What Is LLC Insurance Coverage & How Much Does It Cost?
Limited liability company (LLC) insurance is a set of policies that LLC owners buy to protect their financial assets. Each policy covers a different type of risk, but the most common ones include general liability and commercial property. Most LLCs can combine these coverages into a business owner’s policy (BOP) that can cost $450 to $1,200 annually, depending on the industry.
Shopping for insurance can be confusing, but The Hartford makes it easy to get a quote with tailored coverage. In our evaluation of the insurance landscape, it’s the best provider for LLC insurance—in a matter of minutes, it can generate a quote for your business.
LLC Insurance Costs
The cost of LLC insurance is the total amount of all the policies your business requires. The estimated annual premium for a BOP is $450 to $1,200 annually, but depending on your industry, you may need additional coverage, which can raise the total cost of your insurance.
Estimated Annual Premium
$450 to $1,200
$1 million per occurrence/$2 million aggregate; $10,000 property limit
$500 deductible for first-party property claims
$950 to $2,200
$1 million per occurrence/$2 million aggregate
$500 to $1,000
$2,100 to $4,900 per vehicle
$500,000 combined single liability limit
No deductible for liability
When an insurer calculates the premium, a variety of factors are considered. The specific factors can vary depending on policy and industry, but insurers usually consider the following:
- Risk: LLCs in some industries have a greater chance for losses than others. An LLC in construction, for instance, will pay higher premiums than a cleaning company.
- Claims history: Insurers will request claims history for the last three to five years. Prior losses will be considered in the computation.
- Employees: If you have employees, this can increase the cost of premiums, such as with workers’ comp.
- Training: Depending on the coverage, like with cyber insurance, the training of your employees will matter for the premium.
- Coverage: The limits you request and the deductible you set will impact the amount you pay.
When it comes to the cost of insurance, every situation is unique. If you’re ready to purchase a policy, check out our guide to the best LLC insurance providers.
Most Common LLC Insurance Coverages
For many LLCs, liability insurance is a key concern because almost anyone the business interacts with represents a potential lawsuit. The most common risks LLCs face are covered by general liability. However, liability isn’t the only insurance you should consider—some states might require other specific policy coverages.
Type of Insurance
Brief Coverage Overview
Third-party bodily injury, property damage, and reputational harm
First-party coverage for property and equipment
Third-party claims of professional negligence that caused financial harm
Medical bills and lost wages for employees injured while doing their job
General liability insurance covers the most common business risks from a third-party. The coverage applies to three areas: bodily injury, property damage, and reputational and advertising harm. If your LLC is accused of any of these, general liability insurance will handle the investigation, costs, and legal fees if the matter goes to court.
Some examples of general liability claims would be a
- Delivery driver’s injury in a slip-and-fall incident on your property
- Customer’s shattered window broken while your employee detailed the car
Additionally, products-completed operations coverage is included in many general liability policies. This coverage helps with the cost of any claims related to a defective product.
Did You Know?
If your LLC rents a space, damage caused to the leased property is typically covered by the general liability policy.
Property insurance is a first-party coverage for the physical assets your business owns: buildings, furniture, and equipment. LLCs renting business space can get property insurance only for their business property.
The coverage usually works on a named-peril basis, meaning covered losses are named—like fire, theft, or lightning damage. Commercial property usually limits coverage to the listed locations on the policy. If your LLC has tools and equipment you take to different locations, then you’ll want to ensure those are covered as well by adding either an endorsement to the property policy or purchasing inland marine insurance.
Many providers will offer you general liability and commercial property bundled together as a single policy called a Business Owner’s Policy (BOP). The advantage of this is you have one policy for multiple coverages, and providers will usually offer a BOP for less than if you purchase both policies separately.
This insurance is often called errors & omissions (E&O) coverage. It is for claims that occur when your business made a mistake that either violated a contract or caused some form of financial harm to another involved party. LLCs that provide professional services or advice should consider professional liability.
Some typical claims for this coverage are a
- Claim that a lawyer missed an important court deadline
- Financial planner who provides investment advice causes financial distress to a client
Many providers will combine professional liability with general liability for LLCs that are in a professional service industry.
If your LLC has one or more employees, your state probably requires you to carry workers’ compensation insurance. Some form of this insurance is required in every state except Texas and South Dakota because it helps injured employees with medical bills and lost wages. Some states, however, have specific rules for LLC owners, meaning the LLC members may be exempt from workers’ comp requirements.
Some state-specific workers’ comp rules for LLCs include:
- Alabama: Companies with five or more employees are required to provide workers’ comp. Full-time and part-time LLC members are counted as employees.
- Alaska: LLC members with 10% ownership or more are exempt.
- Colorado: LLC members, under certain circumstances, may choose to exclude themselves from workers’ comp coverage.
- Kentucky: Qualified LLC members can choose whether or not to participate in workers’ comp.
Besides helping your employees, workers’ comp coverage is important so as to stay compliant with state regulations. Check with your local workers’ compensation board to find out the specific requirements in your area. The United States Department of Labor has helpful resources for finding the appropriate authorities for your state.
Less Common Types of LLC Insurance Coverage
Depending on the structure of your business, industry, or risk, your LLC may need additional insurance policies. Here are some additional policies to consider.
Directors and officers insurance or management liability is a specialized coverage for businesses with a leadership board. This policy has coverage for a number of different types of losses, all related to actions taken by the board.
Some allegations include
- Breach of fiduciary duty
- Failure to comply with regulations or company bylaws
- Harassment, wrongful termination, and other employee complaints
- Theft of intellectual property
LLCs with a board of directors can use this coverage to attract board members.
LLCs that store private client information, like credit card numbers or email addresses, or are technology-based, should consider cyber liability insurance. This coverage helps pay for data breaches, client notifications, credit monitoring services, and even public relations campaigns.
While the cost of cyber insurance premiums is rising in 2023, it is because cyber claims are so costly. This means the cost of not carrying cyber insurance for your LLC is a serious business risk.
If your LLC has dedicated work vehicles or is regularly on the clock while driving, then you need to consider purchasing commercial auto insurance. This insurance has multiple types of coverage included in one policy and can offer one policy for an entire fleet of vehicles.
Some standard coverages included are
- Liability: Third-party coverage for bodily injury and property damage when your driver is at fault
- Collision: First-party coverage for damage to your vehicle from an accident
- Comprehensive: First-party coverage for damage to your vehicle from weather-related loss, theft, vandalism, and animal upset
- Medical Payments: Helps cover the cost of injuries to occupants of your vehicle regardless of fault
Frequently Asked Questions (FAQs)
LLC insurance is a policy, or combination of policies, purchased to provide protection against financial loss for your business as a result of first- and third-party claims. The most common LLC insurance policies are general liability and commercial property insurance. In most states, you’ll need workers’ compensation insurance if your LLC has employees.
While an LLC is structured to protect the owner against loss, it doesn’t mean it isn’t susceptible to the same types of losses and risk exposures all other businesses face. If someone is injured on your property because of negligence by the business, the LLC is still responsible for handling any related medical bills. Insurance helps defray those costs.
A BOP for an LLC can range from $450 to $1,200 annually. If you’re in the service industry and get professional liability, the cost can range from $950 to $2,200. Both ranges are for smaller businesses with little risk. The larger the operation or the riskier the industry, the price will increase.
An LLC, like any other business, is still vulnerable to losses. Buying LLC insurance helps protect your business during the difficult time of a claim so that you can focus on growing your company and delivering great service. The Hartford can help you make sure you obtain the necessary coverage so that your company is protected in case something goes wrong. Get a quote for your LLC insurance today.