Operating as an LLC? The complete guide to get the coverage you need for your small business

Forming an LLC protects your personal assets from many business debts, but it isn't insurance. Your LLC still needs its own coverage to pay for lawsuits, property damage, employee injuries, and other losses that could otherwise drain the business.

This guide explains what an LLC does and doesn't protect, the types of business insurance most small businesses need, what coverage costs in 2026, and how to buy the right policies for your company.

IS AN LLC THE SAME AS HAVING INSURANCE?

No. A limited liability company (LLC) is a legal business structure, not an insurance policy. It separates your personal assets, like your home and savings, from the business's debts and legal obligations. If the business is sued, your personal assets are generally protected.

An LLC doesn't protect the business itself. If a customer is injured at your location or a client sues over your work, the LLC's own money, equipment, and property are on the line. Business insurance is what pays those costs.

LLC protection also has limits:

• It isn't automatic. You need to keep your LLC in good standing, file required state reports, and keep business and personal finances separate. If you don't, a court can "pierce the corporate veil" and hold you personally responsible.
• It doesn't cover your own actions. If you personally cause harm, such as through negligence or professional mistakes, you can still be held personally liable.
• Personal policies usually exclude business activity. For example, a personal auto policy may not cover an accident while you're driving for the business, and a homeowners policy rarely covers business property or client injuries.
  

DO I NEED BUSINESS INSURANCE IF I HAVE AN LLC?

Yes. The LLC structure protects you, and business insurance protects the business. Most LLCs need insurance for three reasons:

1. The law may require it. Most states require workers' compensation once you have employees. Commercial auto is required if the business owns vehicles. Some licensed professions and contractors must carry liability insurance or a surety bond.
2. Contracts often require it. Landlords, lenders, clients, and general contractors commonly require proof of insurance (a certificate of insurance) and may ask to be named as an additional insured.
3. One claim can sink an uninsured business. A single slip-and-fall lawsuit, data breach, or fire can cost more than many small businesses earn in a year.
   

Does a single-member LLC need insurance?

Yes. A single-member LLC faces the same business risks as a larger company, and because the owner often does most of the work personally, the line between business and personal liability can be thinner. At a minimum, most single-member LLCs should consider general liability and, if they give advice or provide professional services, professional liability. If you work from home, check whether your homeowners policy covers business equipment and client visits. Usually it doesn't. Learn more about home-based business insurance. 

WHAT TYPES OF COVERAGE DO I NEED FOR MY LLC?

Every business is different, but most small businesses build their insurance program from a few core policies and add specialized coverage based on their industry and risks.

Core coverage most small businesses need 

General liability insurance Covers claims that your business caused bodily injury or property damage to someone else, such as a customer slipping in your store or an employee damaging a client's property. It also covers advertising injury claims like libel or copyright infringement. This is usually the first policy a small business buys, and landlords and clients often require it.

Commercial property insurance Protects buildings, equipment, inventory, furniture, and other business property from fire, theft, vandalism, and certain weather damage, whether you own or lease your space. Most commercial leases require tenants to carry property and liability coverage. Note that standard property policies exclude flood and earthquake, which require separate coverage.

Business owner's policy (BOP) A BOP bundles general liability, commercial property, and business interruption coverage into one policy, usually at a lower price than buying them separately. BOPs are designed for small and mid-sized businesses with lower-risk operations, such as offices, retail shops, and many service businesses. See the benefits of bundling insurance policies.

Business interruption insurance Replaces lost income and helps pay ongoing expenses, like rent and payroll, if a covered event such as a fire forces you to close temporarily. It's usually added to a property policy or included in a BOP.

Workers' compensation insurance Pays medical bills and lost wages for employees injured or made ill on the job, and generally protects the business from related lawsuits. Most states require it once you have employees, though thresholds vary. Texas is the notable exception, where most private employers can choose not to carry it. Learn how workers' compensation benefits work and strategies to reduce workers' comp costs.

Commercial auto insurance Covers vehicles your business owns or leases. If employees drive their own cars for work, like running errands or making deliveries, hired and non-owned auto coverage fills the gap that personal auto policies often leave. Read more about commercial auto insurance and why commercial auto rates are rising.

Additional coverage to consider 

Professional liability (errors and omissions) insurance Covers claims that your advice, services, or work caused a client financial harm, including mistakes, missed deadlines, and negligence. It's essential for consultants, accountants, real estate professionals, designers, and other service businesses. Technology companies should look at tech E&O insurance.

