LLC Insurance Policy Information
LLC Insurance. Separating your personal liability from that of your business is a key reason for choosing the Limited Liability Company or LLC structure for your business. Business owners choosing LLC structures do so in order to protect their businesses in the event they face liability insurance claims or lawsuits in the future.
Finding an appropriate level of LLC insurance to protect the business from any gaps in coverage is an essential for smart business owners. We can help businesses with LLC structures to find the right LLC insurance coverage for their particular requirements and risks. A local agent is adept and knowledgeable with the regulations for, and the agent can work with individual business owners to customize an LLC policy for the needs of their businesses.
LLC insurance protects your business from lawsuits with rates as low as $27/mo. Get a fast quote and your certificate of insurance now.
Below are some answers to commonly asked limited liability company insurance questions:
- What Is LLC Insurance?
- How Much Does LLC Insurance Cost?
- Do I Still Need Insurance With An LLC?
- What Type Of Insurance Do LLCs Need?
- What Does LLC Insurance Cover & Pay For?
What Is LLC Insurance?
LLC insurance, also known as limited liability company insurance, is a type of insurance coverage that protects the owners, shareholders, and employees of an LLC from financial loss in the event of a liability lawsuit. This insurance provides coverage for claims related to bodily injury, property damage, advertising injury, and other liabilities that may arise from the business operations of an LLC.
The policy may also cover legal fees, court costs, and settlements if the business is sued for a covered liability claim. The purpose of LLC insurance is to help shield the personal assets of the LLC owners from being seized in a liability lawsuit.
How Much Does LLC Insurance Cost?
The average price of a standard $1,000,000/$2,000,000 General Liability Insurance policy for small limited liability companies ranges from $27 to $49 per month based on location, size, payroll, sales and experience.
Do I Still Need Insurance With An LLC?
Although the LLC structure protects assets of business owners in many circumstances, business owners may find themselves held responsible for work performed by them on behalf of their companies.
Simply having a business structured as an LLC does not protect the business from all potential risks. The business is still responsible for its own actions and the actions of employees. This is where LLC insurance can help in certain circumstances.
To better understand the limitations of an LLC, it is important to understand what is known as "piercing the corporate veil." It is generally accepted that an Limited Liability Company structure forms a sort of veil between the business owners' personal finances and the business' operations.
Nonetheless, even with an LLC in place, there are some types of errors and activities that give the legal system the capability to pierce this corporate veil, such as when an LLC takes on too much debt. In this case, it may be possible for the business owner to be held responsible for the debt, especially if it is deemed excessive.
For instance, an LLC structure does not protect a business owner who:
- Personally insures another person.
- Guarantees a business debt or loan personally.
- Fails to manage the businesses tax responsibility appropriately.
- Commits a crime that damages the company.
- Engages in reckless or fraudulent behavior that causes harm to the company.
- Mixes personal and business expenses or accounts, failing to treat the business as a separate entity.
A consultation with an insurance agent who understand LLCs and insurance - and advice from a knowledgeable business attorney skilled in corporate law can help business owners to evaluate their specific risks, the need for LLC insurance and in what amounts, so that the business and the business owner is fully covered in the event an incident occurs.
What Type Of Insurance Do LLCs Need?
When a business' activities pierce the corporate veil, business owners can be held liable. liability insurance for LLCs protects the business and business owner should the business find itself on the receiving end of a lawsuit or claim.
Preparing for any potential risks involves evaluation of a business' specific needs by a qualified and seasoned agent. There are several options to consider, including:
- General liability insurance. This type of policy covers injuries to customers while they are on the business' property or slander accusations resulting in claims. The policy usually provides for medical costs, legal defense costs, and the costs of settling with claimants or paying judgments.
- Product liability insurance. For businesses that manufacture, distribute, or sell products, product liability coverage protects the business from claims resulting from claims of personal injury or property claims resulting from using a faulty product.
- Professional liability insurance. Also known as E&O or errors and omissions coverage, this type of insurance is essential for LLCs who provide professional services to their clients, such as financial advisors, lawyers and doctors. For instance, a doctor need malpractice insurance specially written for members of the medical community. By contrast, E&O insurance for an investment broker protects him against losses resulting from advice he gives to clients.
- Directors and officers liability coverage. When an officer or director of a company is named in a legal suit, D&O, or directors and officers coverages, protects the company from liability.
Of all the LLC insurance types available for businesses, property insurance is among the most crucial. All businesses should purchase property insurance to protect them from loss due to covered perils, such as wind or fire.
Basic property policies cover a variety of potential hazards, including the building in which the business is housed and any inventory or equipment inside the building. business owners should closely examine their property insurance coverage to ensure that nothing that is important to them is excluded.
There are three basic types of property insurance for commercial businesses. These include:
- Basic coverage. This type of coverage is structured much like a homeowner's policy and covers perils such as vandalism, natural disasters, and fire. It may cover theft, but this is not always the case.
- Broad coverage. A broad coverage policy covers more perils than a basic policy.
- Special form. This type of coverage does not list for the policy owner what it covers, but instead offers a list of uncovered perils.
Regardless of policy type, damage and loss caused by flooding not covered on basic policy. Flood insurance is usually a separate type of insurance for business owners, and it is a must in flood-prone and flood zone areas.
