Forming a Limited Liability Company (LLC) is a smart first step toward protecting your personal assets. But here’s a common misconception we hear often: “Once I form an LLC, I’m covered, right?”
Not exactly.
While an LLC offers legal protection, it doesn’t come with automatic business insurance. If you own or are starting an LLC, it’s critical to understand the difference between legal structure and insurance coverage—and why you need both to protect your business fully.
What Protection Does an LLC Actually Provide?
An LLC shields your personal assets (like your home or savings) from liability related to your business. If your business is sued or faces debt, only the assets owned by the LLC are at risk—not your personal ones.
However, this protection has its limits. An LLC does not protect your business against:
- Lawsuits from customers or clients
- Employee injuries
- Natural disasters or property damage
- Cyberattacks or data breaches
- Vehicle accidents involving company cars
This is where business insurance comes in.
No, LLCs Do Not Automatically Have Insurance
Let’s be clear: forming an LLC does not provide any insurance coverage by default.
Business insurance must be purchased separately, and the type of insurance you need depends on the nature of your business, how many employees you have, and where you operate.
Essential Insurance Policies for LLCs
To fully protect your LLC, consider the following types of coverage:
1. General Liability Insurance
Covers third-party bodily injury, property damage, and legal fees. It’s essential for nearly every type of business.
2. Professional Liability Insurance
Also known as Errors and Omissions (E&O) insurance, this protects service-based businesses from claims of negligence or mistakes.
3. Workers’ Compensation Insurance
Required in most states if you have employees. It covers medical expenses and lost wages for work-related injuries.
4. Commercial Property Insurance
Protects your physical location and business assets from fire, theft, or damage.
5. Business Owner’s Policy (BOP)
A cost-effective package that combines general liability and property insurance.
6. Commercial Auto Insurance
Required if your LLC owns vehicles or if employees drive for business purposes.
Why Your LLC Needs Insurance
Even with LLC status, a single lawsuit or accident could financially cripple your business. Insurance ensures that your LLC stays protected, allowing you to operate with confidence.
Additionally, many clients, landlords, and contractors require proof of insurance before doing business with you.
Need Help Finding the Right Insurance for Your LLC?
At Eugene C. Yates Insurance Agency, we’ve been helping Sacramento businesses get affordable, tailored insurance for over 75 years. Whether you’re a startup or a growing enterprise, we can match you with the right policies from top-rated carriers to ensure your LLC is fully covered.
📞 Call us today to speak with a licensed agent, or get a free, no-obligation quote online.
Secure your business. Protect your future. Get insured today.