Forming a limited liability company separates your personal assets from your business debts in many situations, but it does not stop your business from being sued. Insurance pays for claims against the company and helps keep it in business. In some cases, owners can also be held personally responsible, which makes coverage even more important.
Why an LLC needs insurance
- The LLC itself can be sued for injuries, property damage or professional mistakes, and those costs can wipe out business assets.
- Owners may be personally liable for their own negligence, and courts can sometimes set aside LLC protection.
- Clients, landlords and lenders frequently require proof of insurance.
- States require workers’ compensation for employees in most cases, regardless of business structure.
Common coverage for LLCs
- General liability insurance for third-party injuries and property damage.
- Professional liability insurance if you provide advice or services.
- Business owner’s policy to combine liability and property coverage.
- Workers’ compensation if you have employees.
- Commercial auto insurance for vehicles used for business.
- Cyber liability if you store customer data.
Single-member vs. multi-member LLCs
Coverage needs depend on activities, not just structure. A single-member consulting LLC may only need general and professional liability, while a multi-member construction LLC with employees and trucks needs a full program.
How to choose limits
Look at your contract requirements, the size of your projects and the assets you want to protect. Many small businesses start with $1 million per occurrence for liability coverage, but your industry and clients may require more.
Insurance built for LLCs and small businesses
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Frequently asked questions
Does an LLC protect my personal assets from all lawsuits?
Not always. You can still be personally liable for your own negligence or certain obligations. Insurance adds an important layer of protection.
Is insurance required to form an LLC?
No state requires insurance to form an LLC, but specific coverage may be required by law or contracts once you operate.
What insurance does a one-person LLC need?
Often general liability and, for service providers, professional liability. Needs vary by industry.
Related business insurance guides
This page is for general information only and is not insurance, legal or tax advice. Requirements, coverage and prices vary by state, industry and insurer. Review policy documents and speak with a licensed agent before buying.