There’s a lot that comes with running a small business. It can be overwhelming, whether it’s taxes or making sure you have the right permits. But one important thing that often gets overlooked is LLC insurance. While it might seem like just another hassle, it can greatly benefit your company. So here are a few things to keep in mind about it.
What’s an LLC?
A limited liability company (LLC) is a business structure often used by small companies. It’s built to separate one’s personal finances from their business ones, preventing a business owner from being personally responsible for business dealings, especially if debt is involved.
While some states will charge a special LLC fee, this entity had numerous tax breaks and flexibility, making it ideal for small business owners.
6 Things to Remember About LLC Insurance
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It Includes Multiple Policies
LLC insurance covers a handful of aspects, so you’ll easily be covered for almost everything. It’s usually broken up into two categories: general liability and professional liability.
General liability is an overall business coverage. For example, this will cover your business should an employee get injured while on the job or there’s property damage.
Professional liability is more in-depth. Often referred to as errors and omissions (E&O) insurance, it’s meant for serious business mistakes that could affect a customer relationship, like incorrect quotes or negligence.
Within these two categories, you’ll also get:
- Workers’ compensation – designed to protect your employees should be they get injured on the job.
- Commercial auto – covers damages done to your work vehicles.
- Commercial property – protects your business property from natural disasters, accidents, or vandalism.
Many insurance providers will also work around your needs and can make a custom policy. This way, you don’t have to worry about paying extra for certain aspects you might not use.
Remember that if you have employees, you’re usually legally required to have workers’ compensation regardless of the liability type you choose. However, this might not be necessary if your employees work from home. Because of this, it’s vital to check with local laws or ask your insurance provider about these details.
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It’s Affordable
Some might be hesitant to purchase insurance because they feel it will be too big of an investment. But, the good news is LLC insurance is budget-friendly.
For those curious about LLC insurance but don’t want to purchase a certain policy yet, see if an online quote is available. All you have to do is answer some questions about your business (like its size and if you have employees), and you’ll get an instant quote. This will help you see if the policy and provider work for your needs.
You could also chat live with a representative who can walk you through your questions and guide you toward the right policy.
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You Can Get Temporary Coverage
Another unique aspect is that sometimes you can get temporary coverage for certain projects. This can be helpful if you don’t want a full policy but feel better if a specific task was insured. Sometimes you can also request that any subcontractor you work with purchase the temporary coverage. Many insurance providers allow this, but it’s still good to confirm it with yours just to make sure.
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It’s Not Mandatory, But Ideal
While some states might require that you have insurance to operate (like workers’ compensation if you have employees), LLC insurance itself isn’t always required.
Despite this, it’s a good idea to consider investing in it. It will give you financial peace of mind should something happen, like an employee hurting themselves or if you accidentally damage a client’s property.
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There are Some Exceptions
LLC insurance will protect you for most things, but there are some aspects it won’t. These include:
- Poor business tax management
- Giving a personal guarantee for a loan
- Doing something illegal that causes the issue
Many insurance providers will require proof that your LLC is keeping up on paying bills to stay covered. Otherwise, you might be dropped because you’re considered too much of a risk.
Overall, it’s good to double-check with your provider to confirm if there are other limitations with your policy, so you know what to expect.
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It Saves You Money
The biggest perk of LLC insurance is that it will save you money should something happen. The initial investment is often worth it because it will pay off over time. For instance, if you get sued because a client’s property was damaged, insurance will help cover pricey costs, like court fees, that could potentially bankrupt your small business.
LLC insurance is a useful thing to invest in, but there are some intricacies that are important to know about. By keeping the information above in mind, you can determine whether it will work for you.