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General Liability Insurance for LLCs

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Many small-business owners structure their companies as limited liability companies, often abbreviated as LLCs. True to its name, the LLC business structure limits the extent to which business owners are personally liable for company debts or losses.

But while an LLC structure offers some protection for your personal assets, it doesn’t protect your company from the expenses associated with any legal actions taken against it. That’s where business insurance comes in.

Here’s what you should know about general liability insurance and how it can protect your LLC.

What general liability insurance for LLCs covers

General liability insurance protects a company’s assets when the business has been accused of harming another person or their property. It covers third-party claims for bodily injury and property damage, as well as personal and advertising injury.

Businesses face numerous risks on a daily basis. If a customer slips and falls inside your place of business, you could be liable for the cost of medical treatment. You could be sued if your employee makes an accounting error on a client’s taxes, or if you inadvertently damage someone else’s property while on the job.

And even if the claim brought against you is ultimately unfounded, you could still find your business on the hook for thousands of dollars in legal fees.

In these situations, general liability insurance can cover the costs associated with third-party claims against your LLC including legal and settlement costs.

What general liability insurance doesn’t cover

While general liability insurance covers your business in a variety of scenarios, this type of insurance alone doesn’t offer enough protection for most small businesses. Here are a few examples of what general liability doesn’t cover:

  • Harm to your employees. General liability insurance doesn’t cover bodily injury claims for people you employ. Instead, you’ll need a workers’ compensation policy to cover medical costs or other fees associated with workplace injury or illness. Some states require workers’ comp coverage for any company employees — and in some states, you’ll need to provide this benefit for contracted workers as well.

  • Commercial vehicles. If you or your employees get in a road accident in a company vehicle, you’ll need commercial auto insurance to cover expenses associated with repairing your own or another party’s car, or to pay for medical bills in the event of bodily injury.

  • Harm past your maximum limit. Even if a claim falls within the scope of general liability insurance, you could still face a large bill if the claim exceeds your policy’s coverage amount. To pay that additional amount, you’ll need excess liability coverage, which kicks in after a general policy limit has been reached.

There are many additional kinds of insurance products that can benefit your LLC, depending on your scope of work. It’s a good idea to familiarize yourself with what they have to offer, just in case they can provide extra protection.

Many insurance providers bundle general liability insurance with one or more types of additional coverage within a business owner’s policy, or BOP, which can mean discounted rates for your business.

How much general liability insurance does your LLC need?

All LLCs benefit from general liability insurance, given that a single expensive claim could wipe out your LLC’s financial resources.

Deciding how much coverage your LLC needs varies greatly depending on the size and scope of your company’s operations, business location, number of employees and contractors, and more. If you’re unsure how much coverage is right for you, consider working with a broker.

General liability insurance cost

  • Company size (number of employees and contractors).

  • The nature of your business.

  • How much business property and equipment you own.

  • The number of policies you purchase.

  • Coverage limits and deductibles.

The average small business can pay from $30 to $50 a month for a stand-alone general liability insurance policy, depending on the amount of coverage purchased.

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