Business insurance for S corporations
An S corp shields you from personal liability as a business owner, but a lawsuit could still devastate your business’s finances. The right business insurance can protect your bottom line from lawsuits, property damage, and other risks.
Recommended policies for S corps
General liability insurance
This policy protects S corps against legal costs from common third party (non-employee) claims. Bundle it with commercial property insurance in a business owner's policy (BOP).
- Accidental client injuries
- Accidental damage to client property
- Defamation and copyright lawsuits
Errors and omissions insurance
E&O covers the cost of lawsuits filed by clients or customers that accuse your S corp of an error or oversight. It's also called professional liability insurance.
- Accusations of poor performance
- Contract disputes
- Work errors and oversights
Workers' comp insurance
State law requires that S corps carry this policy when they hire employees. Workers' comp covers medical expenses and lost wages if an employee is hurt on the job.
- Medical care for work injuries
- Disability benefits
- Employee injury lawsuits
Cyber liability insurance
This policy helps S corps recover after a cyberattack or data breach. It can also covers legal costs when an S corp is held responsible for failing to prevent a client's data breach.
- Cyberextortion payments
- Customer notification costs
- Data breach lawsuits
Employment practices liability insurance
EPLI covers liability lawsuits filed by current or former employees who say they experienced discrimination, harassment, or another violation of employee rights at your S corp.
- Wrongful termination lawsuits
- Accusations of unfair hiring practices
- Discrimination claims
Commercial property insurance
This policy covers the cost of property damage caused by incidents that are out of your control. Many commercial landlords require this coverage.
- Extreme weather
- Fire
- Theft and vandalism
Commercial auto insurance
Most states require that you carry commercial auto insurance for vehicles owned by your S corp. This policy covers costs related to an accident involving a business vehicle.
- Medical bills from an auto accident
- Property damage caused by your vehicle
- Vehicle theft and vandalism
Directors and officers insurance
D&O protects directors and officers from lawsuits related to decisions they made on behalf of your S corp. Some people may require this coverage before they will join your S corp.
- Poor investment decisions
- Failure to comply with regulations
- Defamation lawsuits
Professional liability insurance
This policy, also called errors and omissions insurance (E&O), protects small businesses that provide professional services or advice. It covers lawsuits related to work performance.
- Work mistakes and oversights
- Professional negligence lawsuits
- Late or incomplete work
How much does S corp insurance cost?
From our customer data, here's a quick look at the average costs of common TechInsurance policies:
General liability: $42 per month
E&O insurance: $61 per month
Workers' compensation: $45 per month
View more small business insurance costs.
Start a free application to see how much insurance will cost for your S corp.
Hear from business owners like you who purchased insurance coverage.
Bundle insurance policies to save money
When buying insurance for your S corp, see if you can bundle policies to save money. For example, a small, low-risk company might qualify for a business owner's policy (BOP). This package includes both general liability insurance and commercial property insurance at a discount.
S corporation owners in the tech industry usually need both cyber liability insurance and errors and omissions insurance. You can buy these policies together in a package called technology errors and omissions insurance (tech E&O).
Note that there are two different kinds of cyber insurance. First-party cyber liability insurance covers data breaches and cyberattacks on your own systems. Third-party cyber liability insurance covers data breaches on clients’ systems that you worked on or for which you are responsible. Tech E&O includes both types of coverage.
What are an S corp’s advantages?
An S corp is a designation some small businesses elect for tax purposes. It can reduce the amount of Social Security and Medicare taxes (sometimes called FICA) that your company owes.
Owner-employees are required to pay themselves reasonable salaries, including payroll taxes as both employer and employee. But profits beyond the salary are not subject to FICA taxes.
S corps aren't required to pay corporate income tax. Instead, profits can be distributed to the S corporation shareholders as dividends, which are reported on their personal tax returns.
Beyond the tax benefits, an S corp protects the personal assets of its business owners by shielding them from legal liability for the corporation. Unless an owner makes an express personal guarantee, the owner doesn’t have personal liability for the debts or expenses of the business.
This means that a court can’t dip into the pockets of the S corp’s owners to cover the cost of judgments against the corporation. Owners are liable only if they act negligently or violate the terms of the S corp.
Can S corps deduct the cost of insurance?
The IRS considers business insurance part of the cost of doing business, which means you can deduct your insurance premiums from your taxable business income. To claim the tax deduction, you'll need to file the proper paperwork. For worksheets that help you calculate deductions, see:
A tax professional can ensure you file your business insurance tax deduction correctly. The deduction can include all the recommended insurance policies for S corps, along with the cost of unemployment insurance, health insurance, and life insurance. However, health and life insurance premiums for a spouse or domestic partner's employer-sponsored insurance may not be deducted.
Some other insurance payments can’t be included in the tax deduction, such as:
- Payments into a self-insured reserve (if you use a reserve in place of an insurance policy)
- Premiums on a disability policy that covers your lost income
- Premiums for loan protection insurance
Which insurance policies does your state require for S corps?
Compare quotes for S corps insurance
With TechInsurance, you can compare business insurance quotes from top-rated carriers with one easy application. Get free quotes for coverage that matches your S corporation's unique risks and budget.