BUSINESS INSURANCE FOR LLC: Everything You Should Know

business insurance for LLC
business insurance for LLC

People who run limited liability companies do not have to fear going broke when the company faces huge financial challenges. This is because one feature of an LLC is the protection of the personal assets or funds of business members. It is, however, unfortunate that this leads LLC owners to believe that business insurance for LLCs is a waste of money. If you already run a limited liability company or plan to start one, you’ll want to read this article to find out why your business requires insurance and what type of insurance you should definitely opt for.

Business Insurance Coverage for LLC in 2023

Business insurance coverage for LLCs takes into consideration the features of LLCs and the types of risks that they could encounter in their day-to-day business activities. This coverage includes:

#1. General Liability Insurance

Whether you run a sole proprietorship business or an LLC, the chances that a customer or third party could sustain an injury in your company are present. This is why general liability insurance is necessary for every type of business. It covers bodily injuries of third parties, damage to customer’s property, and sometimes, libel or copyright infringement.

#2. Professional Liability Insurance

It is also referred to as error and omission insurance. If your company fails to satisfy a customer through the services you render, there are chances that they’ll sue. Professional liability insurance covers legal fees and settlements. If you own an LLC that offers services, you would most probably need this policy

#3. Workers Compensation Insurance

No matter the type of company you have, if your company has employees then you should consider buying workers’ compensation insurance.

This insurance policy covers the medical fees of employees who sustain an injury during work. It equally covers the disability benefits of employees. the benefit of this policy is that it not only protects your employees but may equally improve productivity. Workers who are aware that they are insured over likely accidents would most likely work better.

#4. Commercial Property Insurance

In case of damaged properties in your office, workshop, or company, due to fire or theft, this insurance helps to replace them or pay for them.

#5. Commercial Auto Insurance

If your company uses a vehicle, then you’d need a commercial auto insurance policy.

How Much Does LLC Insurance Cost?

To get a precise cost for any business insurance coverage, it’s important to get quotes from the insurance companies you want to use. This is because; various factors determine the cost of business insurance. Therefore, the cost for different businesses varies according to the factors taken into consideration. For LLC insurance, the same thing applies.

Even so, the estimated cost for LLC insurance shows that annually, insurance premiums may have an average cost of $2000-$4000 for commercial auto insurance and $1000-$2000 for professional liability insurance. 

Other insurance policies like general liability insurance, business interruption insurance, and commercial property insurance when combined under the umbrella term, Business Owner’s Policy will cost about $400-$1000. Buying these policies individually will cost you more, hence why you should consider buying them as BOP.

But before you purchase an insurance policy, it’s important to be aware of the various factors that will affect the cost of the policy you wish to purchase. the factors include:

  • Industry
  • Location of business
  • Type of coverage you want to purchase
  • Claims history
  • Number of employees
  • Type of business/services rendered
  • Risk factors
  • Zip code
  • Deductibles

Why Should I Get LLC Insurance?

As stated earlier, one of the swell features of a limited liability company is that it gives its members personal liability protection. By implication, this means that the personal assets of LLC members are protected from business liabilities. That is, one doesn’t need to take from his personal assets to sort business liabilities. If this is the case why does LLC need insurance?

Well, here’s what you should know

LLC provides you protection against your personal assets but not against your business assets. The purpose of insurance is numerous. But we would agree that financial crises not putting one out of business is the major reasons for business insurance.

If for instance, an unsatisfied client sues your business to court. The legal charges and settlement fees might accrue to a very large sum of money. Your business stands the chance of folding if you have to use all the business assets to settle these charges.

Since some of these business disasters are not totally inevitable no matter how careful one is and the claims from accidents and disasters come with huge price tags, it’s no brainer that every business whether a sole proprietorship or limited liability should have insurance benefits.

What is the Most Essential Business Coverage for LLCs?

Excluding the insurance coverages that are required by law in some states or countries, essential business insurance coverage is highly dependent on the risk factor of the company.

The risks Limited Liability Companies encounter are different. It all boils down to the industry, type of business, services they render, and other unique characteristics of the business.

So, when a limited liability company wants to purchase an insurance policy, the first question should be what risk is the business most likely to face? this will determine what insurance coverage is essential for the company.  For instance, General liability insurance is very important for almost every business since the bodily injury of customers or other third parties could happen in any company despite the services you provide.

