Do You Need Business Insurance as an LLC?

Business insurance, also known as commercial insurance, is a broad category of insurance products that offer protection in the event of a covered loss.
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Do You Need Business Insurance as an LLC?

Written by Brian Greenberg
CEO / Founder & Licensed Insurance Agent

Last updated: November 29th, 2022

Reviewed by Paige Geisler
Licensed Insurance Agent

This category includes errors and omissions coverage, general liability protection, and business travel insurance, among other policy types. Anyone who owns a limited liability company (LLC) should consider purchasing business insurance to protect their assets. The following outlines how the owner of an LLC should go about evaluating the value of business insurance.

What Is LLC Insurance?

LLC insurance refers to the many types of business insurance available to LLCs. Although it is possible to structure a business as a sole proprietorship, doing so leaves the owner’s personal assets at risk. The LLC structure separates personal assets from business assets, protecting members in the event of a lawsuit or business bankruptcy.

This type of insurance adds an extra layer of protection by covering a wide variety of losses, such as medical expenses associated with work-related injuries or income lost due to a natural disaster.

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Do You Need Business Insurance as an LLC?

Yes. Every LLC should have comprehensive insurance coverage. In fact, some states require companies operating within their borders to carry some type of business insurance. For example, most states have laws requiring certain businesses to buy workers’ compensation insurance, which covers an employee’s medical expenses in the event of a work-related injury or illness.

Even if your state does not require insurance, it is a good idea to have a policy that covers several types of losses. Getting the right insurance in place helps manage risk, leaving you in a much stronger position.

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What Does LLC Business Insurance Cover?

What business insurance covers depends on what type of business insurance you purchase. The table below lists some of the most common types of business coverage and explains what each one covers.

What Does LLC Business Insurance Cover?

Type of InsuranceWhat's Covered?
Business Income Insurance- Lost income due to business interruptions
- May be used to pay rent or cover payroll in the event you cannot operate your business due to some type of covered property damage (e.g., natural disaster)
Workers' Compensation Insurance- Medical bills associated with work-related illnesses and injuries
- Lost wages due to workplace injuries and illnesses
- Funeral costs (if the work-related injury or illness leads to death)
General Liability Insurance- Personal injury
- Bodily injury
- Property damage
Commercial Auto Insurance- Property damage caused by company-owned vehicles
- Injuries caused by your company's employees while they're operating company-owned vehicles
Business Travel Insurance- Trip cancellations
- Medical evacuation
- Evacuation associated with local safety conditions
- Trip interruptions

Commercial Property Insurance- Company buildings
- Company equipment
* May not cover buildings or equipment damaged by an earthquake or flood
Errors and Omissions Insurance- Covers mistakes and omissions made in the course of providing professional services
- Attorney fees
- Administrative costs
- Court costs
- Judgments/settlements

Commercial Umbrella Insurance- Losses not covered by your general liability policy due to coverage limits
Cyber Liability Insurance/Data Breach Insurance- Business interruption due to data breaches and other cyber security issues
- Forensic investigations
- Cyber extortion
- Lawsuit expenses related to a data breach or other cybersecurity incident
- Government fees/fines

What Doesn’t Business Insurance for an LLC Cover?

Although business insurance provides comprehensive protection against covered losses, it does not cover everything. Generally, business insurance does not cover illegal acts or intentional damage to company property. There may also be some exclusions depending on the type of policy you buy.

For example, general liability insurance only covers property damage, personal injury, and bodily injury for other people. If a customer sustains an injury on the premises, your general liability policy will cover their medical expenses. However, if one of your employees is injured, general liability insurance will not cover it. In this instance, you will need to submit a claim under your workers’ compensation policy.

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How Much Does Business Insurance for an LLC Cost?

On average, business insurance costs between $14 and $124 per month. Several factors influence the cost of business insurance, such as what type of insurance you buy and how many employees you have. The table below shows the average monthly cost of five common types of business insurance for LLCs.

How Much Does Business Insurance for an LLC Cost?

Insurance TypeAverage Monthly Cost
Business Interruption Insurance$40
Workers' Compensation Insurance$70
General Liability Insurance$30
Commercial Property Insurance$65*
Cyber Liability Insurance$125

* This is the median monthly cost for commercial property insurance.

Key Takeaways About Business Insurance for LLCs

Business insurance protects you against many types of losses, including employee injuries, property damage, cyber threats, and business interruptions. The best way to guard against significant losses is to do a thorough risk assessment and build a policy that covers the risks inherent in your business.

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