A limited liability company (LLC) is a type of business entity that protects company owners from personal liability. While LLCs protect owners’ personal assets, LLC insurance protects the business from liability arising from accidents, injuries, or mistakes. LLCs can save money with a Business Owner’s Policy (BOP) that costs $1,281 per year on average.
If you have an LLC, you should be sure to work with an insurer that bundles policies to save money for small businesses. The Hartford offers policies that provide coverage for many different aspects of small business. Visit The Hartford today to get a quote in minutes.
How Liability Insurance for LLCs Works
LLCs need protection from many possible sources of loss that could affect the company. Unfortunately, there’s not just one policy to buy to get all of the necessary protection. LLCs need different coverage for different risks, including risks specific to their industry.
General liability coverage and property damage coverage are two of the most important insurance types for LLCs. General liability coverage pays for claim costs and settlements or damages if the LLC is sued for injury or property damage. Property damage coverage pays if the LLC’s property is damaged. A BOP bundles this coverage for more affordable premiums.
Top LLC Insurance Providers
| Provider | |
|---|---|
| The Hartford | Bundled policies that allow you to get full coverage for potential loss |
| AP Intego | Work with nationally licensed agents to find the best policy at the best price. |
| Trusted Choice | Help from an independent agent comparing quotes from multiple insurance providers |
| Insureon | Obtaining quotes from multiple online providers with a single online application |
| American Family Insurance | Determining your coverage needs with a helpful online assessment tool |
The Hartford
The Hartford makes it easier than most insurers to buy liability insurance for LLCs, so if simplicity is your goal, this is the place to start your search for LLC insurance. The Hartford has insurance policies customized for different industries so small business owners can buy the right bundled plan without extensively researching which policies are right for their situation.
AP Intego
If you aren’t sure what insurance company you want to use, AP Intego can help you identify the right provider to insure your LLC. AP Intego matches you with a team of nationally licensed agents who will help you find multiple quotes from top insurance companies, such as Travelers and AmTrust. Visit AP Intego today to get the policy that works best for you.
Trusted Choice
If you want to compare LLC insurance quotes from different providers but aren’t sure where to start, Trusted Choice can help. Trusted Choice will match you with an independent agent to obtain quotes from trusted carriers. This personalized help is ideal if you need a little more advice on what coverage to buy. You can request a quote online or search for an agent in your area to provide in-person assistance navigating your insurance options.
Insureon
When you’d prefer to compare quotes online quickly, rather than wait for an agent to help you, Insureon is your best resource. Insureon allows you to submit one application that takes around 15 minutes to complete. You’ll get quick quotes from multiple top-rated insurance carriers, and an agent can help you to navigate different policy offers to find affordable, comprehensive coverage that meets your needs.
American Family Insurance
American Family Insurance is the right place to turn when you’ve just started shopping for coverage and aren’t sure what your needs are. You can use its Business Needs Assessment to find out exactly what coverage is right for you. This Business Needs Assessment walks you through the process of determining your coverage needs in an easy-to-understand format, and then makes it easy to get quotes on policies that provide the necessary protections.
Types of Liability Insurance for LLCs
Every LLC needs a BOP because any company risks loss in case a visitor is hurt or an employee damages property. Depending what the LLC does, other coverage is also necessary. Many LLCs are formed by professional service providers like doctors or lawyers, who need professional liability coverage. Others might be formed by construction workers who need builder’s risk insurance.
The most common types of liability insurance for LLCs include a BOP, professional liability coverage, commercial auto insurance and workers’ compensation.
Most Common Types of LLC Insurance
| Type of Insurance | What it Covers |
|---|---|
| Business Owner’s Policy | General liability and property damage to the LLC’s property |
| Professional Liability Coverage | Liability related to professional errors |
| Commercial Auto Insurance | Liability and property loss resulting from automobile accidents |
| Workers’ Compensation Insurance | Injury to employees on the job |
Business Owner’s Policy
Every LLC should have a BOP. A BOP is the most affordable way to obtain coverage in case your LLC is sued or has its property damage. As an example, if someone sues after falling at your headquarters or your building is damaged in a fire, your BOP pays for lawsuit defense costs, a settlement or damage award or repairs to your own property.
Don’t assume you aren’t in need a BOP because forming an LLC limits liability. While your personal assets aren’t at risk, a judgment could be entered against the company that the business is forced to pay. Liability insurance for LLCs is always required because the risk for loss exists in every industry.
Professional Liability Coverage
If your LLC provides professional services, professional liability coverage protects you for claims arising out of your work. A lawyer sued for malpractice for missing an important court deadline or a doctor sued for an incorrect diagnosis requires professional liability coverage to pay for legal defense costs as well as a judgment or settlement.
Your LLC may not require this coverage if you do not engage in any business activities for which you could be sued based on the work you do. If the only risk of being sued is an injury on your premises, your general liability policy will cover you, and you won’t need separate professional liability coverage.
Commercial Auto Insurance
When your LLC owns company cars or work trucks, commercial auto insurance provides protection if you or an employee is operating a company vehicle and you cause an accident. The policy pays for legal defense costs and money provided to the accident victim in a settlement or court verdict. You’d also be covered for the damage to your own work vehicle.
If your LLC does not own vehicles and employees do not drive for work, your LLC won’t require this coverage.
Workers’ Compensation Insurance
LLCs that have staff need workers’ compensation insurance to protect workers injured on-the-job. Policies provide coverage for medical benefits arising from work injury, loss of wages and disability. Workers’ compensation is required in most but not all states — Texas doesn’t require it, for example — but some states don’t mandate coverage until you have several employees.
