How Much Does LLC Liability Insurance Cost?

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How Can You Get LLC Insurance Coverage and How Expensive Is It?

Insurance for a Limited Liability Company (LLC) is a business owner's policy to protect their business assets. Whenever you decide to own an LLC, being covered is a top priority. Depending on the risks of your company, different policies are available. Typically, LLC insurance covers your business property and liability. If you like, you can combine your coverages into a business owner’s policy (BOP).

Depending on your industry, the average cost for a business owner’s policy is between $350 and $1,000. Your LLC might need multiple policies that will protect the losses your business incurs.

Why Do You Need LLC Insurance Coverage?

Members or owners of an LLC usually assume that their business structure will protect them from losses. In many ways, they are right. You separate your personal and business assets by choosing to operate as an LLC. That means that if a client sues you and wins, your business assets are in jeopardy, but your personal assets are safe.

Without LLC insurance, the expenses of a court award or settlement come out of your business accounts. If you choose to get LLC insurance, those expenses are taken care of with no out-of-pocket payment made by you.

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What Will Your LLC Insurance Coverage Get You?

Before continuing, keep in mind that buying just one policy won't get you all the essential protection you need. To be protected entirely, it's best to get multiple policies for your LLC.

Your LLC insurance will cover any losses that could harm your company. Your insurance covers damages such as:

  • Accusations of neglect by clients

  • Medical bills for employees' workplace injury or illness

  • Customer lawsuit for property damage or physical injury

  • Damage to business-owned property

A Deeper Look Into Your LLC Business Insurance Cost

Depending on your industry, you may need professional liability insurance, commercial auto insurance, or cyber liability insurance. These policies have a higher total cost than average. They usually cost between $800 to $2,500 a year, compared to the business owner’s policy that costs $350 to $1,000 annually.

What You Need to Know About the Policies, Deductibles, and Costs Of LLC Insurance

Here we take a deep dive into the policies that make up LLC insurance:

1. Business owner's policy (BOP)

Expect to pay an estimated annual premium of $350 to $1,000. You’ll have $1 million per occurrence and $2 million aggregate as your total coverage amount. For this type of insurance, your deductible will be $500.

2. Professional liability insurance

Your estimated annual premium for professional liability insurance is between $800 and $2,500. It gets you $1 million per occurrence in coverage and $2 million aggregate. Your deductible will be $500 to $1,000.

3. Commercial auto insurance

For commercial auto insurance, your estimated annual premium will be $2,000 to $4,500 per vehicle. Your coverage amount will be $1 million per occurrence and $2 million aggregate. Your deductible will be $500 to $1,000.

Different factors come into play to determine your insurance premiums. They may vary by policy, but the characteristics are generally the same.

The factors most insurers consider are:

• Your industry

• Your employees

• Your claims history

• Your deductibles

If you're in an industry known for negligent lawsuits brought against them, this could cause you to have higher premiums. Also, if you have employees, workers’ comp premiums figure into your overall cost and may increase your other insurance premiums.

Past claims equal riskier business for insurers. Past claims will almost always raise your premiums. If you want to lower your premium, the best way to do it is by paying a higher deductible when someone files a claim.

Sure, an LLC general liability insurance policy can be a bit pricey. When you purchase multiple policies, there are often discounts associated with doing so. If you want to reduce coverage gaps, purchasing all your policies from one insurer is the way to go. If you can find carriers that specialize in different policies, you may save some money that way.

4. What Are Some Essential Liability Insurance Coverages for LLCs?

Liability insurance may be a significant concern for your LLC. The people who come in contact with your business all represent a potential lawsuit. These lawsuits could include vendors, the delivery person, employees, and customers.

Your general liability insurance will cover common cases associated with LLCs. You might need extra liability insurance like workers' compensation and professional liability insurance for your LLC, depending on your operations and industry.

These are the two most common liability policies LLCs choose

When it comes to liability insurance policies for LLCs, two are common: general liability and professional liability. Let's take a deeper look at these two policies to decide which one is best for you.

General Liability Insurance: General liability insurance covers most of your business risks concerning third-party reputational harm, slander, property damage, or bodily injuries. If you find yourself experiencing any of these, your general liability insurance will cover the plaintiffs, legal fees, property repairs, or medical costs if the individuals involved decide to sue you.

Professional Liability Insurance: Professional liability covers third-party claims of errors, omissions, and professional negligence. If your LLC provides professional services, then you need professional liability insurance. For example, if you have a client suing you for their financial losses, professional liability insurance covers your legal fees.

What Kind of Insurance Does An LLC Need?

When searching for insurance for your business, never expect to make the same purchase someone in another industry made. Because of your operations and unique industry, your LLC may need additional coverage. Here are other types of LLC insurances for you to consider:

Worker Compensation Insurance: If you have a staff working for your LLC, you need workers’ compensation insurance. This form of insurance covers the cost of lost wages, medical bills due to injury, and workplace accidents. Four states make LLC members exempt from the requirements of workers' comp. They are:

  1. Colorado
  2. Alabama
  3. Connecticut
  4. Alaska

Commercial Auto Insurance: If you have vehicles that you use or own under your LLC name, you need commercial auto insurance. You'll be covered if you or one of your employees is in an accident. Liability insurance is one of the many coverages you can buy to protect your business, and most states require you to have it for your LLC.

Directors’ and Officers’ Insurance: If your LLC has a board of directors, investing in directors’ and officers’ insurance is a good idea. If any lawsuits arise against your board members for their managerial decisions, you’ll be covered.

Umbrella Liability Insurance: If you want to extend the coverage of your underlying liability insurance, an umbrella policy is the best option. If you have an underlying policy and the claim reaches its limit, umbrella insurance pays the remaining cost up to its limit. You can use umbrella policies to extend general liability and commercial auto insurance policies. You cannot use umbrella liability insurance to extend your professional liability coverage.

Cyber Liability Insurance: If you have a technology-based LLC that houses confidential client information like email addresses and credit cards, you need cyber liability insurance. In the event of a data breach, you're covered. There are several costs that these policies cover. They are:

  • Goodwill PR campaigns
  • Client notification
  • Investigation costs
  • Fines by regulatory agencies
  • Credit monitoring

Commercial Property Insurance: If any damage occurs to the physical assets of your LLC, including your building, commercial property insurance covers them. Any personal property owned by the LLC is covered. Your policy includes furniture, office equipment, fixtures, and inventory. If any damage occurs to these assets, you will be paid the insured amount, not counting your deductible.

Damage caused by vandalism, fire, hail, windstorms, or theft is covered in a commercial property policy. If you rent a business space, then commercial property insurance will only cover your business’s personal property. If the property you lease incurs damage, your general liability insurance will cover it.

Conclusion

When you own an LLC, purchasing business insurance is essential. Like every other person who owns a business, you are vulnerable to taking losses. If something goes wrong, you want to protect your company by purchasing the right coverage for the right situations.

By making sure you're covered, you give yourself peace of mind, knowing that a natural disaster or accident won’t close the doors to your business for good. For more information on LLC business insurance costs and LLC insurance requirements, feel free to contact us at CoverWallet at (646) 844-9933. You can also fill out our online form to schedule a free consultation.

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