The Limited Liability business structure is increasingly becoming very common among enterprises. One of the major reasons is that it offers the tax advantages of a partnership. Most often, the assets of the owners of LLC enterprises are off-limits and they can be held liable for the debts as well as obligations of the business. Some states however require health care providers to purchase professional liability insurance (malpractice insurance), even though many health care providers are organized as LLCs. Nevertheless, most LLCs have the rights to choose whether or not to cover different risks pertaining to their business and this can be done by purchasing different types of insurance. That said, some of the business insurances needed by LLCs include:
- General Liability Insurance
It is worthy to note that general liability insurance policies cover both the Limited Liability Company as well as its members. However, in some cases, a general liability policy can be used to pay damages while the assets of members are shielded. Of course, this happens where it is possible for individual members to be sued personally. More so, it is apparent that coverage for the business can only shield the LLC against catastrophic judgment if it’s sufficiently high. For instance, if an LLC is liable for a $3.5 million damage while having a general liability policy with a cap of $1 million, the insurance will cover $1 million while the Limited Liability Company will be responsible for the remaining $2.5 million.
- Malpractice Insurance
Of course, doctors as well as other professionals need professional liability insurance. Thus, professionals in a health care Limited Liability Company are obliged to obtain a malpractice insurance, even if the state law does not require it. Recall that failing to obtain this insurance simply implies that your LLC is ‘going bare’. Thus, your business will be forced into bankruptcy if it loses a malpractice case in court. Similarly, Limited Liability Companies that consist of professionals with fiduciary duties to their clients such as insurance agents and accountants also need professional liability insurance. Nonetheless, if the status of the business is a non-medical LLC, such insurance policies are termed ‘errors and omissions’ coverage.
- Property Insurance
A property insurance is also important for an LLC because if the business facility is suddenly destroyed by fire, flood, or even robbed, the property insurance will cover the damage. However, it is imperative for the business owners to ensure that the coverage is adequate. Recall that a property insurance can be written in a manner that covers the actual value of the property before it was destroyed.
- Lost Income or Key Personnel
Aside from the structure and other equipment like computers as well as other valuables covered by property insurance, the LLC may also want to be covered for loss of income in circumstances where the company ceases operation for a period. That said, it is possible to replace lost income with a business interruption policy. Besides a Limited Liability Company can as well purchase a ‘key man’ insurance policy in a bid to ensure stability in the case of the death of a partner. Similarly, the LLC can as well purchase life insurance. After all, a life insurance is always required as collateral by the U.S Small Business Administration and private lenders before the approval of a loan.
An LLC which hires employees is also obliged to pay worker’s compensation insurance under the state law. This insurance policy covers employees who could be injured on the job. Rest assured the LLC will also pay unemployment insurance taxes and, in some states, a disability insurance policy.