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7 Reasons Why You Need LLC Insurance?

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Estimated reading time: 4 mins

As a business owner, you know the risks that could impact your company’s livelihood. You probably already have a general liability policy should an employee damage a customer’s property or should someone get injured in your store. As an LLC, you are counting on the benefits of your entity structure to protect you against costly lawsuits.

This is a common misconception that is a costly lesson to learn later. Yes, your personal assets are separate and shielded from matters related to your business. However, you may still have to pay for damages out of your own pocket if your company doesn’t have enough funds to cover a liability claim against it.

Top 7 Reasons to Own an LLC Insurance Policy

Insuring against perils requires comprehensive protection made up of multiple coverages to be the most effective. Here are seven reasons you need LLC insurance today: 

1. You Have Employees 

As your LLC grows, the need for employees will likely become a necessity. Unfortunately, general liability policies don’t cover employment risks, such as:

  • On the job injuries
  • Lost wages
  • Medical bills
  • Professional errors and omissions
  • Damage to your commercial property and assets

You must purchase an LLC insurance policy to provide better protection for you and your employees. Mistakes happen but shouldn’t mean the end of your business. With adequate coverage, even your legal defense fees could be covered should a customer sues your company for damages due to false advertisement or employee errors. Insuring against these situations can ensure your financial well-being is always protected.

2. Protect Your Personal Assets 

As mentioned earlier in this article, your personal assets are separate from your business as an LLC. But, if your current business insurance isn’t sufficient, you may find yourself dipping into your private accounts to cover damages that exceed your policy limits. This is an all too common occurrence for many business owners, so it’s vital to plan for the worst and have customized coverages that address almost every situation. 

Remember, it only takes one lawsuit to potentially shut down your enterprise permanently. So instead of constantly worrying about the unpredictability of business liability, an LLC policy lets you focus on creating a thriving business. 

3. Insure Against Contract Disputes

You may feel that your business deals are airtight because your attorney approved a contract template you use or reviewed it first. However, life is full of the unexpected. A last-minute change that isn’t avoidable could mean a lawsuit later if the terms of that modification weren’t in writing. Sometimes, customers will sue regardless if you had a contract or not because they aren’t satisfied with the outcome of their project. 

Not all insurance coverages will cover the costs of your legal woes, so it’s important to identify what risks you are more likely to encounter and protect against them accordingly. 

4. Lawsuits May Be Unavoidable

No matter how strong your client relationships are, things can go wrong. A miscommunication on expectations, dissatisfaction with quality, or believing your company advertised dishonestly. There are countless reasons a lawsuit could be brought against you, and sometimes through no fault of your own. 

Sometimes, companies get sued by their customers because there is no other option. For example, in situations involving a larger contract, you may get sued because that is the only way a client’s liability can be mitigated. Your legal fees to defend against these actions are covered by an LLC policy.

5. Protection for Your Company Assets, Inventory, and Property 

Without a location to do business and the necessary goods or equipment, how would you thrive? Interruptions are a significant issue for any growing company, whether due to supply chain backlogs or calamitous weather. You need these elements of your business’s infrastructure always to be available to maintain your profitability. 

A personalized LLC insurance plan can help minimize the negative impact of poor shipping times, natural disasters, theft, and much more. So don’t wait until you need it to buy your policy. 

6. Have Confidence in Your Business

Long-term success and maximum ROIs is the goal of any company. Achieving these goals can be challenging because of competition, consumer trends, and inherent risks within your industry. To give your business the best chances of becoming a lasting enterprise, you need to protect your interests. 

From inventory and commercial vehicles to employees and customers, numerous working parts can make your endeavor lucrative or a financial struggle. Having the appropriate insurance coverages to protect against the liabilities these factors bring can help you plan for the future with confidence. 

7. You Plan to Seek Financing

At some point in your business planning, expanding your services or brand reach will be necessary. This often requires funding from investors or taking out a business loan. Either way, lenders may hesitate if you aren’t insured properly. Business insurance for LLCs not only demonstrates your commitment to managing risk but shows you are serious about their investment.   

Conclusion

Creating an LLC structure for your small business is a wise first step in your risk management strategy. To ensure your company has comprehensive liability protection, investing in a customized LLC policy is a must. Knowing you have coverage should a customer or employee bring a claim against your organization can let you focus on more important matters like growing your brand.

 

About the author /


Simon is a creative and passionate business leader dedicated to having fun in the pursuit of high performance and personal development. He is co-founder of Truthsayers Neurotech, the world's first Neurotech platform servicing the enterprise. Simon is also an Ambassador for Gloucestershire business. Simon is an Associate Member of the Chartered Institute of Professional Development and Associate Member of the Agile Business Consortium.

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