Why does an LLC need General Liability insurance?
General Liability insurance can help protect your small business from expensive problems like medical bills for non-employees injured at your place of business, or damage you or your employees accidentally cause to other people’s property. It could also help pay some legal costs.
General Liability insurance for an LLC may cover:
- Bodily injury, such as someone getting hurt at your business
- Property damage you or your employees cause as a result of your business operations
- Personal injury, which can include libel or slander
- Advertising injury, such as copyright infringement in your advertisement
- Medical payments to help cover some bills if a non-employee is hurt in an accident on the premises
Is a General Liability policy required for an LLC?
You’re not required by law to carry a General Liability policy for an LLC. You’re free to conduct business without it and assume all the financial risks yourself.
However, buying a general liability policy for an LLC is recommended, and is often necessary for business needs.
- Some commercial landlords require a business or an LLC to carry general liability insurance before they’ll lease you a storefront or office space.
- Some professional boards and licensing agencies require proof of general liability insurance as part of the licensing process, especially in regulated industries like construction.
- Many companies that hire professionals, such as consultants, require proof of general liability insurance before entering a contract for services.
- Suppose a customer at your flower shop trips over a hose and breaks their arm. Your LLC’s general liability coverage could help pay their medical bills and some of your legal costs if they take legal action against you.**
How much does General Liability cost for an LLC?
The cost for a general liability policy for an LLC depends on several factors, including:
- The nature of your business: Businesses with a higher risk profile, like general contractors, often have higher premiums.
- Your number of employees: Single-member LLCs may pay less than a business with multiple employees.
- The state where you’re located: Insurance rates vary by state, and urban areas may cost more than rural areas.
- The coverage limits you choose: Higher limits often come with higher premiums, though they offer greater protection. Your deductible selections can change rates, too.
- Your claims history: Losses and claims you’ve filed in the past can affect your insurance.
You can use a general liability insurance calculator to see what a business like yours can expect to pay for coverage. But the best way to see your exact price for coverage in about 10 minutes is to start a free, no-obligation quote with ERGO NEXT.
And don’t forget, it’s likely that your business insurance premiums are tax-deductible as part of the cost of doing business.
When should an LLC buy General Liability coverage?
You can buy general liability coverage for an LLC at any time. However, buying a policy when you form the limited liability company can help ensure your LLC will be protected from the start.
There are also a few milestones for your business where you’ll want your general liability coverage in place:
- Before you lease a commercial space, as many landlords will require a certificate of insurance (COI)
- Before you sign your first vendor contract, as clients may require it
- Before you meet with your first customer, as insurance protection signals the maturity and professionalism of your business
- Before you publish your first advertising campaign in case things go sideways
- Before you attend your first business event or first contact with the public to help provide a financial safety net from day one
