5 Insurance Policies That Your LLC Needs
Dan Levenson July 07, 2022
A Limited Liability Company (LLC) is a type of business structure that protects the owners from liabilities that the company may face. In other words, financial obligations and other problems faced by the company won’t be extended to the owners’ assets. Therefore, the owners, commonly known as members, are not personally liable for the actions of the company.
Such a kind of business structure is beneficial to you as an owner since it is relatively easy to set up. Not to mention, it offers flexibility in management as the members can take part in decision-making, or hire professionals to run the business on their behalf.
Running any kind of business is a risk, and at any given point in time, your business is exposed to a plethora of risks that may be known or unknown to you. A fire could blaze your shoe store to the ground, or burglars could break into your jewelry store and make away with your precious diamonds. For this reason, you need to insure your business.
The main reason why you should insure your LLC is to ensure continuity in the face of unforeseen perils. Insurance does this by indemnifying your business back to the financial position it was in before incurring the covered loss. Apart from this, insurance is a legal requirement in some states. For instance, many states require employers to take out Workmans’ Compensation for their employees.
Now, let us have a look at some of the insurance policies that your LLC needs.
1. Commercial Property Insurance
This type of insurance protects your business assets from loss or damage due to some covered perils. The building in which you carry out your business operations, whether leased or owned, is prone to damage from accidental fires, floods, or even hurricanes. These are risk events that are out of your control and you can never be fully prepared for them. Also, the assets that you use in your business like your laptops, office stationery, or merchandise could be robbed by burglars. Such risks can lead to the paralysis of your business operations.
Commercial property insurance ensures that you get reimbursed for the losses that your business incurs through accidental damages. This enables your LLC to continue its day-to-day operations as usual. In addition, the policy can also be extended to cover loss of profits. This means that your business can continue receiving its usual revenue from the insurance company during the time it takes to rebuild or repair the business premises following damage from an insured peril. Therefore, commercial property insurance is essential for any LLC.
2. Commercial Auto Insurance
If your business uses motor vehicles as a part of its business activities, then your LLC needs commercial auto insurance. Vehicles used by your business could be the trucks that do deliveries, pickups, or even vans with which you run errands. Not to mention, auto insurance is legally required in most states.
The commercial auto insurance policy covers your business vehicles as well as drivers from accidental damage. It also covers legal expenses that result from third-party damage caused by your business vehicles. When buying this policy, it is important to disclose whether the vehicles are owned by your LLC or leased.
3. Workers’ Compensation
Employees of your LLC may suffer injuries or illnesses arising from the job they do for you. For instance, a drugstore attendant may slip and fall while working in your place of business. They may break a leg in the process. The employee has a right to sue you since this injury arose from the course of their employment with you.
In many states, including New Jersey, it is a legal requirement to purchase Workers’ Compensation if you have any employees. This type of insurance covers you against liability that arises from illnesses or injuries of your employees as a direct consequence of their employment with you. This way, your LLC will be protected from the legal expenses and settlements associated with such kinds of claims. For this reason, Workers’ Compensation is not only a necessity but a requirement for your business.
4. Cyber Liability
In the current day and age, technology is a necessity for most, if not all, businesses. Your LLC may hold electronic data on clients, or even some digital assets like apps and other software. This data can be breached by hackers who may introduce malware and ransomware into your company’s digital database. They may then proceed to extort you or use your clients’ personal data to commit crimes like identity theft.
Such an occurrence could be detrimental to your LLC. There will be costs associated with the extortion, recovery, and clean-up of the corrupted data. You may also need to inform your clients of the breach and this will be costly, not to mention the lawsuits that your company may be slapped with.
However, cyber liability is here just for you. This policy will take care of the costs of ransom, expenses involved with informing clients, as well as associated legal fees, should any of your clients decide to take legal action against your company. Therefore, if your company holds any client information, or relies upon digital assets in its operations, then you should strongly consider cyber liability.
5. General Liability
Your LLC can get sued at any time for causing injury to third parties or damaging third-party properties. For instance, a client visiting your coffee shop may trip and fall on the stairs. This client may proceed to pursue legal action against your business, and this will force you to incur some legal expenses. Also, a water pipe may burst on your business premises and damage someone’s vehicle.
The general liability policy will come in to cover the legal expenses associated with such charges, whether they are legitimate or fraudulent. In addition, this policy will also cover the settlement amounts on behalf of your LLC.
It is also important to buy professional indemnity since the general liability policy excludes claims arising from professional errors made in the course of business. For instance, if you run a healthcare organization and one of your doctors erroneously misdiagnoses a patient, the professional indemnity policy will respond to legal claims arising from this. Therefore, your LLC needs general liability insurance.
Businesses that are structured as Limited Liability Companies are increasingly becoming popular. However, the risks they face are ever-changing and that is why they need insurance. At insureyourcompany, we are enthusiastic about the success of your business. With over 15 years of experience working with small companies, our insurance professionals are sure to get your LLC the insurance policies it needs. We are passionate about customizing our insurance products to suit your business needs.
Your business has its own insurance needs that may have not been captured above. To find out more about how we can help you insure your company, contact us today.
This article is for general information purposes only. It is not insurance, tax, legal, business, or other advice. For specific insurance questions related to you or your business, please contact our office.