General Liability Insurance for LLC

You have a lot to consider when you start a business. One of these items relates to the way you structure your organization. Is it going to be a sole proprietorship? Or do you feel the best way to go with a Limited Liability Corporation (LLC)?

When you decide to go with an LLC, the next step is to determine how you'll protect it. While it has some built-in shielding, it doesn't fully protect you if you are successfully sued. To help with potential court fees and settlements, you need an insurance policy to back you up. Namely, a general liability program.

To help you get through the sometimes complicated items related to entrepreneurship here's information on obtaining business general liability insurance for your LLC.

What Is An LLC?

An LLC is a step above a sole proprietorship. The latter is an unincorporated organization. It's owned by an individual and doesn't have a legal distinction between them and the business itself. In simpler terms, actions taken against the business are really against the entrepreneur.

Conversely, an LLC is a separate entity from its owner. It protects the personal assets of an individual should legal action be taken. It's the reason LLCs should always have a separate business bank account than the one used for personal spending.

Nevertheless, an LLC doesn't provide 100% protection for your business. There are several situations where your assets could be in danger.

  • A customer or employee is injured at your business and sues for damages.
  • Your employee gets into a car accident that injures the other driver. You could be responsible for damages regardless if they drove a company car or their own vehicle.
  • You miss a client's critical deadline and they sue you for lost revenue.
  • The customer alleges the advice you provided caused them or their organization to suffer.
  • Your IT support allegedly causes a data breach or ransomware attack at the client's site and they sue you to recover their losses.

If you're unable to fight any of these issues, then you not only pay the settlement but also attorney and court fees. If you don't have enough assets to cover these, the court may decide you need to liquidate your company's assets to cover the suit. As a result, you lose your business.

Although an LLC protects your personal income, there's still a chance it could be affected if a client or the state believes you have allegedly engaged in criminal or negligent behavior. Furthermore, if you don't separate your business and personal assets ahead of time, it is all in danger if you're sued.

General Liability Insurance for LLC

What Is General Liability Insurance?

The above possibilities detail why your LLC needs to carry general liability insurance. This form of policy covers the typical risks your business could face. A basic plan tends to handle:

  • Bodily injury of a customer due to negligence while at your business or the job site.
  • Property damage that takes place at a customer's location.
  • Costs when your business is accused of using improper or copyrighted images in advertising.
  • A client seeks restitution when they feel they've been slandered or defamed.
  • Your organization is taken to court due to alleged libel.
  • The payment of court and legal fees when sued.

The reason it's called general liability insurance is these are the most common items that affect businesses. It doesn't matter the industry. Furthermore, it's the insurance most used for LLCs and other small companies.

How Much Does It Cost?

There are a few factors that determine the cost of your general liability insurance policy. First is the type of business you run. A publishing company or print-on-demand service doesn't need as much coverage as if you handled construction or home renovation.

Next is the number of people you employ at your company. You'll pay more when you have 50 workers instead of being a single-person operation. Location is another factor. Your insurance rate could be different if you're based in a suburb or the middle of a large city.

Overall, it comes down to risk. If your organization deals in dangerous situations where an injury or damage is more likely, then you'll be charged more. Additionally, your premium could be higher if the insurance underwriter discovers records of previous negligence and harm to people and locations.

On top of this, the cost of your general liability insurance policy increases depending on additional riders that you attach to it. These are programs that cover situations not handled by the original program. Among these are:

Since costs differ between companies and regions, it's best to reach out to insurers in your area to determine the final premiums for your general liability policy.

Advantages To Your LLC

Although a policy is an extra cost to your LLC it has an enormous return on investment. Case in point, when you promote the fact you have general liability insurance, it shows customers that you're reliable. Plus, it provides peace of mind that you're prepared for any situation.

Depending on your state's regulations, you might not have a chance to forego a policy. You won't be able to register as an LLC without some form of general liability insurance. This also applies if you wish to be accredited by organizations within your business sector.

Finally, a general liability insurance policy for your LLC allows you to breathe. You don't have to be worried that you'll lose everything if someone is injured or believes your products caused damage. In turn, you should be able to focus on creating new items and building your business to reach a bursting point. Related: Warehouse Insurance