How much is business insurance for an LLC?Types and Premium Information

Denise Elizabeth P
Senior Financial Editor & Contributor

Whether you have a small freelancing business, a startup, a brand new LLC, or a multi billion dollar international conglomerate, one thing is universally true: you should have business insurance.

The type of insurance and the amount of insurance that you need is going to vary greatly.

In some cases this insurance will be an optional expense, but sometimes it’s mandatory for you to have business insurance depending on your location and your industry.

Limited liability company insurance is purchased by business owners, through the LLC, to protect their business assets against a number of potential threats that could otherwise be enough to destroy the business.

How Much is Business Insurance for an LLC in 2022?

insurance expense

The cost of business insurance for an LLC in 2022 is $300-1000, depending on a number of factors.

That’s an approximate range.

The price for LLC insurance will depend on where you live and which types of coverage that you need.

At the lower end, you can get business insurance for a few hundred dollars.

On the higher end, it can cost into the low thousands, or even more depending on your industry and the amount of coverage that you need.

Somebody who does wedding photography or works as a freelance graphic designer isn’t going to need nearly the same levels of insurance as somebody who is doing plastic surgeries or working to restore multi-million dollar works of art, just to toss out a few random examples.

When you think about how devastating a lawsuit or something else could be towards the LLC, the cost of insurance becomes a small price to pay.

Some people think it’s not worth it, since as a whole, insurance companies are profitable which means that they take in more money than they pay out in claims, otherwise they wouldn’t operate.

But it’s not about looking at this as a whole, it’s about asking a simple question: Could the LLC survive a massive lawsuit, or other huge liabilities, without insurance?

Does an LLC Need Insurance?

Even if the owners (members) of an LLC are incredibly careful, diligent, and aren’t in a field with a lot of risk, it’s still a good idea to foot the bill for LLC insurance.

Lawsuits protect from things like customers who suffer some form of damage, clients who claim that the LLC caused them damages, damage or destruction of business property, medical costs for employees who could suffer injuries on the job, and a lot more.

There are a lot of things that can go wrong in any type of business, and insurance helps to protect you from externalities that would otherwise be very detrimental.

What Does Business Insurance Cover?

There are different types of business insurance for an LLC and they cover different things.

Here’s a quick overview of the most common types of insurance for an LLC to have, but keep in mind that this isn’t an exhaustive list and that the specific needs for your LLC will vary.

An insurance agent that’s familiar with business policies can help give you some insights and guidance beyond this overview.

  • Business property insurance: This is a policy that helps protect the business against damage and losses for things like business structures, inventory, tools and equipment, and other personal property belonging to the LLC.
  • Business income insurance: There are a number of things that can result in a loss of the business’ ability to generate income, for example if equipment is stolen or if their store is damaged due to a fire.
  • Worker’s compensation insurance: Some workplaces are inherently more dangerous than others, and an employee getting injured can be a costly thing, beyond the toll it takes on the employee themselves.
  • Commercial auto insurance: If an employee of the business is in an auto accident while driving for work, a commercial auto insurance policy helps to deal with the costs associated with that.
  • Data breach insurance: In this day and age, cyber security is increasingly important. There are all sorts of things that can go wrong, including data breaches where customer information is leaked or stolen. Costs of this include dealing with the issue, finding out how much damage was done, contacting customers, and compensating them.
  • Commercial flood insurance: Floor and water damage can be absolutely devastating, and very costly. Without specific insurance for floods, a business can be in for a rude awakening if they discover that their usual coverage doesn’t apply.
  • Multinational insurance: For companies that operate in different countries, multinational insurance is important to have. It helps for a number of issues that can crop up internationally and in businesses that operate around the world.
  • Commercial umbrella insurance: Umbrella insurance is used when other policies are maxed out but the damages exceed what they covered. This can be helpful to have as an umbrella on top of all of a business’ other policies.
  • Professional liability insurance: Certain professions have their own types of liability insurance. For instance, a doctor operating a clinic will have professional liability insurance. The same applies for contractors, dentists, and countless other professions where the stakes can be particularly high or the risk of lawsuits is above average.

Choosing LLC Insurance

When you’re shopping around for insurance for an LLC, you need to read over each policy closely, or work with an insurance agent that you trust to go over your options with you.

You’ll have a better understanding of the LLC than an insurance agency, and they’ll have a better understanding of the available policies, so work together to find an optimal solution.

Make sure that you have enough coverage that the LLC will be okay if there’s ever a need to file a claim.

You don’t want to end up losing $500,000 in equipment, only to find out that your policy caps out at $150,000.

Common Liability Insurance for an LLC

Here are the four most common types of liability insurance for an LLC to consider.

  • Business owner policy: This is called BOP for short and it combines a handful of different types of business insurance policies into one singular product. It includes general liability insurance, business interruption insurance, and commercial property insurance into one insurance policy, but it’s not the only policy that a business should consider.
  • General liability insurance: This type of policy covers damage to property, bodily harm, and also harm to the reputation of a business in some cases.
  • Professional liability: This protects the LLC against different types of mistakes or errors including negligence and omissions.
  • Workers compensation: This type of insurance policy is often mandatory and it’s used for things like lost wages for employees who are injured on the job, for medical bills, and for rehab costs. (*Note: There are some important tax ramifications with workers comp that you should be aware of as well)

The aforementioned policies are the most common types of liability insurance, but as you can see from the list in the previous section, there are many other types of insurance to consider.

Some industries need insurance more than others, but for the low cost of a few hundred dollars a year, it’s worth it for any business to consider protecting itself from the numerous third-party risks that are just part of having a business.

Final Thoughts on Business Insurance for an LLC

It’s really important to get adequate business insurance for an LLC.

A lack of coverage can be catastrophic, and the price for business insurance for an LLC is relatively low compared to the risk of not having proper coverage.

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  1. Santa Clara University "What Kind of Business Insurance Do I Need?" Page 1 . October 14, 2022