Starting a business is an exciting journey filled with critical decisions. One of the most common first steps entrepreneurs take is forming an LLC (Limited Liability Company). It’s a smart move for protecting your personal assets—but here’s a common misconception we hear all the time:
“If I have an LLC, I don’t need business insurance, right?”
Wrong. And here’s why.
LLC vs. Business Insurance: What’s the Difference?
Think of your LLC as a legal shield. It separates your personal finances from your business liabilities. So if your company is sued or accrues debt, your personal assets (like your house, car, or savings) are typically off-limits.
But that shield doesn’t cover everything. That’s where business insurance steps in.
What an LLC Doesn’t Cover
Even with an LLC, you could still be personally or professionally exposed in many ways. For example:
- Customer slips and falls at your office or job site? Not covered.
- You damage a client’s property while working? Not covered.
- You make a professional error that costs someone money? Still not covered.
An LLC doesn’t pay for lawsuits, accidents, or damages. Business insurance does.
Types of Insurance Every LLC Should Consider
Depending on your industry, you may need one or more of the following:
- General Liability Insurance – Covers injuries and property damage involving third parties.
- Professional Liability Insurance (E&O) – Protects against claims of mistakes or negligence in your services.
- Commercial Property Insurance – Covers damage to your business property.
- Workers’ Compensation Insurance – Required if you have employees in most states.
- Business Owner’s Policy (BOP) – A cost-effective bundle of liability and property coverage.
Why You Need Both
An LLC provides legal protection, while insurance provides financial protection. Together, they form a solid foundation for risk management. Without insurance, you’re still vulnerable to claims that can financially devastate your business—even if your personal assets are safe.
Final Thoughts
Forming an LLC is a smart start, but it’s not a substitute for business insurance. If you’re looking to fully protect your business and your future, combining an LLC structure with the right insurance policy is the best move.
Need Help Finding the Right Coverage for Your LLC?
At Eugene C. Yates Insurance Agency, we’ve been helping Sacramento businesses like yours since 1946. We’ll find a custom insurance solution that fits your needs and your budget.
Get in touch with one of our experienced agents today.