S Corporation (S Corp) Business Insurance

State laws and client contracts may require certain types of coverage for an S corp. Here are a few cases where insurance is crucial for S corps, LLCs, sole proprietors, independent contractors, franchises, and other types of small businesses.

You may need insurance coverage for a contract, loan, or lease. Clients, lenders, and landlords may require you to carry insurance to protect themselves against potential losses. In some cases, they may ask you to list them as an additional insured on your policy.

You may need insurance to comply with the law. Depending on the laws in your state, you may need coverage for a business-owned vehicle, to obtain a license in your field, or to protect against work-related injuries.

You gain client trust by being insured. Even when it's not required, carrying insurance is a sign of professionalism and financial stability. It helps attract clients and can give your S corps an edge over the competition.

Insurance protects your business from catastrophic losses. 43% of small businesses have faced or been threatened with a lawsuit, but they often lack the resources that larger companies draw upon to survive a legal battle. Insurance helps your S corp withstand unexpected costs from customer injuries, fires, and other incidents that might otherwise prove devastating.

With Insureon, you can get usually get a certificate of insurance on the same day that you apply for quotes. It’s a simple three-step process:

1. Fill out our easy online application.
2. Compare free quotes from top-rated insurance providers.
3. Buy a policy and download a certificate of insurance.

A certificate of insurance will outline the details of your business liability insurance, such as policy limits, deductibles, and any endorsements. It serves as proof of insurance for clients, landlords, lenders, and anyone else who asks whether your business is insured.

Insurance is usually affordable for small, low-risk S corporations. There are a few ways to find cheaper insurance:

Compare quotes. With Insureon, you will instantly get multiple free online quotes from leading insurance companies. Compare insurance options from different providers and consult with our agents to make sure you're not paying too much for insurance while getting what's best for your S corp.

Bundle policies. Many small business owners buy general liability coverage and commercial property insurance together in a business owner's policy, which costs less than purchasing each policy separately. Cybersecurity businesses and other tech companies can often buy a bundle called tech E&O, which includes cyber insurance and errors and omissions insurance.

Choose a high deductible. You can customize your insurance policy to save money, such as by choosing a higher deductible or lower policy limits.

Avoid claims. Finally, take steps to reduce your business's risks. Prompt cleanup of spills, the elimination of clutter, and bright lighting can help customers and employees avoid accidents, which helps keep your premiums low.

S corporations are pass-through entities, meaning the business itself usually doesn’t pay federal income tax. Instead, profits and losses pass through to the owners and are reported on their personal tax returns. Owners must pay themselves a reasonable salary (subject to payroll taxes), and any remaining profit can be taken as distributions, which are typically not subject to self-employment tax.

S corps can also deduct ordinary and necessary business expenses—such as insurance premiums, software, and office costs—before profits are passed through. The business files Form 1120-S each year and provides shareholders with Schedule K-1s, usually on or before the standard filing deadline of March 15.

Yes, the type of work you do can affect which business insurance policies you need.

For example, state laws sometimes require workers' comp coverage for construction contractors even if they work alone, due to the high risk of injury. In some states, real estate agents and brokers are required to carry errors and omissions insurance. Plumbers, landscapers, and personal trainers may need a general liability policy to obtain a license.

Manufacturers, retailers, and others involved with products should consider carrying product liability insurance. Often included in general liability insurance, this policy covers liability claims related to harm caused by a product.

Cleaning businesses may need a janitorial bond before a client will allow cleaners onto their property.

It may take a little research to find out which type of business insurance coverage you need, or simply ask a licensed insurance agent.

The policies your business needs depend on your specific risks, such as whether you drive for work or provide IT services to clients.

Other coverage options to consider include:

Business interruption insurance: Also called business income insurance, this policy covers loss of business income and operating expenses if your business is forced to close temporarily due to a fire or extreme weather. It can often be added to a business owner's policy.

Hired and non-owned auto insurance: An HNOA policy provides liability protection for an S corp where employees drive their personal vehicles, leased vehicles, or rented vehicles.

Directors and officers insurance: This coverage protects an S corp's board members and officers from lawsuits claiming their decisions resulted in a financial loss.

Commercial umbrella insurance: Umbrella insurance covers legal expenses when the limit is reached on another liability policy, such as general liability or commercial auto insurance. S corporations may need this coverage to meet client requirements for higher liability limits.

Fidelity bonds: Your clients might ask you to carry a fidelity bond, which would reimburse them in the event of employee theft or fraud.

View all small business insurance policies.