A limited liability company (LLC) is a business entity that protects company owners from personal liability. While LLCs protect owners’ personal assets, LLC insurance covers the business’s liability in accidents, injuries, and mistakes. LLCs can save money with a business owner’s policy (BOP) that costs between $350 – $1,600 per year.
If you have an LLC, you might need multiple coverage types to protect your business from losses. To make the process easier, reach out to a reliable insurance broker such as CoverHound. They will simplify shopping for insurance by allowing you to compare policies from top carriers. Check out CoverHound to find proper coverage fast.
How LLC Insurance Works
LLCs need insurance to cover many possible sources of loss that could affect the company or even the owners personally. Unfortunately, there’s not just one policy to buy to get all the necessary protection. LLCs need different coverages for different risks, including risks specific to their industry.
General liability and commercial property insurance are two of the most important insurance policies for LLCs. General liability coverage pays for costs that follow third-party injuries and damages, including medical bills, repair bills, and settlements or judgments if the LLC is sued after a covered event. Property insurance pays if the LLC’s property is damaged. A business owners policy (BOP) bundles these coverages for more affordable premiums.
Top LLC Insurance Providers
Small business insurance companies have target industries—essentially, businesses they prefer offering coverage to. As a result, LLC owners often find working with online insurance brokers a convenient way to get coverage. Brokers can assess their risks, determine their coverage needs, and usually offer quotes from multiple carriers for comparison.
Top LLC Insurance Providers
|CoverHound||LLC owners who need fast quotes from top carriers|
|AP Intego||LLC owners who want to pay-as-you-go workers’ compensation insurance|
|Insureon||LLC owners who want to save on their business insurance|
|American Family Insurance||LLC owners who want help determining their coverage needs|
|Insurance321||LLC owners who don’t have time to research insurance coverages and companies|
Here are five insurance companies to consider for LLC insurance.
CoverHound is an online property and casualty (P&C) platform that partners with many top-rated carriers to bring insurance solutions to small business owners. Its partners include financially sound small business specialists such as Nationwide, Chubb, and Liberty Mutual, that can offer key commercial coverages.
CoverHound is built to deliver fast rates on general liability, professional liability, workers’ compensation, and commercial auto insurance, and this makes it ideal for business owners who need immediate quotes. Most applications see quotes from more than one carrier in under two minutes.
AP Intego is an online broker that specializes in small business insurance in a number of industries including healthcare, trades, and business services. As a broker, AP Intego can get over quotes from many quality carriers such as Travelers and AmTrust.
LLCs with employees should consider getting quotes from AP Intego to take advantage of its pay-as-you-go workers’ compensation plan. By charging a monthly premium, AP Intego minimizes the chance of LLC owners overpaying or underpaying for workers’ comp. Moreover, AP Intego’s technology integrates with many payroll service providers, including Gusto and Square so that LLC owners can set up automatic payments.
Insureon is an online small business insurance agency that makes it easy for LLC owners to comparison shop. Business owners spend about 15 minutes completing a single application, and Insureon’s technology submits its information to all available carriers, many of which may offer instant quotes.
While Insureon’s application is longer than most, it often provides multiple accurate quotes, and this makes Insureon a great choice for LLC owners looking to save money on their insurance. Most business owners save 10% to 20% when they shop with Insureon.
American Family Insurance
American Family Insurance is an insurance carrier, which means the company creates, manages, and sells its own insurance products. The company has been in the business of helping small companies meet their insurance needs for 85 years and has grown to be one of the top 20 largest P&C insurers in the nation.
American Family Insurance is a great place to turn when you’ve just started shopping for coverage and aren’t sure what your needs are. LLC owners can use American’s business needs assessment tool to determine the appropriate coverage or work with a local agent who can walk them through their options.
Insurance321 is an online insurance company designed to eliminate the guesswork that sometimes comes with applying for coverage. LLC owners who choose Insurance321 submit their business information, and then a representative contacts them to evaluate their risk further. After that, the company’s technology matches the LLC to the right insurance provider.
LLC owners who don’t have time to research all of their insurance needs but what to be sure they get appropriate coverage should consider working with Insurance321. The company’s process makes applying for coverage easy and minimizes the chance of the LLC’s application being declined.
Types of Liability Insurance for LLCs
Most LLCs need general liability in case a third party, like a client or vendor, claims the business caused their injury or property damage. Depending on what the LLC does, other liability insurance may also be necessary. For instance, professional service providers who form LLCs, such as architects and lawyers, typically need professional liability insurance to cover accusations of negligence.
The most common types of liability insurance for LLCs are general liability, professional liability, commercial auto, and workers’ compensation insurance. However, many LLCs may also need to insure their business-owned property.
