Starting an LLC in Texas is an exciting step toward building your business, but it also comes with responsibilities—one of the most important being business insurance. While Texas doesn’t legally require most businesses to carry insurance, not having coverage can leave your LLC financially exposed in case of accidents, lawsuits, or unexpected losses.
In this guide, we’ll cover:
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Why an LLC alone doesn’t fully protect your personal assets
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The types of business insurance you might need
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When to get insured in the startup process
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How much coverage is enough
If you’re launching a small business in Dallas, Houston, or anywhere in Texas, this article will help you understand what you need to protect your investment and operate with confidence.
Why an LLC Alone Isn’t Enough Protection
Many business owners form an LLC (Limited Liability Company) thinking it will shield them from personal liability. While an LLC does provide some protection, it doesn’t cover everything. Here’s why:
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You can still be sued. If a customer slips and falls in your store, your LLC may be sued for damages. Without General Liability Insurance, you’d have to pay out of pocket.
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Your personal assets may still be at risk. If you mix personal and business finances, sign contracts personally, or are accused of negligence, you could lose personal savings and property.
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Property damage isn’t covered. If a fire, theft, or storm damages your business, your LLC structure won’t help—you need Commercial Property Insurance.
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Client lawsuits can be expensive. If you provide professional services and make a mistake, Errors & Omissions (E&O) Insurance helps cover legal costs.
This is why most businesses, even small LLCs, choose to get insurance—because it offers true financial protection where an LLC alone falls short.
What Business Insurance Does Your Texas LLC Need?
The right type of insurance depends on what kind of business you’re running. Here are the most important policies to consider:
✅ General Liability Insurance (Most Common)
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Covers bodily injury, property damage, and legal fees.
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Essential if you have a physical location or meet with clients.
✅ Professional Liability Insurance (Errors & Omissions)
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Protects against lawsuits claiming your advice or services caused harm.
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Ideal for consultants, realtors, accountants, and service providers.
✅ Business Owner’s Policy (BOP)
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A bundle that includes General Liability + Commercial Property Insurance.
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Cost-effective for small businesses and storefronts.
✅ Commercial Property Insurance
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Covers buildings, equipment, and inventory in case of damage or theft.
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A must-have if you own or lease office space.
✅ Workers’ Compensation Insurance (If You Have Employees)
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Pays for medical expenses and lost wages if an employee is injured.
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Not required in Texas, but highly recommended.
✅ Commercial Auto Insurance
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Legally required if you use a vehicle for business purposes.
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Covers accidents, theft, and property damage.
✅ Cyber Liability Insurance
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Protects against data breaches and cyberattacks.
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Important for online businesses or those handling customer data.
How Much Coverage Does Your LLC Need?
Every business is unique, but here’s a general guideline:
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General Liability Insurance: Most businesses get $1 million per claim / $2 million aggregate.
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Professional Liability (E&O): $500K to $2 million, depending on your industry.
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Commercial Property Insurance: Should cover the full value of your assets.
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Workers’ Comp: Depends on payroll size and job risk.
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Cyber Liability: $1 million is standard, but higher if you handle sensitive data.
Need help figuring out the right coverage for your LLC? An independent insurance broker, like the Thumann Agency in Dallas, can help you compare policies and find the best fit for your business.
When Should You Get Business Insurance?
While you don’t need insurance to register your LLC, you might need it before you officially start operating. Here’s when to get coverage:
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Before signing a lease – Many landlords require proof of insurance.
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Before signing contracts with clients – Some businesses require liability coverage before working with you.
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Before hiring employees – Protects against workplace injuries.
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Before you start selling products/services – To limit liability risks from Day 1.
✓ TIP If you're unsure about your industry’s risks, check out our guide on General Liability Insurance for small business in Texas.
Common Mistakes to Avoid
- Skipping insurance – Even a small lawsuit can bankrupt your business.
- Buying too little coverage – Some businesses need more than just the minimum.
- Not reviewing policies annually – As your business grows, your coverage should too.
- Mixing personal & business finances – Can lead to losing LLC protection in court.
Next Steps: Get the Right Coverage for Your Texas LLC
Starting a business is a big step, and getting the right insurance is just as important as forming your LLC. Whether you’re a Dallas-based contractor, a Houston consultant, or an Austin tech startup, our team at Thumann Agency can help you find the best policy at the best price.
Ready to protect your LLC? Get a business insurance quote Or call us at (972) 991-9100
Last Updated: 02.20.2025
Author: Lauren Thumann Director of Marketing.
Disclaimer: This page is for educational purposes only. Coverage details vary by provider. Contact us for a personalized quote.