Among other things, the pandemic kicked off a bit of an entrepreneurship boom with around 5.4 million new businesses starting in 2021 alone. Getting a new venture off the ground is an exciting time, but it’s also an overwhelming time in terms of details.
You must worry about finding inventory and establishing vendor relationships. If you’re going the e-commerce route, you need to figure out your logistics in terms of storage and delivery. In the midst of all that, it’s easy to overlook business insurance.
Not sure if your LLC needs insurance? Keep reading for some of the key reasons almost every LLC needs business insurance.
Lawsuits
While your LLC may help protect your personal assets if you get sued, it does nothing to protect your business assets. Someone can sue your business and if things go their way, get a judgment against you. If you think your small business has low lawsuit potential, let’s look at some common types of lawsuits.
Slip-and-Fall
If someone ever visits your business, there is the potential that they will slip on something, fall, and injure themselves. You face liability for those injuries and the potential for a lawsuit.
Remember, this applies even if you work from home, even if you don’t have customers at your home. Let’s say someone comes by for a business meeting and injures themselves. The same principles apply.
Data Breach
Cybersecurity failures like data breaches cost businesses billions annually. Unfortunately, small businesses prove especially vulnerable to cybersecurity failures. They often lack the budget for comprehensive cybersecurity protection or to hire cybersecurity experts.
Yet, a breach of customer information still leaves you open to a lawsuit.
Cyber liability insurance is still very affordable and you can get quotes from independent agencies like Harris Insurance in minutes. If your business conducts business over the internet or even takes electronic payments, you should have cyber liability.
Employee Accident
While employee on-the-job injuries are covered by mandatory worker’s compensation insurance in nearly every state, employee-caused injuries are another story. Let’s say that you send an employee on an errand in a company vehicle and they cause an accident. The other driver gets injured.
No matter the circumstance or hypothetical scenario, it is very easy for people to see dollar signs when businesses are involved. It is up to you as the business owner to ensure that you are ready to protect yourself and your business.
One of the major functions of LLC business insurance is providing you with liability coverage.
Personal Assets Are Not Completely Immune
As a general rule, forming an LLC exempts your personal assets from the results of a lawsuit. There are exceptions to that rule, however.
Most business owners do a good job of keeping their personal finances separated from their business finances. It’s a basic rule of thumb for business finance.
Yet, small businesses get in trouble sometimes. More than one business owner has transferred money from a personal account into a business account to keep the business afloat for a while.
If you get sued later, that mixing of funds can open up your personal assets in any future judgment against you.
Let’s say that you wanted a line of credit for the business, but the business’s credit wasn’t good enough. Instead, you get the line of credit based on your personal creditworthiness. If the business uses that line of credit, it puts your personal assets back into the mix in the event of a lawsuit.
Legal Costs
Let’s say that you get sued and the other person agrees to a settlement. You still rack up legal costs with your lawyer.
One of the benefits of business insurance is that many of them include a provision for covering legal costs up to a point. Assuming that the case doesn’t drag out for too long, you can often get away without paying any legal fees out of pocket.
It’s Mandatory
Business insurance isn’t mandatory for every single business in every single state, but it is a requirement for many of them. Not carrying business insurance when it’s mandatory can open you up to fines and even end up with your business closing down.
Even if your state doesn’t mandate business insurance for your specific kind of business, it will always make sense to carry it. It doesn’t cost you anything to contact a local Agent and learn about your options. A small investment could save your business completely. As noted above, lawsuits are common. Plus, there are several other reasons we’ll cover below.
Accidents Happen
Even in the most orderly business, accidents can happen. Electrical equipment can malfunction and start a fire. Pipes can burst and destroy inventory.
A good LLC business insurance policy will provide coverage for your business structures and the business personal property inside the business.
Crime Happens
As noted above, small businesses are often at-risk for cybercrime. You can often find policies that include cyber coverage or offer it as an add-on. This kind of cyber coverage will help you pay legal fees, identity protection services, and even some public relations problems.
Plus, there are the old-fashioned types of crime such as burglary and vandalism. A good business insurance policy will also provide coverage for things like stolen property or damage to your property.
Natural Disasters
While you cannot predict a specific natural disaster, the arrival of one can put a business out of business in no time flat. Hurricanes, tornadoes, and flooding can level buildings or leave them unusable without substantial repairs. FEMA reports that 1 in 4 businesses are unable to open back up after a significant natural disaster. With preparation, you can keep your business out of the negative side of that statistic.
Another important note for business owners: If a particular type of natural disaster shows up a lot where you live, that type of natural disaster is often excluded in a general policy. You typically need a separate policy or an add-on to provide coverage for that specific disaster type. In Florida, especially in coastal communities, you might see this with X-Wind policies. Wind coverage is vital all throughout Florida so it’s important to use an independent agency like Harris Insurance who can shop multiple markets on your behalf.
Your LLC Needs Business Insurance
Even if you run a home-based business with little or no contact with customers, your LLC needs business insurance.
After all, it only takes one moment to find yourself on the wrong end of a lawsuit. Your inventory could unexpectedly get damaged by an accident or even stolen. A flood or fire in your town could level your building and take all of your business assets with it. It doesn’t matter what the peril is, with a solid business insurance policy you want to be confident in the coverages you have selected.
Harris Insurance offers a full range of Florida business insurance options. For more information, contact Harris Insurance today.
LEGAL DISCLAIMER
Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Discussion of insurance policy language is descriptive only. Every policy has different policy language. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. Please refer to your policy for the actual language.