Most Common LLC Insurance Policies
|Type of Insurance||What it Covers|
|General Liability Insurance||Third-party claims of bodily injury, property damage, and reputational harm|
|Commercial Property Insurance||Damage to property owned by the LLC|
|Professional Liability Insurance||Third-party claims of professional negligence, errors, and omissions|
|Workers’ Compensation Insurance||Employees’ work-related illnesses and injuries|
|Commercial Auto Insurance||LLC’s liability in auto accidents and damage to their business-owned vehicles|
General Liability Insurance
General liability insurance is a policy that covers some of the most common business risks, namely third-party injuries, property damage, and reputational harm. If your LLC is accused of causing any of these, your general liability insurance typically pays for the injured party’s medical costs or repairs, or your legal fees if they decide to sue.
Some situations where an LLC might need general liability insurance include:
- A deliver’s injury in a slip-and-fall on your property
- A customer’s shattered window if one of your crew broke it
- A competitor claims you defamed them in a radio interview
Most general liability policies also have products-completed operations coverage. It pays for property damage and bodily harm caused by defective products, such as exploding e-cigarettes for a retailer or a poorly constructed staircase for a carpenter.
Commercial Property Insurance
Commercial property insurance covers damage to your LLC’s physical assets. These assets may include your building, if it’s owned by the LLC, and your business personal property, such as office equipment, inventory, fixtures, and furniture. If these are damaged by covered events, then your property insurer pays the insured amount minus your deductible.
Covered events in commercial property policies often include:
LLCs that rent business space can get commercial property insurance for their business personal property only. Any damage they cause to the leased property is typically covered by general liability insurance.
Professional Liability Insurance
LLCs that provide professional services typically need professional liability insurance to cover claims arising out of their work. If a client claims your service caused their financial loss, professional liability insurance covers the cost of your legal defense.
A few examples of professional liability insurance for LLCs include:
- A lawyer being sued after missing an important court deadline
- A doctor being sued for an incorrect diagnosis
- An architect being sued for miscalculations that causes a wall to collapse
In these and similar situations, professional liability companies typically pay your attorney’s fees, court costs, and any judgment or settlement.
Workers’ Compensation Insurance
LLCs that have staff need workers’ compensation insurance to cover costs after workers are injured on the job, typically paying for the injured employee’s medical bills and lost wages. 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. Some states also have specific rules for LLC owners.
States with specific workers’ comp rules for LLCs include:
- Alabama: LLC members are counted as employees and workers’ comp is required when there are four or more employees
- Alaska: Members in a member-managed LLC are exempt
- Colorado: LLC members may choose to exclude themselves
- Connecticut: Members in a multi-member LLC are included automatically, but single members are not required to carry workers’ compensation
If you have no employees, you still may want workers’ compensation insurance to cover yourself and other LLC owners even if your state doesn’t mandate it. The same may be true if you’re the sole owner and employee. Without coverage, you wouldn’t receive benefits in the event of an injury. You can learn more by visiting our ultimate guide to workers’ comp for self-employed individuals.
Commercial Auto Insurance
LLCs that own or use vehicles for their business need commercial auto insurance in case they or their employees cause an accident while operating a company vehicle. Most states require vehicle owners to purchase liability coverage to pay for other’s property damage and physical injuries. However, business owners may want to add other coverages to increase their protection.
Additional commercial auto coverage for LLCs include:
- Hired and non-owned auto: Covers your liability for damage to vehicles your LLC rents, hires, or borrows
- Collision: Covers damage to business-owned autos caused by an accident
- Comprehensive: Covers damage to business-owned autos caused by something other than an accident, such as extreme weather or vandalism
- Uninsured/underinsured motorist: Covers your injuries and damage to business-owned vehicles if the at-fault driver does not carry enough insurance
LLCs owners who regularly drive their personal auto for work still need commercial auto insurance because their personal auto insurance most likely excludes business driving.
Additional Types of LLC Insurance
Business insurance is never a one-size-fits-all purchase, and that’s especially true for LLCs. Your industry and unique operations can mean you need additional types of LLC insurance. Depending on the industry you’re in, you may want to consider other types of insurance.
Some other types of LLC insurance include cyber liability and umbrella liability insurance.
Cyber Liability Insurance
Technology-based LLCs and LLCs that store client information, such as credit card numbers or email addresses, may need cyber liability insurance to pay for the cost of data breaches. Policies can cover a number of costs, including client notification, credit monitoring, goodwill public relations (PR) campaigns, investigation costs, and fines levied by regulatory agencies.
