Many small business owners choose to set up their business as an LLC (Limited Liability Corporation) as opposed to a sole proprietorship or corporation. An LLC protects your personal assets such as your house and your car and keeps them separate from your business assets. Setting up your business as an LLC does have advantages, but there is still some risk involved. That’s why you should purchase LLC insurance (also called business insurance or liability insurance for LLCs). Here are our recommendations of the top 5 providers of LLC Insurance.
- Top 5 Providers of LLC Insurance
- What is LLC Insurance?
- What Business Insurance does an LLC Need?
- General Liability Insurance for LLCs
- What doesn’t LLC Insurance Cover?
- How Much does LLC Insurance Cost?
- What is a Single-Member LLC?
- I thought I was protected by registering as an LLC. Why do I need insurance?
Top 5 Providers of LLC Insurance
CoverWallet: Best for Comparison Shopping
CoverWallet pairs with top insurance carriers such as Hiscox, Liberty Mutual, and Chubb to get you online quotes fast. They can present you with as many as three quotes suited to your business, so comparison shopping is easy.
For our cleaning business in Colorado, CoverWallet got quotes from two carriers:
Keep in mind, this was for a Business Owners Policy (BOP)
The Hartford: Best for Combining General Liability and Professional Liability Policies
The Hartford is one the leaders in small business insurance. They are also one of the oldest and most reputable insurance companies in the world. For LLC customers, they seem to focus on recommending general liability and professional liability insurance, although they do offer other policies as well such as workers compensation, commercial auto, commercial property, and business interruption. It is quite easy to get a quote online with the Hartford.
Here is a quote we got from the Hartford for a cleaning business:
Hiscox: Best for Reasonable General Liability Insurance Quotes
Hiscox specializes in providing insurance to small businesses. They offer a wide range of small business insurance policies. However, for LLC companies, they seem to recommend general liability insurance. It is very easy and fast to get a quote online with Hiscox. The quotes are very reasonable compared to other companies. You can also purchase a policy online as well.
Suracy: Best for Specialty LLC’s
Suracy used to be AmVenture. They specialize in small business insurance and offer a wide variety of coverage—everything you need as a small business owner. They can find coverage for many specialties, so no matter what sort of business you have, Suracy can help you protect your business.
To get a quote, you have to fill out the online form and someone will get back to you.
Simply Business: Best for Those Needing Help Select the Right Insurance Policy
Simply Business builds customized policies for business owners running an LLC. They pair with many large insurance companies, such as CNA, Travelers, Markel, and others to find you the best coverage. They are reported to have very good customer service.
However, the online quoting process isn’t very friendly. After filling out a 6-7 page online form, they said an agent would be in touch with us.
What is LLC Insurance?
While your personal assets are protected as an LLC, you’ll still need insurance to protect the businesses assets in case of accidents, injuries, and mistakes. Many business owners opt to set their business up this way because they believe it protects them from all liability, but in this litigious society, that isn’t true.
What Business Insurance does an LLC Need?
Insurance for an LLC is basically a combination of business insurance policies that protect your business and its assets. This is usually made up of:
- Professional liability insurance
- General liability insurance
Professional liability insurance, also known as Errors and Omissions insurance, protects your business from mistakes you might make (errors), or things you forget to do (omissions). It will cover your legal costs in the event you are sued.
General liability insurance protects you against lawsuits related to customer injuries and customer property damage. It also protects you against product liability and advertising injuries, such as slander or copyright infringement.
Other types of insurance an LLC will want to consider include:
- Commercial property insurance
- Workers’ compensation insurance
- Commercial auto insurance
- Cyber liability insurance
- Umbrella liability insurance
General Liability Insurance for LLCs
If LLCs can afford one business insurance policy only, they should definitely buy general liability insurance. The general liability insurance policy will protect LLCs from law suits in which the business is sued to have caused property damage and bodily injury.
Without general liability insurance, the LLC is still at risk in the law suits. Its assets such as account receivables, property, inventory, equipment, etc. might be liquidated to pay for all expenses related to the law suits.
Sometimes your personal assets may be at risk in these law suits if you don’t separate personal and business assets clearly enough, even you already formed an LLC. A general liability insurance will protect your LLC business and your personal assets from these potential risks.
It is relatively easy to find a reasonable general liability insurance policy for an LLC, any business insurance companies should offer it. Below are a few options for your consideration:
- Hiscox, Liberty Mutual, Chubb, or the Hartford: These established insurance companies offer general liability insurance for small businesses, including LLCs. Some might not offer it online and require you to contact an agent.
