employers or clients might require you to carry a certain amount of general liability coverage before you can work for them. Most landlords will require that you secure the coverage before they’ll rent business space to you. Businesses in certain industries, such as electricians, plumbers, and contractors get coverage so they can use “Licensed and Insured” as a marketing tag line.
In any case, it’s a good idea for businesses to have it. In the situations outlined in the previous section, general liability insurance would likely cover the expenses related to the incidents. If the business owner didn’t have coverage, he or she would have to pay for the damages out of pocket. Even LLCs aren’t immune to business lawsuits.
Could a lawsuit impact my personal or business assets?
Possibly. LLCs are not necessarily foolproof or impenetrable entities. The answer to this question is more of a legal issue than an insurance related one. You should consult with a legal expert to find out for sure. The good news is that the impact on your business assets could be less if you have general liability coverage.
What does general liability insurance for LLCs cover?
General liability insurance helps pay for property and other types of damage that occur as a part of doing business. It also helps cover injuries that happen on your business property. Typically, general liability insurance can help pay claims related to:
- Third party property damage caused by you or an employee while conducting business
- Medical costs if your customer or client gets hurt when visiting your business
- Reputational harm resulting from malicious slander, libel, violating a person’s privacy, and more
- Advertising issues, such as copyright infringement and mistakes on your website.
What does general liability insurance not cover?
General liability insurance provides very specific types of coverage. It doesn’t protect all aspects of your limited liability company or the risks it could face.
Here are some examples of things that are definitely not covered:
- Bad professional advice: If you or someone who works for you provides a client or customer with incorrect or incomplete advice, general liability won’t cover it. You’ll need to buy professional liability insurance to be protected. Learn more at the best professional liability insurance companies.
- Business property damage: General liability covers third party property damage, but it doesn’t cover damage to your business property, including buildings, equipment, or merchandise. You’ll need commercial property coverage for this. Learn more at the best commercial property insurance companies.
- Business Owners Policy: If you want to combine general liability and commercial property coverages in one policy to save money and make it simpler to manage, you can get a business owners policy (or BOP). It is also easier to add other coverages as endorsements to a BOP such as cyber security coverage or employment practices liability coverage. Learn more at the best BOP insurance companies.
- Crime or theft: If an employee commits a crime against your business or steals from it, general liability will not make your business whole. You will have to purchase employee dishonesty insurance.
- Data theft or loss: If your business data is lost, compromised, or stolen, your business general liability coverage won’t pay for related costs. Cyber security insurance covers those losses. Learn more at the best cyber insurance companies and the best data breach insurance companies.
- Employee injuries: Your general liability insurance covers injuries to clients, customers, and passers-by that happen on your business property. However, it doesn’t cover workers injured while on the job. You’ll need workers’ compensation insurance for that. Learn more at the best workers comp insurance companies and the cheapest workers comp insurance companies.
- Vehicle damage: If a business-owned truck, van, car, or other vehicle is damaged in an accident while being used for work related purposes, your general liability policy wouldn’t cover it. You’ll have to buy commercial auto insurance for that protection. Learn more at the best commercial auto insurance companies and how to find cheap commercial auto insurance.
What other coverages do LLCs typically buy?
There are additional types of insurance many small businesses purchase. These include:
- Errors and omissions: This covers businesses for mistakes, errors, forgetting to convey information, misrepresentations, and more.
- Employee dishonesty: Workers are often tempted to take tools and equipment from job sites. This coverage will help you recover losses from employee theft.
- Umbrella liability: This provides additional coverage over your policy’s limits. This is protection contractors who face costly risks should consider. Learn more at the best commercial umbrella insurance companies.
How much does general liability insurance for LLCs cost?
The average cost of general liability insurance for LLCs is about $55 a month.
The price of general liability coverage can vary more than almost any other type of business insurance. It’s dependent on many factors, including the type of business, size of the operation, condition of business property, number of locations, and the specific risks faced by the business. The cost of this coverage can range from several hundred to many thousands of dollars a year.
The best way to ensure you’re paying a fair price for your general liability coverage is to get quotes from multiple providers. That way, you can compare coverages and costs to find the best combination for you. If you have any doubts, speak with an experienced insurance agent.
How to find cheap general liability insurance for LLCs
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 and compare prices and coverages.
- Don’t stop shopping around. Make sure you get new quotes before you renew your 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 general liability coverage.
How to get general liability insurance for LLCs
There are three ways you can get general liability insurance:
Here’s an overview of each, examples of insurers, and the pros and cons of them.
Getting LLC general liability insurance from digital brokers and marketplaces
If you prefer to do things online, a digital broker or marketplace could be ideal for you. Examples include:
- CoverWallet: A top online insurer that can get you competitive quotes in minutes.
- Policy Sweet: An experienced business insurance broker with decades of experience working with small businesses across the countries
- Insureon: A fast digital business insurer that allows you to chat online with a business insurance expert.
- Commercialinsurance.net: Provides quotes from local agencies so you can compare coverages and prices.
Pros of digital brokers and marketplaces:
- Relatively low coverage costs because of limited infrastructure.
- Simplest way to see multiple quotes at once.
- Quick way to get coverage. Can provide you with a certificate of insurance in minutes.
Cons of digital brokers and marketplaces:
- Can sometimes be difficult to customize coverage.
- May need to complete more complex insurance transactions over the phone.
- Not all insurers are represented on every marketplace.
Here is a sample LLC general liability quote from CoverWallet.
Getting LLC general liability insurance from traditional insurers
If you have more complex business insurance needs, or don’t feel comfortable buying coverage online, it might make sense for you to get protection from a traditional insurance company. Examples include:
- The Hartford: One of the oldest, most established, and ethical business insurers in the United States.
- Travelers: Solid coverage from a leading business insurer you can purchase through an agent affiliated with the firm.
- Hiscox: A leading and respected multinational business insurer.
Pros of traditional insurers:
- Easy to get professional support when purchasing general liability and other LLC coverage.
- Generally committed to preventing work related risks.
- Usually financially strong and stable and able to pay claims.
Cons of traditional insurers:
- More difficult to get multiple quotes and compare them than marketplaces and digital brokers.
- Typically more expensive to get coverage than from digital insurers.
- May take longer to get coverage than from online insurance companies.
Here is a sample LLC general liability quote from The Hartford.
Getting LLC general liability insurance from insuretech startups
If you prefer working with cutting edge companies, an insuretech startup could be right for you. Some examples include:
- Next: A financially sound insuretech, backed by MunichRe, a top tier insurer and reinsurer.
- Embroker: A relatively new company that has become an expert at using technology to reduce the cost of general liability and other business insurance.
- Vouch: An insuretech that works exclusively with startups and new businesses.
Pros of insuretech startups:
- Typically the lowest cost providers because of low overhead and their use of modern, efficient technology.
- Provides the best online insurance shopping experience because the technology backing up insuretechs is cutting edge.
- Can usually get insurance coverage in minutes, with no need to speak with a company representative.
Cons of insuretech startups:
- Small startup insurers may not provide round the clock customer service.
- Coverages and customization options may not be as flexible as other types of insurers.
- Certain insuretechs may not be as financially sound as more established insurance companies.
Here is a sample quote from Next.