A limited liability company (LLC) is the U.S. tax and business structure of most small partnerships or sole proprietorships. The LLC designation protects owners from being held personally responsible for the company’s debts or liabilities.
While this distinction protects the owner’s personal assets, it doesn’t reduce or eliminate business risk. What if someone trips and falls on your property, or a work-related accident results in death or injury? What if the LLC is responsible for a client’s data breach? In these examples, an LLC may be held responsible.
These liabilities threaten the long-term viability of any business. LLC business owners often finance their operation with their own funds, using personal savings or borrowing money from friends and family to get their businesses off the ground.
That means a major claim or settlement against an LLC business could destroy the equity invested in it.
What is LLC insurance?
LLC insurance protects the LLC entity from financial loss. This can include, but is not limited to, the following coverages:
- Errors & Omissions (E&O) insurance, also called Professional Liability insurance, protects professional services firms from claims they made an error in their work.
- Directors & Officers (D&O) insurance protects directors and officers and employees of the company for the actions and decisions made on behalf the organization.
- General Liability insurance protects a business when accused of causing bodily injury, property damage, copyright infringement and more.
- Property insurance protects an organization from a claim against their property.
- Worker’s Compensation (WC) coverage helps the LLC cover a claim after a worker got injured on the job. Most states require this coverage when a business employs more than two individuals.
- Cyber insurance will cover an LLC for a data breach, including specialized counsel, business interruption expenses, breach victim notification, credit monitoring and more. Cyber coverage is critical for LLCs with an online business, or that handle sensitive data digitally.
- Commercial auto insurance protects a business from the costs and claims related to an accident with a company-owned vehicle or a leased, rental or employee vehicle while working.
What is the difference between LLC insurance and a BOP policy?
Sometimes, small businesses combine protection from several types of liability coverage into a single policy, called a business owner’s policy, or BOP.
LLC insurance typically covers Property, Business Interruption and E&O liability only. Because the policy is packaged together, LLC insurance is finite and can’t be expanded. Packaged policies are often suited for small businesses that face like risks, whereas larger organizations are more likely to purchase individual commercial policies that can be customized to the unique risks they face.
A BOP policy combines business property and business liability (otherwise called general liability) insurance, but does not include E&O, Commercial auto or WC insurance. These coverages would have to be procured in addition to the package policy.
How much do LLC insurance and BOP insurance policies cost?
As with any insurance coverage, price will vary based on location, individual business risk, industry and more.
Generally, packaged policies like a BOP policy can be less costly as they cover aggregated risk. However, a packaged policy may provide less coverage or carry more exceptions than a series of individual LLC policies. Work with your broker to find the best solution to your LLC’s needs.
Contact your HUB Professional Liability expert for more information on obtaining the right LLC insurance policy for your business. You can also learn more about E&O insurance here!