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LLC insurance: What kinds of coverage does my business need?

Let’s face it: You structured your limited liability company (LLC) to avoid taking on certain types of risks and liabilities. But if you still don’t carry business insurance coverage—or you have the wrong type of policy—you could be leaving your entire company and your personal finances open to serious risk.

With that in mind, we’ll explore why every LLC should have business insurance, including the kinds of coverage that work best for limited liability companies like yours.

Why you need LLC insurance

Before we dive into the specific types of LLC insurance policies, let’s examine why you should get coverage in the first place:

  • Business insurance helps protect you against costly claims from accidental property damage or injuries.
  • It can pay for your legal defense in the event that claims are brought to court. And if you are found responsible, your insurance can pay the cost of claims (up to your policy limit).
  • It puts you on the right side of the law, as most states require businesses to carry some sort of liability insurance.
  • It gives customers and vendors the extra incentive they need to work with you, as insurance helps establish you as a legitimate and highly professional business.

Now that you have the reasons why you need to get insured, let’s take a look at the specific policies you should consider for your LLC.

The most common types of LLC insurance

While every LLC is different, most business owners can cover a decent portion of their risks with the following policies:

General liability insurance

This insurance coverage covers any costs that arise from property damage, accidents, and bodily injury that your business may have caused to a client or vendor. These costs are no joke; it’s estimated that the average property damage claim is a whopping $30,000.

That could be absolutely catastrophic for most LLC owners, which is why having this coverage can be critical for your company’s survival.

We recommend getting this policy if you spend a lot of time on client properties or your particular industry carries any risk for causing accidental damage. For example, if you own a construction or contracting company, general liability insurance should play a foundational role in protecting your business.

Professional liability

This policy comes in handy if a client accuses you of negligence or mistakes during the course of your work. For example, if you’re an accountant and you made a mistake on a client’s financial paperwork, that client could potentially sue you for damages.

Plus, if the case ends up going to court, you could be required to pay legal fees, even if you’re not found negligent.

Business owner’s policy (BOP)

This is a special type of bundled insurance that combines general liability insurance, property insurance, and business income insurance (which protects you in case you experience a temporary loss of income due to an accident or storm). BOP is one of the more convenient choices for small businesses, as it covers a variety of needs in a single insurance policy.

Workers compensation insurance

Finally, if you have employees, you’re legally required to carry workers compensation insurance. This policy protects you and your business by paying the medical bills if an employee (even if they’re part-time or a subcontractor) gets injured on the job. In most cases, workers compensation prevents employees from suing you for their medical bills or other damages like pain and suffering or mental anguish as a result of an accidental injury.

Overall, business insurance is a great way to protect your LLC from the unexpected. If you need help choosing LLC insurance policies, try shopping with an online business insurance brokerage that can help you pick and choose the right policy based on your specific risks. That way, you can choose a policy that works for your budget, while getting transparency around how your LLC is covered.

*Legal disclosure: Simply Business, Inc. is not a law firm and does not provide legal advice This article is intended to be used for informational purposes only and is not a substitute for obtaining professional legal advice.

Simply Business

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