LLC Insurance Cost

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Forming a limited liability company (LLC) is the first step most people take when starting a new business. Doing so separates your personal assets from those of the business, but that protection only prevents you from personally being held responsible. Your company is still liable for the risks of conducting actual operations. LLC insurance is the best way to protect your business.

The cost of LLC insurance can vary considerably based on a number of factors. To make an informed decision, you must evaluate the risks of your industry and your particular business and find the policy to best cover your concerns and needs.

We’ll Cover

  • How much does LLC insurance cost?
  • What is LLC insurance?
  • What does LLC insurance cover?
  • What does LLC insurance NOT cover?
  • Benefits
  • Types of insurance you may need
  • Tips for buying
  • How to save on LLC insurance during a crisis
  • FAQ
  • Summary

How Much Does LLC Insurance Cost?

The cost of LLC insurance is highly dependent on both your business itself and the type of coverage you choose to include in your policy. Insurance companies typically base premiums on your number of employees and payroll, whether your location makes you more susceptible to litigation, the risks of the work you do, and your insurance history. Most LLC insurance policies combine coverage for liability and property and cost anywhere between $350 and $5,000 annually. For instance, a small accounting firm would be considered low risk and might see rates of $350 per year; while a similarly-sized delivery business with several vehicles is higher risk and will have rates closer to $2,000 a year.

What Is LLC Insurance?

While the LLC business structure protects your personal assets from getting caught up in business lawsuits, the company itself is still vulnerable. LLC insurance is a type of policy that covers a firm against various risks of business operations. It provides a combination of general and professional policies that protects your company and covers it against claims from injury or damage caused by your services, products, or employees.

What Does LLC Insurance Cover?

LLC insurance policies protect a company from liabilities relating to business conduct that can include the following:

  • Bodily injury or illness to clients, employees, or third parties
  • Property damage
  • False or misleading advertising
  • Malpractice, errors, negligence, or omissions
  • Damage to business assets
  • Business-owned vehicle accidents
  • Legal costs

Your specific coverage will depend on the policy package you choose. While basic LLC insurance might protect you from most of your potential liabilities, each business has its own particular risks. Review your policy to understand your coverage and add specialized insurance to fill in any gaps.

What Does LLC Insurance NOT Cover?

While LLCs do protect your personal assets from business claims and debts, there are some circumstances that are NOT protected, including:

  • Personally injuring someone
  • Incorrectly paying business taxes
  • Engaging in fraudulent, reckless, or irresponsible behavior
  • Signing a personal loan guarantee
  • Negligent or criminal behavior
  • Mixing business and personal expenses

Benefits of LLC Insurance

LLC insurance offers numerous benefits to cover risks, including:

  • Protecting business assets: If a client, third party, or employee is injured on your property, or if your services cause harm, your company may be liable, and without LLC insurance, its assets may be liquidated to cover the costs.
  • Complying with regulations: Certain types of insurance, like workers’ compensation, disability, or unemployment tax, may be required to operate in your state. Adding such coverage to your LLC insurance puts you in compliance.
  • Cover legal expenses: If a client, employee, or third party files a lawsuit against your business, LLC insurance will cover the expenses, including attorneys’ fees and damages.

Types of Insurance Your Business May Need

LLC insurance offers various types of coverage for the different needs of each industry and your business in particular.

  • General Liability Insurance: Protects your business from injury or accident claims, property damage, false or misleading advertisement, and pays related costs and expenses.
  • Product Liability Insurance: Provides coverage for lawsuits resulting from injury or property damage from your products.
  • Professional Liability Insurance: Businesses that provide services or offer advice are at risk of claims resulting from alleged malpractice, errors, negligence, and/or omissions. Professional liability insurance covers related legal costs and damages.
  • Directors and Officers Liability: This policy protects your company’s directors and officers if accused of wrongdoings and helps pay for legal expenses and damages.
  • Property Damage Insurance: Covers your business property against natural or human-caused disasters.
  • Commercial Auto Insurance: Helps cover damage if a business-owned vehicle is involved in an accident.
  • Business Income Insurance: Replaces lost income if you are unable to conduct business.
  • Workers’ Compensation Insurance: Required to operate in many states; workers’ compensation covers your business from medical expenses and lost wages if an employee is injured or becomes ill while working.

Tips for Buying

When considering the cost of LLC insurance, keep the following in mind before making your decision:

  • Insurance bundling: Bundling your various insurance needs may help you save on insurance premiums with discounted rates.
  • Work with an independent agent: LLC insurance policies are extremely complex and there are countless companies that seem to offer the same service. An independent agent will help assess your policy needs and direct you to the broker that best serves your industry.
  • Compare quotes: Policy costs vary considerably between insurance providers. Make sure your agent brings several quotes to the table to find the best rates and coverage for your needs.

How to Save on LLC Insurance During a Crisis?

Your company is subject to risks in the best of times, but the stakes become even higher in the middle of a crisis. You may be taking actions to cut costs in times of uncertainty, but reducing your coverage may not be necessary. Check your policy–changes you have already made may result in savings. Consider the following:

  • Reducing your workforce: Your workers’ compensation insurance is dependent on your number of employees. If you were forced to make some layoffs, your rate might decrease.
  • Reduce your insurance providers: By purchasing more of your insurance needs from one source, your bookkeeping will be simplified and the broker may provide discounts resulting in lower rates.
  • Pay-As-You-Go: Instead of large upfront payments, some insurance companies allow monthly premiums, allowing you to keep more money on hand.

FAQ

Why do I need LLC insurance?
There are plenty of risks, both as a result of your actions and completely outside your control, when you own a business. LLC insurance coverage protects your company from the financial devastation of lawsuits or asset loss.

Doesn’t a limited liability company already act as LLC insurance?
No. Forming a limited liability company only prevents your personal assets from being used to cover damages from claims against your company. LLC insurance is necessary to cover potential liabilities from your company’s activities.

Is LLC insurance mandatory?
Some types of insurance are mandatory depending on your industry and location. For example, almost every state requires workers’ compensation insurance; and some also require disability and unemployment tax coverage. Even though general LLC insurance is not mandatory, most experts recommend proper coverage to protect your company and allow it to succeed.

Summary

Despite the personal protections afforded by a limited liability company, only LLC insurance protects your business from the potential for financial ruin or even bankruptcy following a lawsuit.
By understanding the cost of LLC insurance and determining the particular needs of your company and your industry in general, you can assemble a policy that covers all your potential risks and feel secure that your business is protected.

Typical cost is

$350-$600/Year

The cost of LLC insurance varies considerably depending on the industry, the particulars of the company, and exactly what types of coverage are included in the policy. Rates start as low as $350 per year, but can be as high as $5,000.