If there’s one thing (future) business owners will need to understand, it’s commercial insurance. Making sure your business is covered from liability is crucial to keeping you out of bankruptcy and in business for years to come. That’s why many business owners choose professional liability insurance. But is this type of business insurance necessary for limited liability companies (LLCs)? Does an LLC still need liability insurance?
The answer is yes, depending on the type of business you own.
The Difference Between LLC and Liability Insurance
Sure, the very name limited liability company has the word “liability” in it, but that doesn’t mean your business can go without professional liability coverage. Forming an LLC and buying liability coverage protects you, the business owner, against two very different things.
As you may know, forming an LLC is done for multiple reasons. The most important reason is that doing so can protect your personal finances (i.e. lawsuits are brought against your company, not you personally, which means that your company is responsible for paying settlements and judgments. A person suing your company cannot come after your personal assets).
There are other tax-based reasons for forming an LLC, but for the purposes of liability, an LLC ultimately protects you, the business owner.
Professional liability insurance, on the other hand, protects your business. Professional liability insurance provides coverage for your business should a lawsuit be brought against it and a financial judgment be ruled in favor of the party suing your company.
If you own a business that deals in professional services, there is always the potential for someone to bring a case against you for negligence, which is also known as errors and omissions. Your professional liability insurance will pay out a portion (or all) of the financial judgment that is brought against you should you settle or lose the case.
Simply being an LLC is not enough to protect your company against lawsuits; getting professional liability insurance is integral if you operate a business in one of the following fields:
- Accounting
- Construction or contracting
- Architecture or engineering
- Education
- Medical
- Legal
Many other businesses can also benefit from purchasing professional liability insurance. If you need coverage, let one of our commercial insurance agents build a plan that is right for your business. For any questions regarding coverage, get in touch with our team at The Patrick J. Thomas Agency today.
Disclaimer: this is for informational purposes only and is not intended to be legal advice. If you need legal counsel, please contact an attorney directly.