Insurance For Sole Proprietors: How To Get The Coverage Your Business Needs

Sole proprietors may run their businesses on their own, but they need help from experts occasionally. If you’re a sole proprietor looking for business insurance, this is one of those times.

Choosing the best business insurance can be intimidating if you don’t know what coverage is available or required. Knowing what types of business insurance you need is the first challenge an insurance professional can help you with.

Jumpstart your search for sole proprietor business insurance by reading this post. The answers you’ll find here will help you find the coverage your sole proprietorship needs.

What Is Sole Proprietor Business Insurance?

Insurance for sole proprietors is not a single policy you can buy but a customized package that meets your business’s unique needs.

For most sole proprietors, business insurance will start with general liability and commercial property coverage. You may be able to bundle those two types of coverage into a single policy known as a business owner’s policy or BOP.

Depending on your industry, your business size, your number of employees, and your physical location, additional types of coverage might be recommended.

We’ll explore these types of coverage in-depth below.

Why Do Sole Proprietors Need Business Insurance?

Running your own business can be a dream come true. Without adequate business insurance, however, your dreams can become a nightmare.

Some types of business structures, like a limited liability corporation (LLC), legally shield the business owner from personal liability in case of lawsuits, bankruptcy, claims of negligence, and so on.

Sole proprietors do not have that protection, because a sole proprietorship is not considered a separate legal entity.

So if your business is targeted by a lawsuit, you could be held personally liable. That leaves your personal assets, such as your bank account and real property, at risk.

Unless you’re comfortable putting everything you own on the line, business insurance is a must for a sole proprietor.

6 Types Of Business Insurance For Sole Proprietors

Convinced you need business insurance and ready to find the right coverage? Congratulations on taking a positive step.

Before you contact an insurance company in person, over the phone, or online, it’s smart to know a bit about the different types of business policies so you can be prepared to discuss the coverage your business will need.

The following are the best policies to start with. Remember that you may see the first two, general liability and commercial property, combined into a bundle known as a business owner’s policy. When purchased as a bundle, you can expect to receive a discount on these two important types of coverage.

1. General Liability Insurance: Remember that, legally, a business run as a sole proprietorship is not a separate entity. That means you could be on the hook for damages following a lawsuit or accident. General liability adds an important layer of protection. Our list of the best liability insurance for small businesses shows you some good options.
2. Commercial Property: If your business property, including equipment, inventory, and technology items, was stolen, lost, or damaged, could you afford the out-of-pocket cost of replacing it? The best commercial property insurance protects all your business property and your physical building as well. (If you rent your space, you might prefer a commercial renter’s policy instead.)
3. Commercial Auto Insurance: Do you or any employees use business-owned vehicles to transport goods and provide services? If so, you’ll need to add a business car insurance policy. Your personal auto insurance probably doesn’t cover you for accidents and losses while your vehicle is used for business purposes. Look for one of the best commercial auto insurance to make sure you’ve got the coverage you need.
4. Cybersecurity Coverage: Does your business involve the handling or storage of sensitive information? If you’re handling personally-identifying information like Social Security numbers or credit card numbers, you may need coverage to protect yourself in case of a data breach or malicious hack that exposes this data.
5. Workers’ Compensation: If you have employees, you’re required by law in every state (but Texas) to provide workers’ compensation. This type of insurance pays benefits directly to employees who are injured on the job.
6. Health Insurance: Did you know that you can offer a cost-effective health insurance plan as soon as you hire a single employee? It’s true. Offering health insurance to one eligible employee plus yourself makes you eligible to join a group healthcare plan. You may find an affordable plan on our list of the best health insurance for small businesses.

These six policies are the most important for small business owners to consider. They offer the basic protections you’ll need as you grow.

Other policies to consider, depending on your business type and your budget, include personal indemnity, product liability, business interruption, and errors and omissions coverage. Sole proprietors also should consider essential employee coverage to help your business recover or carry on if you’re unable to do so yourself.

One final note: If you operate your business from home, be certain to talk to your insurance representative about that. Operating a business from home without alerting your insurance company may invalidate important parts of your homeowner’s insurance policy.

Although your homeowner’s policy probably does provide some business property protection, you may need additional home-based business insurance to ensure complete coverage.

How Much Does Insurance For Sole Proprietors Cost?

Business insurance offers a huge amount of protection for a relatively small cost that even the smallest business budgets should be able to make room for.

In fact, we think business insurance is so important that the right question is not “Can I afford business insurance?” but “How can I afford to run this business without insurance?”

It’s always hard to nail down the cost of business insurance. The price you’ll pay depends on factors such as your industry, the types of coverage you purchase, your annual revenue, the number of employees, and so on.

That’s why many insurance companies provide price information by personal quote only.

To give you an idea of what to expect, consider these figures from the business insurance company Embroker. Most companies will pay between $500-$2,000 a year for a business owner’s policy that combines general liability and commercial property insurance.

On the low end, that breaks down to about $40 a month or about $1.40 a day for the most important business insurance you can buy.

Many sole proprietors can find policies that cost less than that, too. For the smallest businesses, we recommend taking a look at Thimble and NEXT, two insurance companies that cater to small businesses and their unique needs and budgets.

Both these insurers offer especially affordable business insurance. NEXT says that half its customers pay less than $25/month for general liability coverage. Thimble, like NEXT, offers almost instant online quotes, easy terms, and instant coverage so you can get the insurance you need and get back to the business of running your business!

How To Get Business Insurance For A Sole Proprietorship

Most insurers make it easy to buy coverage. And you can use your choice of contact, by phone or online.

Be prepared to answer a few basic questions about your business, including the number of employees, your industry, location, revenue, and so on.

Many insurers will issue coverage almost instantly. But you shouldn’t feel pressured to make an instant decision on what company offers the best coverage.

We recommend getting at least a couple of price quotes and comparing your coverage options. Make sure you understand your business insurance quotes, so you’re making fair comparisons between them. Look for differences in deductible amounts, endorsements and exclusions, premium costs, and so on.

Be sure you understand how claims work, too. You want to make sure you pick an insurer who will support you after a loss or covered incident and help you recover quickly.

The Bottom Line On Business Insurance For Sole Proprietors

Maybe you came to this post wondering, “Do I need business insurance?”

Hopefully, by this point, you understand what business insurance does and why you need it. If so, your next step is simply to start contacting insurance providers and asking for quotes.

We’ve outlined the steps to getting business insurance to guide you along the way. You may choose a well-known national provider like Nationwide, Liberty Mutual, or Travelers Insurance. You might start with an insurance broker like Simply or CoverWallet. Or you might prefer a small company like biBERK, NEXT, or Thimble.

Whichever route you choose, start collecting and comparing business insurance quotes today, before something goes wrong and it’s too late. You’ll be very glad you did.

Next up: It’s time to separate your business and personal finances if you haven’t already. Along with business insurance, this adds another layer of protection. Check out our list of the best free business bank accounts and get started!

FAQs: Sole Proprietor Business Insurance