Insurance for LLCs
Forming an LLC keeps the company’s debts off your personal balance sheet, but the LLC itself still has to pay for a lawsuit, an injured worker or a damaged lease space. General liability insurance for an LLC, and the policies that sit beside it, is what funds those costs. We look for coverage for California LLCs, and the insurer decides once it has reviewed what the company does.
What the LLC shield actually protects
California’s Corporations Code section 17703.04 says an LLC’s debts and liabilities, in contract, tort or otherwise, belong to the LLC alone, and a member or manager is not personally liable for them simply because of that role.
The shield moves a claim off your house and savings but leaves it on the company. The SBA notes that an LLC can protect your personal property from lawsuits, but that protection has limits, and Insureon points out that it does nothing for company finances when a suit has to be defended. A slip-and-fall claim can drain a small LLC’s operating account long before anyone asks about personal liability.
Three ways an owner’s own assets come back into play
- Your own conduct. Section 17703.04(c) keeps a member personally liable for the member’s own participation in tortious conduct. If you cause a crash while driving to a job, the LLC can be liable and so can you.
- Your own signature. The same subsection carves out a written guarantee or other contract the member signs, apart from the operating agreement. A personal guarantee on an office lease or an equipment loan follows you, not the company.
- Piercing the veil. Under section 17703.04(b), members can be held liable under alter ego law in the same circumstances as corporate shareholders. Skipping meetings is not a factor unless your articles or operating agreement require them.
A member can also agree in writing, in the articles or an operating agreement that references section 17703.04(e), to answer personally for LLC debts. Insurance can’t cancel a personal guarantee, but a liability policy pays the defense and covered damages on injury and property claims, including ones that name you as a member over the LLC’s business, before they reach the LLC’s accounts or your own.
Policies a California LLC typically carries
For business insurance for an LLC, Insureon lists general liability, professional liability (E&O), workers’ compensation, a business owner’s policy, cyber and commercial auto as the core policies for LLCs, with D&O and a commercial umbrella as add-ons. The SBA adds product liability and commercial property, plus unemployment and disability insurance once a business has employees.
General liability answers a customer’s injury or property damage claim, and a business owner’s policy bundles that with coverage for your space and equipment. Professional liability responds when the complaint is about advice or a service that went wrong. Corporations Code section 17701.04 bars a California LLC from rendering professional services as defined for professional corporations unless the licensing law allows it, so confirm the entity with your licensing board before buying E&O in the LLC’s name.
Vehicles titled to the LLC or to you
Insureon notes that personal auto insurance covers personal use of a vehicle, not work-related driving beyond your commute. Match the policy to whoever holds the title: an LLC-titled truck belongs on commercial auto in the company’s name, and a vehicle kept in your own name while the LLC uses it needs a conversation with us before a claim, not after.
Members and employees who drive their own cars for the company raise a separate exposure, covered in our guide to hired and non-owned auto.
Single-member, multi-member and workers’ comp for members
Workers’ comp turns on what each member does, not on how many members the LLC has. Under Labor Code section 3351(f), working members of an LLC who receive wages irrespective of profits count as employees. A managing member may opt out with a written waiver signed under penalty of perjury, as section 3352(a)(17) allows. It takes effect when the insurer accepts it and lasts until withdrawn in writing.
State Fund’s broker guidance draws the line sharply: only working members who are managers can be excluded, and manager-members who keep coverage are rated at executive minimum and maximum payroll. A non-manager who works in the business cannot waive. So a single-member LLC run by its manager can usually choose, while a working member who is not a manager counts as an employee. Any LLC that hires staff outside the membership must carry workers’ compensation like every other California employer.
Whose name goes on the policy
Under the standard ISO commercial general liability form, IRMI’s analysis explains, an LLC is protected only when it is designated as a named insured. Members are insureds for the conduct of the LLC’s business, managers for their duties as managers, spouses get no automatic coverage, and an LLC not shown as a named insured has no coverage for its conduct.
That catches owners who form a second LLC for a new location and assume the old policy follows. Tell us before the new entity signs a lease or contract so it can be listed, and use each LLC’s legal name consistently, including on any CSLB workers’ comp certificate.
General liability insurance for an LLC: leases, contracts and contractor licenses
Insureon reports that the most common limits for LLC general liability insurance are $1 million per occurrence and $2 million aggregate, and that owners often buy the coverage to meet a lease, loan or contract requirement. Expect the landlord to ask for a certificate of insurance and, often, additional insured status. See commercial lease insurance requirements for the clauses.
An LLC that holds a California contractor’s license has a statutory floor too. Business and Professions Code section 7071.19 requires liability insurance with an aggregate of at least $1,000,000 when five or fewer persons are listed on the license, plus $100,000 for each additional listed person, up to $5,000,000. The license is suspended if exhausted limits are not reinstated. Our contractor insurance page covers the rest of a contractor’s program.
How much does insurance cost for an LLC?
The figures in this section are published industry data, not a Mithril1 quote for your LLC. Insureon reports, from policies sold to its small-business customers, about $45 a month for general liability, with annual premiums from roughly $250 to over $3,000. It reports $88 a month for professional liability and $83 a month for a business owner’s policy, with BOP premiums running from about $400 to over $6,000 a year. Those are starting points for very small LLCs at standard limits; established companies pay well above them.
Take an LLC that buys a BOP and professional liability at Insureon’s figures: $83 plus $88 comes to $171 a month, or $2,052 a year. Put one LLC-titled van on commercial auto at Insureon’s reported $245 a month, and the total climbs to $416 a month, about $4,992 a year, before workers’ comp for any employee.
Your premium runs higher with more vehicles and drivers, employees on payroll, lease or contract limits above $1 million, an umbrella, and past claims. It runs lower for a home-based LLC with no vehicles or staff, limits that match what contracts require, and a clean loss history.
A few useful answers
Common questions
Do I need general liability insurance for an LLC if the LLC already limits my liability?
The shield keeps the LLC’s debts off you, but the company still pays to defend a claim, and your own conduct and guarantees stay personal. General liability funds that defense.
Can I exclude myself from workers' comp as an LLC member?
A managing member can sign a written waiver under Labor Code section 3352(a)(17), effective once the insurer accepts it. State Fund does not let working members who are not managers opt out.
My second LLC shares an owner with my first. Is it covered by my existing policy?
Not automatically. Under the standard general liability form, an LLC not shown as a named insured has no coverage, so add the new company before it operates.
My truck is in my name but the LLC uses it. Is my personal auto policy enough?
Personal auto covers personal use, not work driving beyond a commute, according to Insureon. Tell us who holds the title and how the truck is used, and we look for a commercial auto setup that matches.
Can my LLC get coverage through Mithril1?
It can, when an insurer accepts the LLC as a named insured. We request quotes for the policies above, and each insurer decides after reviewing the company’s operations and claims.