Product liability insurance For businesses that make, distribute, or sell physical products. It covers injury or property damage caused by a defective product.

Cyber insurance Covers costs from data breaches, ransomware, and other cyberattacks, including notification, recovery, legal defense, and some lost income. Small businesses are frequent targets because they often have fewer security resources. See what small business cyber insurance costs and our complete guide to cyber insurance.

Employment practices liability insurance (EPLI) Covers claims from employees or job applicants alleging discrimination, harassment, wrongful termination, or retaliation. General liability policies exclude these claims.

Commercial umbrella insurance Adds extra liability limits on top of your general liability, auto, and employer's liability policies, which helps when a large verdict exceeds your primary limits.

Inland marine insurance Despite the name, this covers business property that moves or is stored off-site, such as tools, equipment, and goods in transit. It's common for contractors and mobile businesses. See the value of inland marine insurance.

Commercial crime insurance Covers losses from employee theft, forgery, and certain types of fraud.

Surety bonds Not insurance in the traditional sense, but often required for contractors, licensed professionals, and businesses that bid on public projects. A bond guarantees you'll meet your contract or legal obligations.

HOW DO I GET SMALL BUSINESS INSURANCE?

Buying business insurance takes a few steps:

1. Assess your risks. List what you own (property, equipment, vehicles, data), what you do (services, products, advice), and who you work with (employees, customers, vendors).
2. Check your requirements. Review state requirements (such as workers' comp and licensing), plus insurance terms in your lease, loan agreements, and client contracts.
3. Work with an independent broker. An independent broker can compare coverage and pricing from multiple insurance companies, spot coverage gaps, and help you choose the right limits and deductibles. A broker also advocates for you when you file a claim.
4. Gather your information. Insurers typically ask about revenue, payroll, number of employees, years in business, property values, and prior claims.
5. Compare quotes on coverage, not just price. Look at limits, deductibles, exclusions, and whether policies cover how your business actually operates.
6. Review your coverage every year. New employees, locations, equipment, or services can create gaps. Use our insurance renewal checklist for business owners before each renewal.

If you ever need to use your coverage, here's how to file a business insurance claim and what to expect.

HOW MUCH DOES COVERAGE COST?

The cost of insurance will vary depending on a number of factors, including the types and amount of coverage you purchase, the location and size of your company, and the industry you're in. However, you can expect to pay anywhere from a few hundred to several thousand dollars per year for insurance coverage.

HOW ARE MY PREMIUMS DETERMINED?

Your policy premiums are dependent on three primary variables: insurance carrier capacity, your exposures, and your loss experience. If there’s a shortfall of capital in the insurance marketplace, the cost of all insurance will be high. Insurers set your premium based on how likely you are to have a claim and how expensive that claim could be. The main factors are:

• Industry and operations: a roofing contractor has more liability risk than an accounting firm.
• Size: revenue, payroll, and employee count affect general liability and workers' comp pricing.
• Location: weather, crime, and local legal climate all matter.
• Property values: the more property you insure, the higher the premium.
• Claims history: past losses signal future risk and can raise rates or limit your options.
• Coverage choices: higher limits and lower deductibles cost more.
• Insurance market conditions: when insurers face heavy losses or less capacity, prices rise across the board.

Where the market stands in 2026: commercial insurance pricing is leveling off after several years of increases. According to the Ivans Index, August 2026 renewal rates rose 5.44% for BOPs, 4.18% for general liability, and 3.58% for commercial auto, while workers' compensation rates fell 1.1%. Umbrella rates rose 6.82%, one of the largest increases among small commercial lines.

Ways to manage your premium: bundle policies into a BOP, raise your deductibles where it makes sense, invest in safety and loss prevention, keep up with cyber security, and review your coverage with a broker before each renewal.

CONTACT CHRISTENSEN GROUP TODAY TO DISCUSS YOUR SMALL BUSINESS INSURANCE NEEDS

At Christensen Group, our team is comprised of specialized business insurance experts who are invested in weaving together solutions that are right for your risks. No matter where you are in your business, we deliver a high-touch experience through dedicated consultants who are here to bring clarity as they find creative ways to address your most pressing challenges. Speak with one of our business insurance professionals today to get started.

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