- Next, Thimble, Vouch, and Huckleberry: These are new insuretech startups. They definitely offer general liability insurance for LLCs. You can get quotes and buy a policy completely online within minutes.
- CoverWallet and SimplyBusiness: These are national brokers specializing in small business insurance. If you want to compare quotes from several companies before buying, you should definitely consider these two national brokers.
A good general liability insurance policy for LLCs usually costs, on average, $42 a month or $500 a year.
What doesn’t LLC Insurance Cover?
If you decide to go with the most common LLC insurance policies, general and professional liability, you would not be covered for:
- Employee discrimination lawsuits
- Vehicles used for your business
- Employee injuries
- Damages to business property
Those would be covered under a different set of business policies.
How Much does LLC Insurance Cost?
The average cost of a Business Owners Policy for LLCs is $85 a month. The average cost of a general liability insurance policy for LLCs is $45 a month.
Below are the average cost summary for several coverages that most LLCs may need:
|LLC insurance coverages||Average costs|
|Business Owners Policy (BOP)||$85 a month|
|General liability insurance||$45 a month|
|Professional liability insurance||$30 a month|
|Commercial auto insurance||$120 a month|
|Workers comp insurance||$165 per month per employee|
In order to find the best policy for your LLC, you should definitely compare quotes from a few companies. Working with a top digital broker like CoverWallet, Simply Business, ez.insure, or commercialinsurance.net is a good way to get and compare several quotes in one screen.
Learn more at how much does LLC insurance cost.
Learn more at how much LLC insurance costs
What factors affect the LLC insurance cost?
The cost of insurance for an LLC varies, depending on:
- Which particular policies an LLC tries to obtain
- What industry you work in
- How much coverage you want
- Size of your business
- Location of your business
- If you’ve ever filed a claim
How to find cheap LLC insurance?
Here are some tips to help you find cheap LLC insurance:
Get quotes from a few companies or compare the multiple quotes generated by a service like CoverWallet, Simply Business, ez.insure, or commercialinsurance.net. That is the only way to make sure you do not overpay for your LLC insurance.
Make sure you get new quotes before you renew your LLC business insurance policy. Insurance companies update their underwriting policies frequently based on what they learn and how their business performs. Your current insurer may have offered you the cheapest quote a year ago, but may not be the cheapest today when you renew, so make sure you do your homework before renewing.
Get the right coverages only
As we learn above, different coverages cost differently. Some LLCs may need some coverages, but not the others. Make sure you consult with an experienced agent to advise you on the right coverages you need to protect your LLC. Buying the wrong coverage that is costly isn’t a mistake you want to make.
Choose the right coverage limits and deductibles
Higher coverage limits and lower deductibles increase the premiums. While you may not always be able to decrease coverage limits because minimum coverage is sometimes required, for example in commercial auto insurance, you can always increase deductibles to decrease premiums. Whenever possible, decreasing your policy’s coverage limit will help reduce the cost as well.
To reduce the lawsuit and claim probability, you need to implement safety and compliance standards at your workplace, including regular employee training programs. Emphasizing on safety and compliance practices at your workplace will help your employees and your customers pay attention to the right things to avoid accidents happening in the first place.
Ask for discounts
If they’re not offered to you when getting a quote, ask about them, whether you’re buying online or through an agent. Insurance companies always have a few discount programs in place. You may be eligible immediately for one or some of these discount programs. Even if you are not, you can become eligible in a few months if you implement what needs to be implemented in your workplace. At least, you’ll know how to reduce your LLC insurance premiums next time.
Taking these steps will help ensure you’re not paying too much for your LLC business coverage.
What is a Single-Member LLC?
A single-member LLC is just what it sounds like—a limited liability company consisting of just one person. Setting yourself up as a SMLLC requires a bit more work than calling yourself a sole proprietor but offers more protection. You will have to submit articles of incorporation to your secretary of state’s office and pay the fees.
I thought I was protected by registering as an LLC. Why do I need insurance?
Your personal assets are protected, but not your business assets. Furthermore, there are some circumstances where your personal assets are not protected, even as an LLC. They are:
- You personally caused someone’s injury
- Fraudulent or reckless behavior
- Mixing personal and business assets
- White collar crime (or any other crime)
- Failure to pay business taxes
In all of these circumstances, someone can sue both you personally and your business. It is especially important to keep business and personal expenses separate. If you mix them, a lawsuit could go after both of them since it’s hard to tell which is which.
If you fail to pay your business taxes, the IRS will go after your personal assets to pay them.
Although registering as an LLC does bring certain legal advantages, it doesn’t protect you from everything. It’s important to get insurance for your small business to add an extra layer of protection.