On the other hand, professional liability insurance should be for companies that render professional services only.

Nonetheless, there are some insurance coverage for LLC insurance coverage that most LLC businesses opt for. They include:

  1. General liability insurance: What are the chances of your company not being sued for bodily injury or property damage to a customer? These are challenges that could befall any business no matter how careful they are. This is what makes GLI very important. This insurance policy covers payment or replacement pertaining to bodily injury or property damage to customers. Sometimes, it equally protects businesses from copyright infringement
  2. Business owners policy; there is always a high chance of your business needing this policy. BOP encompasses basic insurance policies that protect your business from property liabilities. Namely, (i) commercial property insurance. (ii) business interruption insurance. (iii) general liability insurance. Buying BOP as a bundle will help you save extra costs as opposed to buying the insurance policies individually.
  3. Workers compensation insurance; except if your business does not have employees, there is no reason you shouldn’t have workers compensation insurance. An employee could sustain an injury while on duty; this insurance covers the medical bills for such occurrences. In addition to that. It gives disability benefits to employees.
  4. Professional liability insurance; most business provides professional services to clients. There is no surety that your company will satisfy these clients all the time. Some unsatisfied clients may file lawsuits. And defending your business in court may cost you a lot of money not to talk about settlement in case of loss. Professional liability insurance covers legal fees in such situations.

Business Insurance for LLC State Farm

State Farm offers various business insurance to limited liability companies. Notably, they are well known for professional liability insurance, which they happen to be one of the few insurance companies that offer. The various business insurance coverage that state farm offers are;

  1. Professional liability insurance for professions such as engineering, accountancy, dentists, and architects
  2. Commercial liability insurance
  3. Business owners policy
  4. Employment practices liability insurance
  5. Not-for-profit organizational insurance

State farm is widely known across the United States and has been praised for offering insurance policies at affordable prices. They equally offer other insurance packages like life insurance, auto insurance, home-owner insurance, etc.

Business Insurance for LLC Georgia

Georgia is a business-oriented state and has roughly about 1.6million businesses. Almost half the population of Georgia gets their incomes from small businesses. This makes business insurance in Georgia very important.

In Georgia, some business insurance coverage is compulsory to own. Depending on which business you run you might be required to get some insurance coverage by law.  For example, a business that employs two or more employees must have a workers’ compensation insurance policy. Likewise, businesses that use vehicles are expected to purchase commercial auto insurance.

Other insurance policies such as professional liability insurance, general liability insurance, Business Owners’ Policy, etc. are optional in Georgia and are reliant on the choice of the company.

How much does business insurance for LLC cost in Georgia?

In Georgia, the average cost of business insurance is $145 for general liability companies, $65 for workers’ compensation policies, and $70 for a BOP.

These prices vary for different businesses though and could be higher or lower depending on the features of your business.

What happens if my LLC doesn’t have insurance?

Despite the fact that most insurance policies are not required by law, and you would not be violating any laws if you didn’t purchase an insurance policy, life might prove difficult for you if you don’t have certain insurance policies for your business.

Not only will you stand the chances of being put out of the business if a sudden accident that requires a huge sum of money to settle occurs, but it will also equally be difficult to take certain steps without business insurance.

You’d be asked for business insurance to get bank loans, to get some rented outlets for your business and so on. As a matter of fact, there are certain clients who may not do business with your company without the necessary business insurance policies.

What Is Cyber Liabilty Insurance?

The world is going digital and most companies secure classified information of there business and that of their customers on the Internet. If someone happens to hack the software, this could cause major damage to your business and to your customers, and they could file a lawsuit. This insurance coverage takes care of the legal fees and settlements in case of such occurrences.

When I Hire Contractors to Help With My Business, Are They Covered by My Insurance?

Independent contractors are often excluded from insurance policies. However, most times, when crises occur, they might want to pin the liability on you.

This is why it is super important to have clear documented contracts when hiring independent contractors. Everything should be stated and signed for reference purposes. That way, such misunderstandings will be averted.

Is There a Comprehensive Insurance Policy That Will Cover All My Risks

No, there is not. Except if the only insurance policies you need are the ones under the Business Owner’s Policy.

The disadvantage of a comprehensive insurance policy is that a lot of businesses would have to buy insurance coverage that they do not need. Imagine a business owner who sells goods having to buy professional liability insurance because it is part of the business insurance policy they want to buy.

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