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LLC Insurance

How to Find LLC Insurance

One of the key reasons for starting a limited liability company (LLC) is to separate your personal liability from your business operations. As a business owner, you want your personal assets to be protected in case your business is taken to the mat with a liability insurance claim, or worse – a lawsuit.

It’s essential that you find the right LLC insurance to protect your business against coverage gaps. A Trusted Choice® member agent can help you find LLC insurance coverage that meets your needs. Local member agents are familiar with your state regulations and LLC insurance requirements and will work with you to tailor a policy that meets your business needs. For professional assistance, contact a Trusted Choice member agent today.

Limited Liability Exceptions

You can be held responsible ("liable") for things you do while performing work for your limited liability company. For example, your LLC will most likely not protect you if:

  • You personally injure someone
  • You personally guarantee a business loan or debt
  • You don’t manage your business taxes correctly
  • You intentionally commit a crime or engage in fraudulent or reckless behavior that damages the company
  • Rather than treating your company as a separate business entity, you mix business and personal accounts or expenses

Does a Limited Liability Company Act as LLC Insurance?

Starting an LLC does not protect you from all threats. For example, a fire can break out and can damage equipment and other business property. This means that while an LLC designation can provide important protection, it does not act as insurance.

It is also important to understand a concept called "piercing the corporate veil." You can think of an LLC as a kind of barrier between your business operations and your personal finances. However, certain errors you make can allow the legal system to break through that barrier. For example, if a limited liability company takes on excessive business debt, a legal team can sometimes hold the business owners accountable for those debts.

Consulting in depth with both your independent agent and your attorney about your personal risks with regard to your LLC activities is wise, and can help to ensure both you and your business are protected.

LLC Insurance Requirements Vary by State

LLC insurance requirements are set by the state government, so make sure you’re complying with state business insurance laws when you begin operation. Your required coverage may include:

  • Workers compensation: All states require this coverage, regardless of whether the business is a limited liability company. But the specific requirements vary by state. Some states require workers compensation whether or not a company hires staff members, and some require it if the business has a certain number of employees, such as three or more.
  • Disability insurance: Some states require businesses to contribute to disability insurance. Whereas workers compensation covers work-related injuries and illnesses, disability insurance covers non-work-related incidents and illness that prevent a worker from returning to work.
  • Unemployment insurance tax: Check with your state to determine if this tax is required. It is designed to help cover the costs of unemployment insurance for workers who lose their jobs. You may need to register your company with the state workforce agency as well.

Property Insurance Coverage for LLCs

Property insurance is one of the critical forms of business insurance that all companies operating from a business site should purchase. This coverage protects your business property from damage or loss due to a covered cause, such as fire. A good commercial property policy will include coverage a variety of things, ranging from the structure of your building to your personal property stored at the business site. Be sure to examine your policy closely for any exclusions.

This type of insurance is typically offered in three forms:

  • Basic: Similar to your homeowner policy, this will cover a list of perils including fire, certain natural disasters, and vandalism. However, it may not cover theft.
  • Broad: This expands the list of perils so that you have added coverage.
  • Special form: Instead of naming the things that are covered, this policy provides the most protection and only lists perils that aren’t covered.

Note that flooding is rarely covered by a commercial property policy.

Liability Insurance For LLCs

Although there are many forms of commercial liability insurance, not all will protect you or your business if you’re held responsible for certain errors. Be sure to talk with a knowledgeable independent agent who can help assess your risks and choose the appropriate coverage for your commercial operation.

Just how extensive your liability needs are depend on the type of business you operate and the risks you face. There are a few different liability insurance options for LLCs:

  • General liability: If a customer is injured while on your property or you’re accused of slander, this policy will help take care of medical expenses, legal defense costs, and judgements/settlements. Setting the right coverage limit will be the key to protecting your LLC.
  • Product liability: If you’re active in any step of product manufacturing or product sales, you need this coverage. You can be held liable if the product causes injury or property damage.
  • Professional liability: Also known as errors and omissions insurance, or "E & O," this is best for LLCs that provide professional services. For example, a doctor will need a form of professional liability known as malpractice insurance, which is specialized for the medical field, while an investment firm needs E & O coverage for advice provided to clients that can potentially result in a financial loss.
  • Directors and officers liability: Also called "D & O," this liability coverage protects your company in the event that legal action is brought against one or more of your directors or officers due to accusations of negligence or wrongdoing.

Of course, there are many other forms of LLC insurance coverage that you may need. If you have a fleet of vehicles, for example, you will need to purchase commercial vehicle insurance that covers all employee drivers, vehicle damage and your company's liability in the event that you or a staff member is at fault for an accident.

Additionally, you may also want to invest in business interruption insurance, which can help cover the expenses it takes to keep running your business if you’re displaced due to a building fire or natural disaster.

How Much Does LLC Insurance Cost?

Costs for the insurance package you need to protect your company will vary widely based on factors such as the type of business you run and the specific types of coverages you need. Additionally, your specific LLC insurance costs will depend on how many employees you have and whether you work in a litigation-prone industry. For this reason, it's a good idea to compare LLC insurance quotes based on your unique business and risks.

Whereas a small business with few risks may only need to pay a few hundred dollars per year for adequate protection, a larger corporation can easily require protection in excess of $500,000 annually. To get accurate LLC insurance quotes that are tailored to your business risks, work with an independent agent in the Trusted Choice network who can fully assess your needs and find the right coverage at an affordable rate.

Protecting Your LLC

Trusted Choice member agents who specialize in commercial coverage can work with you to determine what forms of LLC insurance are best suited to your business. Don’t overpay for coverage that you don’t need. Your member agent will assist with setting the right coverage limits and finding competitive LLC insurance based on your risk factors. Find an independent agent in the Trusted Choice network today for personal assistance.

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