If you have no employees, you still may need workers’ compensation insurance to cover yourself and other LLC owners. If you’re the sole owner and employee, you may not require coverage if your state doesn’t mandate it. However, if you opt out, you wouldn’t receive benefits in the event of an injury.
LLC Insurance Costs
When pricing LLC insurance, you’ll need to add up costs of each different type of coverage. In most cases, it is possible to buy add-ons to a BOP so that you can obtain additional coverage, such as commercial auto insurance, from the same provider. You can expect to pay around $500 to $3,500 for a BOP providing $1 million in coverage and more for additional coverage. A professional liability policy, on the other hand, would cost around $1,735 for $2 million in coverage and a commercial auto policy would run $750 to $1,200 per vehicle for $1 million in coverage.
| Insurance Type | Average Premium Cos | Deductible |
|---|---|---|
| Business Owner’s Policy | $500-$3,500 | $500 |
| Professional Liability Coverage | $1,735 | $1,000 |
| Commercial Auto Insurance | $750-$1,200 per vehicle | $500 |
| Workers’ Compensation | $2,000-$3,000 | $0 |
Many factors determine costs associated with coverage including:
- The specific industry your LLC does business in: Obstetricians face the highest risk of a medical malpractice lawsuit, for example, so an obstetrics practice would pay much higher premiums for professional liability coverage than an LLC formed by a swimming pool cleaning company
- The number of employees: The more employees you have, the more expensive workers’ compensation is and the more expensive your commercial auto insurance if each worker operates company vehicles
- Your past claim history: If you have made claims in the past on your policies, premiums rise accordingly because you present a greater risk to the insurer
Tips for Getting LLC Insurance
Obtaining coverage for your LLC can sometimes be complicated, especially as you try to determine all of the different protections your business requires. These tips can help ease the process of finding the right policies. Tips include looking at the big picture when buying a policy, applying for coverage early and defining your priorities for the coverage you’ll require.
Don’t Shop on Price Alone
When looking for LLC insurance, buying the cheapest policy may be tempting but likely isn’t the right approach for something as important as protection from liability.
“Not all insurance policies are created equal,” warned Walt Capell, president of Workers’ Compensation Shop. “If one policy is dramatically lower in price, there’s usually a reason for it. That reason is rare because the carrier is offering better coverage or they service their customers better than their competitor.”
“Not all insurance policies are created equal,” warned Walt Capell, president of Capell explained that margins tend to be low in the insurance industry, so it’s uncommon for carriers to discount coverage deeply. A price that seems much lower than others should send up red flags.
Apply for Coverage Early
Capell recommends that you start shopping for coverage at least 90 days before you need your policy to go into effect to ensure you have sufficient time to get multiple quotes and compare insurers.
Getting multiple quotes “almost always results in better rates or better coverage for your business,” according to Capell. You should get at least three quotes, which takes time, and you don’t want to be rushed into making a decision because you need coverage right away.
Define Your Priorities for Coverage
Finally, Capell recommends defining your priorities when seeking coverage and, if you’re working with an independent insurance agent, sharing your preferences with that agent.
“It’s important to take adequate time to express your priorities to your insurance agent during the quoting process,” he said. “If you value a low price, let them know that, and they can negotiate on your behalf for a lower price. If you value extra coverage, they can look for policies that have extra coverage for your unique business needs.”
Capell strongly suggests you get an agent to help you, as independent agents work on your behalf to get you the right coverage.
LLC Insurance Frequently Asked Questions (FAQ)
If you’re confused about the specific coverage your LLC needs or want more help getting questions answered, our forums are a great resource. You can also read on to get some answers to frequently asked questions below so you’ll be better prepared when you start shopping for LLC insurance.
Some of the most frequently asked questions about LLC insurance are:
Why Do I Need LLC Insurance?
LLCs are vulnerable to losses from many different potential disasters, ranging from lawsuits based on professional negligence to someone getting hurt on your premises, to your work vehicle sustaining damage. The National Center for State Courts reports the median cost of litigation for professional malpractice is $122,000, so the losses could be substantial.
Even though your personal assets are protected because of your LLC status, you don’t want your company to lose a lawsuit or incur substantial unexpected costs for property damage. LLC insurance provides protection.
Is There Anything LLC insurance Won’t Cover?
Most LLC insurance policies have exclusions, meaning you aren’t protected from certain losses. For example, if your company is sued because you did something illegal, such as if you commit fraud, your insurance policy won’t protect you. If you don’t pay your payroll taxes, you won’t be protected from the financial consequences like IRS fines.
Do We Still Need Workers’ Compensation if All Employees Are LLC Members?
While laws can vary by state, workers’ compensation is typically not required for LLC members if the LLC has no employees. However, if the LLC does employ staff members and obtains a workers’ compensation policy, member-owners who work for the LLC may automatically be covered by the policy. You should check with your local workers’ compensation board to find out the specific requirements in your area. The U.S. Department of Labor provides helpful resources for determining the appropriate authorities to consult in your state.
The Bottom Line
Buying insurance is important when you own an LLC because, like any other business, yours is vulnerable to losses. Make sure you obtain the necessary coverage so that your company is protected in case something goes wrong. Getting covered gives you peace of mind and ensures that a simple accident or natural disaster doesn’t force your business to close its doors.
The Hartford specializes in providing insurance to small businesses including LLCs. Using The Hartford, you can bundle coverage to meet the specific needs of your small business and get the right coverage for the right price. Visit The Hartford today to get a quote in minutes.
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