LLC coverage comes in many other forms, personalized for the business' specific needs. For instance, fleet insurance or commercial vehicle insurance is available for businesses who drive company vehicles. The insurance covers any losses sustained by the business as a result if the company's driver causes an accident. Business interruption coverage is another type of LLC Insurance to consider for all businesses. This coverage keeps the business running by covering expenses during a displacement from the business' location due to natural disasters, fires, and other covered perils.
Requirements for LLC Insurance
Each state government sets the LLC requirements for the particular state. It is important that business owners comply with these laws prior to the commencement of operations. Some types of requirements for business often include:
State Unemployment insurance (SUI) tax. requires that SUI tax is paid by businesses. This type of tax covers the cost of SUI insurance for employees who are laid off or lose their jobs due to other covered reasons.
Worker's compensation coverage. requires worker's compensation coverage provided by businesses, including LLCs. Each state has specific requirements that must be met in order to be in compliance. For example in you must provide this coverage if you have or more employees - but you can exclude the owners.
What Does LLC Insurance Cover & Pay For?
LLCs, or Limited Liability Companies, can be sued for various reasons, just like any other business. Here are some reasons and how insurance might protect the LLC:
1. Professional Negligence: If an LLC provides a service and fails to meet the standard of care required, leading to harm or financial loss to the client, the LLC could be sued for professional negligence. This is common in fields like consulting, medicine, law, and finance. Professional Liability Insurance, also known as Errors and Omissions Insurance, could cover the costs associated with the lawsuit, including defense and any judgments or settlements.
2. Breach of Contract: If an LLC enters a contract and fails to fulfill the agreed-upon obligations, it can be sued for breach of contract. While standard business liability insurance typically doesn't cover contract disputes, a special type of policy known as Contractual Liability Insurance can cover damages and defense costs resulting from such a lawsuit.
3. Employee Discrimination or Harassment: An LLC might be sued if an employee or group of employees feel they have been discriminated against or harassed. Employment Practices Liability Insurance (EPLI) can cover the cost of defending against these types of claims and any settlement or judgment costs.
4. Bodily Injury or Property Damage: If an LLC's operations cause bodily injury to a person or damage to someone's property, the injured party could sue the LLC. General Liability Insurance can help cover the costs associated with these types of lawsuits, including defense costs, settlements, and judgments.
5. Product Liability: If an LLC manufactures, distributes, or sells a product that causes harm or injury, it could be sued for product liability. Product Liability Insurance can help cover the legal expenses associated with defending against such a claim, as well as any resulting settlements or judgments.
6. Director and Officer Mistakes: Directors and officers of an LLC might make decisions that harm the company or its shareholders, leading to a lawsuit. Directors and Officers (D&O) Insurance can cover the costs of such lawsuits, including legal defense, settlements, and judgments.
It's important to note that insurance doesn't prevent lawsuits, but it can protect an LLC from severe financial harm due to litigation. Therefore, it's crucial for LLCs to ensure they have the appropriate insurance coverage based on their operations and risks.
LLC Insurance - The Bottom Line
The type of business and its specific needs determine the ultimate cost of LLC insurance coverage. Other factors that may influence the cost of insurance are the type of industry; industries that are prone to litigation may pay more for insurance. The number of employees in the business may also affect costs.
Small businesses with minimal risks may pay just a few hundred dollars annually to obtain adequate insurance for an LLC, while larger businesses may pay substantially more. Working with an experienced agent is the best way to find a policy tailored to your business' specific needs and risks.
Additional Resources For Small Business Insurance
Protect your company and employees with the right commercial insurance policies. Read informative articles on small business insurance coverages - and how they can help shield your company from legal liabilities.
- Small Business
- Business General Liability
- Business Interruption
- Business Liability
- Business Owners Policy (BOP)
- Certificate of Insurance
- Commercial Auto
- Commercial Crime
- Commercial Package Policy
- Commercial Property
- Commercial Umbrella
- Comprehensive General Liability
- Cyber Liability
- Directors and Officers Liability
- Employment Practices Liability
- Event Cancellation
- Fiduciary Liability
- General Liability
- Home Based Business
- Independent Contractor
- Liability Insurance Certificate
- Liability Insurance
- Ocean Marine
- Professional Liability
- Specialty Directors And Officers Liability
- Specialty Errors And Omissions
- Specialty Excess
Businesses need commercial insurance to protect their assets, employees, and customers. It helps to cover the costs of potential accidents, lawsuits, and other unforeseen events that can result in financial loss.
For example, if a customer slips and falls on a wet floor in a store, the business could be held liable for their injuries. Commercial insurance can help cover the costs of medical bills and legal fees associated with the incident.
Additionally, businesses often have valuable equipment and inventory that need to be protected from theft or damage. Commercial insurance can provide coverage for these items in the event of a disaster, such as a fire or natural disaster.
Furthermore, businesses often have employees that can be injured on the job. Workers compensation insurance can provide coverage for medical bills and lost wages for injured employees.
Overall, commercial insurance is a necessary tool for businesses to protect their assets, employees, and customers. Without it, businesses could face significant financial loss in the event of an unexpected occurrence.