No matter what entity type or size your business is, you need to protect it. Learn about the different types of business insurance that can protect you and your business.
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Unexpected losses can pose extreme financial damage to a business, whether they come from property damage, accidents in the workplace, or professional errors. When you have the right small business insurance in place, you can protect your company against the impact of negative events.
Several questions might run through your head, such as, “What insurance do I need for my LLC, corporation, or other business type?” It depends on several factors, including your industry, the size of your business, your clientele, and even your location. Seeking assistance from an insurance broker who has business experience in your industry can help you make smarter decisions. Finding corporation or LLC business insurance shouldn’t be hard, so get informed below.
General liability insurance protects your business against all sorts of claims resulting from something going wrong with your operations. Among the incidents that general liability insurance can provide coverage for are:
Without this coverage, the business would have to pay out of its own pocket for any claims made in these areas. A single accident on your business’s premises might cost so much that it could sink your business. In some cases, your clients may require you to carry a certain amount of general liability coverage. Consider general liability as a form of corporation or LLC business insurance.
If you’re involved in a licensed profession that can be accused of malpractice, negligence, or misconduct, carrying a professional liability insurance policy can be a good idea. This type of policy might even be required by your industry’s regulatory board, so check with your industry’s regulations for full guidance on professional liability insurance.
If you’re thinking to yourself, “What insurance do I need for my LLC,” then general liability is it. LLCs are known for their personal liability protection, but getting additional coverage is a safe bet. Liability insurance for an LLC should never be ignored, so consider getting it for maximum coverage.
Insurance for an LLC, corporation, or other business type run out of your home is important. If you run your small business from home, you enjoy a level of flexibility that can fuel your entrepreneurial passions. However, don’t make the assumption that your homeowners’ or renters’ insurance covers your business. Your business and your home could both be at risk if you don’t have the appropriate business insurance.
Specifically, your homeowners’ insurance may not cover damage to your:
Home-based business insurance can also cover the costs of any lawsuits brought against your company. You may need home business insurance if clients come to your home office, you have employees working out of your home, or you keep inventory or supplies on the premises.
Professional liability insurance protects you against lawsuits and other actions that may be brought against you if you make a mistake in the course of your business, fail to complete services you’ve contracted to do, or give bad professional advice that has a negative effect on one of your clients.
Professional liability insurance protects companies, especially those providing professional services, against claims of negligence, oversights, or inadequate work. Professional liability insurance covers legal and court costs, out-of-court settlements, and any judgments against your business in court.
You need professional liability insurance if you’re a consultant, accountant, attorney, counselor, doctor, lawyer, event planner, engineer, architect, or real estate agent. You need it if you provide any other type of service where clients might get upset and claim your work didn’t meet their expectations. Your general liability policy won’t protect you against these risks. In some cases, your clients may require you to carry professional liability insurance before entering into a contract with your business.
Commercial property insurance protects the building your business owns or rents. It also covers any moveable equipment or property your company owns. Think of it as the business equivalent of homeowner’s insurance you probably carry on your home.
There are some notable exclusions from commercial property insurance, however. In most locations, it may not cover damage caused by floods or earthquakes. If you live in a region vulnerable to those potential disasters, you may want to get separate policies for them. In many cases, you can get commercial property insurance bundled with general liability insurance in what’s often called a business owner’s policy.
Business interruption insurance (BII) is designed to cover the loss of income if normal business operations are disrupted by damage caused by a fire, flood, or other disaster. BII is intended to cover loss of income directly related to the loss of physical property. Thus, if your location is vital to your ability to make money, then business interruption insurance is important.
A service business probably does not need BII, as services can be performed most anywhere, but a factory would definitely need business interruption insurance.
Whether you’re looking for provisional coverage for your own health costs or you’d like to build a plan for your employees, a health insurance plan can be a helpful tool for your business. Granted, health insurance plans can feel like a hefty expense, so you’ll need to carefully weigh the coverage rates and expenses.
If you have employees, keep in mind that the health insurance benefits you offer could be a huge part of an applicant’s decision to work for you. If you’re looking to attract top talent, you may find health insurance can be a top way to compete.
If you are faced with a serious injury or illness that impacts your ability to work, this can significantly hurt your cash flow, especially if your injury or illness keeps you out of work for several months. Disability insurance is designed to replace the income you lose out on during this time. This can be particularly valuable if you have a spouse and children who depend on you financially.
Disability insurance usually only replaces a portion, about 50% to 60%, of your income, so it will be important that you still have an emergency fund in place and spend wisely until you are able to start working again.
Why are you in business for yourself? Surely, one reason is that you want to create financial stability for yourself and your family. What if something happens to you — what will become of your dream then? Without adequate life insurance, it probably will turn into a nightmare. Beyond that, many banks require that the owner of the business have life insurance before they will loan the business money.
When shopping for life insurance, you will be faced with a decision: term or whole life policy? Buying a whole life policy is like buying a house: as you pay the premium, you build equity in the policy. Buying a term policy is like renting: it is cheaper, but you build no equity. In this case, renting is probably better than buying, as rates for term life insurance are amazingly affordable. Even though you will not be building equity, the money you save is usually better spent in other areas of your business.
There isn’t necessarily a correct answer to this question; you know your business best, your own risk tolerance, and your budget. There isn’t a one-size-fits-all approach to business insurance. Some business owners could easily come up with alternate income sources if an issue arose. Other businesses don’t have the same overhead costs to navigate, and still others have minimal risks associated with their operation.
For many business owners, a general liability insurance policy can be a good starting point. Business auto insurance can also be helpful if you have a dedicated vehicle.
If you’re not sure which policies will be most helpful for your business, it’s helpful to chat with an insurance agent about what you need to protect, your monthly budget, and more.
No matter how large or small your business is, you need to protect it with the appropriate business insurance. That’s also true regardless of your industry or type of business. Your specific business may need specialized insurance, such as malpractice insurance, coverage for commercial building repairs, or paycheck protection coverage.
As you form your business, ZenBusiness can help. Make insurance a part of your business creation plan, and let us help you get your dream off the ground.
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The type of insurance you need depends on where you’re located, what kind of business you own, whether you provide any services, and how many employees you have.
Check with your state, county, and city to see what types of small business insurance (for instance, workers’ compensation insurance) are required. Do some research to see what types of insurance are typical in your industry. And talk with a seasoned business insurance professional for advice.
Your cost for business insurance will vary depending on your location, the type of business, and what types of insurance you require. A business owner’s policy, which combines general liability and commercial property insurance, may run anywhere from about $40 to $85 per month for a small business.
Insurance companies take many factors into consideration when calculating business insurance. Among these are the:
• Type of policy • Deductible you choose • Type of risk involved with your business • Number of employees • Industry you’re in • Annual income of your business • Location of your business
Insurance companies may use information about your gross revenues and the square footage of your property to calculate your insurance quote.
Forming an LLC can protect your personal assets, but you still need business insurance. Your personal insurance doesn’t protect the assets of your business. Also, your business is liable for any injuries a customer or client sustains on your premises. In addition, if your business is sued for anything, it could have a significant bill to pay if you don’t have insurance.
Figuring out how much business insurance is needed for an LLC can be tough since you’ll need to consider many factors. How much coverage you want, your business type, where your business is located, which industry you’re in, and which insurer you want to go with will all determine your overall business insurance cost.
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Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
Written by Team ZenBusiness
ZenBusiness has helped people start, run, and grow over 700,000 dream companies. The editorial team at ZenBusiness has over 20 years of collective small business publishing experience and is composed of business formation experts who are dedicated to empowering and educating entrepreneurs about owning a company.
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