Does an LLC need small business insurance? The short answer is technically no, but as with any insurance, should you ever need it, you’ll be very glad you have it.
Having formed an LLC protects you personally from financial hardship in the event of litigation, but does nothing to protect your business itself. This is where small business insurance comes into play.
After all of your effort you’ve built up a successful business, why roll the dice and risk losing it all? Finding yourself on the wrong end of a liability suit can be disastrous and can mean massive financial woes and very possibly the ruination of your business itself.
Securing small business insurance will protect your business and ensure that should any issues arise, you will be able to deal with them without having to risk bankruptcy or the dissolution of your hard-earned company.
Additionally, many businesses you may work for often require that you have your own small business insurance before they’ll sign a contract. Conversely, as a virtual assistant, you may find that many clients put you under their own business insurance, though that is far from guaranteed. Ultimately, you should get small business insurance as soon as you can afford it.
A good question to ask yourself is: what am I willing to lose?
This is one of those boring-but-necessary things you find along your business (and personal) journey. Don’t be lulled into ignoring what is a truly important issue to consider.
What type of insurance do you need?
There’s a slew of different types of insurance available for small businesses, though as a virtual assistant you’ll likely only need Professional Liability, or what’s also referred to as Errors & Omissions insurance, and possibly Business Interruption insurance
As you grow your business it’s possible that you may end up adding additional coverage. Say for example you add employees—you may find yourself needing Workers’ Compensation insurance, or if you have company vehicles, commercial auto. Though as a virtual assistant, that last one shouldn’t ever come into play. After all, working remotely is kind of the point of choosing to be a virtual assistant, is it not?
Professional Liability
Professional liability insurance is there to help protect you and your small business should you get sued for a mistake you made in your professional services. Even a simple disagreement or contract dispute can land you in court, meaning lawyer fees and possibly a hefty settlement in your client’s favor. Professional Liability insurance helps cover these costs which can be exorbitant. Professional Liability can cover:
- Misrepresentation
- Inaccurate advice
- Negligence
- Libel or slander
All of these can end up in a costly lawsuit. Why not protect yourself?
Cyber Security
Cyber security insurance offers coverage for computer-related crimes and losses. Say you get hacked and all of your client data gets stolen. Ransomware, data breach, or phishing scams can all result in legal trouble for your small business, and cyber insurance is there to help defray those costs
Business Interruption
Business interruption insurance is designed to cover expenses should you be unable to operate your business. Let’s say your office suffers smoke and water damage, taking out your computer and cell phone. Business Interruption insurance will help with your ongoing expenses such as rent, payroll, and utility bills.
You may find some insurance companies advertising blanket coverage under something called a Business Owner’s Policy. Often these have unnecessary coverage rolled into them that a virtual assistant will never need. Be sure to look closely at what coverages they’re offering so you don’t overpay for services you don’t need.
The best of the best
There are plenty of companies to choose from, but we think the following are the ones best suited for virtual assistants and freelancers. Bear in mind, all of the following companies’ prices vary depending on several different factors (profession, income, deductible, etc), so pricing will depend on your small business’s individual needs. On average, you’re looking at approximately $50-100 per month depending on your options and the level of your coverage.
With Thimble, if you want professional liability, you have to get general liability as well. It’s only about a $4/month fee, but the two are inseparable, even though as a virtual assistant you likely won’t need general liability. Not that it hurts to have it, it’s just overkill for the average virtual assistant.
Both State Farm and The Hartford are old-school insurance companies that are just starting to offer more cyber protections. Hiscox, Chubb, and Thimble are really targeting clients that do a lot or the majority of their business using the internet and digital tech and place an emphasis on those coverages.
Hiscox’s back story I found the most interesting—they began business as a division of Lloyd’s of London, covering fine art, bloodstock (thoroughbred horses), and offered “kidnap and ransom” coverage. Since then they have focused on small business insurance and have become a leader in the field.
So really…do I need small business insurance?
Starting out, you can probably get away without it. There can be a lot of costs involved with starting a business, and insurance will likely be down the priority list. However, over time as your business grows and the value of your small business increases, it should move to the top of the list.
A good question to ask yourself is: what am I willing to lose? If you’re content shuttering your small business in the event of litigation or catastrophe, then don’t bother. But if you care about your small business and want it to survive and flourish, you need to seriously consider protecting it with small business insurance.
Matthew Ogden is a Minneapolis-based copywriter and content writer and editor. He’s written for national retailers and lobster roll companies alike. When not writing he can be found nose deep in a book, writing and performing music, or nerding out about guitar tone.