Umbrella Liability Insurance
Umbrella liability insurance is a policy that extends the coverage of underlying liability insurance policies. When the limits on the underlying policies are spent, umbrella insurance often pays the remaining costs up to the umbrella policy’s limit. For example, if a customer’s slip-and-fall ends up costing $250,000 in legal fees and medical bills, and your general liability limit is $150,000, then your umbrella covers the remaining $100,000.
Umbrella policies extend coverage on many liability policies, including general liability and commercial auto. However, it does not extend coverage on professional liability insurance. To increase professional liability limits, LLC owners need to work with their provider.
LLC Insurance Costs
Your LLC insurance cost is the sum total of each coverage your business requires. Most businesses pay between $350 to $1,600 per year for BOPs with $2 million in coverage. For comparison, professional liability insurance for LLCs might cost between $500 to $5,000 annually for the same amount of coverage, increasing the overall cost.
LLC Insurance Costs & Deductibles by Insurance Type
|Business owners Policy|
|Professional Liability Insurance|
|Commercial Auto Insurance|
Factors that may impact your LLC insurance costs include:
- Industry: LLCs in some industries have a great chance of being sued for negligence. For instance, physicians have a high risk of medical malpractice lawsuits, so their professional liability premiums are higher than most LLCs.
- Employees: More employees often means more expensive workers’ compensation, commercial auto, and general liability insurance premiums.
- Claims history: If you made claims in the past, your premiums may increase accordingly because you present a greater risk to the insurer.
- Deductibles: Some policies require insureds to pay a certain amount, called a deductible when they file claims. Selecting a higher deductible typically lowers your premium.
Liability insurance for LLCs can be expensive, but many owners save by using one insurer for their business insurance.
Tips on Getting LLC Insurance
Obtaining commercial insurance 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 it isn’t the right approach for something as important as protection from liability.
“Not all insurance policies are created equal. 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 competitors.”
—Walt Capell, President, Workers’ Compensation Shop
Capell goes on to explain 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.
Define Your Priorities for Coverage
Capell also 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,” Capell said. “If you value a low price, let them know that, and they can negotiate for a lower price on your behalf. If you value extra coverage, they can look for policies that have extra coverage for your unique business needs.”
Apply for Coverage Early
Insurance requires planning ahead, so most experts recommend you start shopping for coverage at least 90 days before you need your policy to go into effect. This gives you sufficient time to get multiple quotes and compare insurers. Getting multiple quotes takes time, and you don’t want to be rushed into making a decision because you need coverage right away.
Work With a Carrier That Focuses on Commercial Lines
Property and casualty (P&C) carriers can usually write both personal and commercial lines of insurance. However, the policies are not interchangeable, and that can cause problems for business owners if they work with a carrier that mainly writes personal insurance, personal auto, and homeowners insurance.
“When I see a consumer-focused insurance carrier insuring contractors and other companies that are higher risk accounts, it makes me very nervous. The best thing to do is to find a competent insurance broker who is experienced in your type of business and has strong relationships with the insurance carriers who traditionally insure businesses like yours. That agent/broker will know which carriers might be a good fit and can provide an unbiased opinion on which company can offer the best combination of price and coverage.”
—Quinten Lovejoy, Insurance Risk Advisor, Crane Agency
Bundle Coverage in a BOP
“Bundle all your different insurance policies with the same provider. Instead of shopping around for each specific policy, talk to your GL insurance provider, and see if they can add on the other policies. Chances are that they can, and you’ll receive a healthy discount for doing so.”
—Matthew Ross, Founder, The Slumber Yard
LLC Insurance Frequently Asked Questions (FAQs)
If you’re confused about the specific coverage that your LLC needs or want more help getting questions answered, our forums are a great resource. You can also read answers to frequently asked questions below so that you’re better prepared when you shop for LLC insurance.
Why do I need liability insurance for my LLC?
Even though your personal assets are protected by your LLC status, you don’t want to incur a substantial unexpected loss from a lawsuit. The National Center for State Courts says the median cost of litigation for professional malpractice is $122,000, so the potential losses are considerable. LLC insurance provides protection by covering these costs.
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 accused of illegal activities, such as fraud, your insurance policy won’t protect you. Each policy has a section listing exclusions you can review before you buy it.
Do we still need workers’ compensation if all employees are LLC members?
Workers’ compensation is typically not required for businesses without employees. However, some states consider LLC members to be employees. Check with your local workers’ compensation board to find out the specific requirements in your area. The United States Department of Labor provides helpful resources for determining the appropriate authorities in your state.
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 permanently.
Finding the right business insurance to make sure your LLC is covered is easy with CoverHound. With CoverHound, you can compare top quotes from trusted insurers all in one place quickly. Visit its easy-to-navigate website, discuss your specific needs, and get instant access to competitive rates and coverages you can rely on.