What Kind of Insurance Does an LLC Need?

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While a limited liability company, or LLC, provides its owners limited personal liability for business debts, owners are still personally liable for their direct actions. For that reason, LLCs should carry small-business insurance. LLCs don't require any special type of insurance, but LLCs with employees do have special insurance needs.

Commercial Business Insurance

Virtually every LLC needs a few types of insurance. General liability insurance protects a business owner from injuries, accidents or claims of negligence by clients and customers. Any LLC owner who provides a service to a customer should carry professional liability insurance to protect against claims of malpractice or errors. Businesses that manufacture or sell products can also benefit from product liability insurance, which kicks in if a product defect causes injury.

Employer-Specific Insurance

In addition to basic commercial business insurance, LLCs with employees require other types of insurance. Employers are required to carry workers' compensation insurance, which pays benefits to workers injured on the job. Employers must also register with the state to pay unemployment insurance tax. California, Hawaii, New Jersey, New York, Puerto Rico and Rhode Island also require employers to carry disability insurance for employees.