Sole Proprietor Business Insurance 2024: What You Need

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    If you’re running your business, getting insurance like general liability, commercial auto, or a Business Owner’s Policy can shield your work and personal assets from lawsuits and other risks. You can often grab the needed coverage in just a few minutes online.

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    What Is Sole Proprietor Business Insurance?

    Sole proprietorship business insurance bundles various small business insurance policies tailored for businesses run by individual owners. A sole proprietorship is a business structure in which a single person owns and operates the business.

    Do Sole Proprietors Need Business Insurance?

    Insurance is crucial, no matter how your business is structured, but it’s especially vital for sole proprietors. As a sole proprietor, your personal and business assets are the same. This means you are personally liable for any mishaps related to your business. 

    Business insurance can cover financial losses, including legal fees, lawsuits, and property repairs, for issues covered by your policy.

    Why Does a Sole Proprietor Need Insurance?

    Do you need business insurance for your sole proprietorship? The quick answer is yes. Unlike an LLC or a corporation, which offer a layer of protection, a sole proprietorship leaves you personally liable for any business-related accidents or mistakes.

    For instance, if you run a small business and a customer sues you after slipping on a wet floor, you’d be on the hook for legal fees and payouts. Business insurance steps in to help. If someone gets injured or property gets damaged due to your business, the insurance provides financial support for medical expenses and repairs.

    What Does Sole Proprietor Business Insurance Cover?

    Sole proprietor insurance combines various small business coverages, protecting your business from accidental property damage, injuries to others, damage to your business property, and lawsuits.

    A business owner’s policy (BOP) is a solid starting point for your insurance needs, providing a strong foundation for sole proprietor business insurance. It bundles three essential types of small business insurance and is usually more cost-effective than buying each coverage separately.

    Here’s what’s typically included in a BOP:

    Business Liability Insurance

    General liability insurance, also called business liability insurance, helps cover costs from accidental property damage and injuries to others. For instance, if a client trips and falls in your flower shop, this insurance can pay for their medical bills.

    It also covers legal expenses if you’re sued for advertising injury, reputational harm, copyright infringement, libel, or slander. So, if an accident or copyright issue leads to a lawsuit, business liability insurance can handle the legal fees.

    Commercial Property Insurance

    Commercial property insurance, also called business property coverage, outlines how you’ll be compensated if your business’s physical assets are stolen, damaged, or destroyed by a covered event.

    For example, if equipment is stolen during a burglary or inventory is damaged in a fire, this insurance helps cover the costs of repairing or replacing your assets.

    Business Interruption Insurance

    If your business must close due to an unexpected, covered event, business interruption insurance supports you by replacing lost income. For instance, if a car crashes into your building and you have to shut down for a month, this insurance can cover the lost wages, helping you stay afloat until you reopen.

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    Types of Business Insurance Sole Proprietors Need

    Beyond a basic Business Owner’s Policy (BOP), let’s explore additional types of coverage that sole proprietor businesses might find necessary:

    Commercial Auto Insurance

    Commercial auto insurance functions similarly to personal auto insurance but covers vehicles used for work purposes. For instance, it covers delivery trucks, vans transporting cargo, or company cars. 

    Like personal auto insurance, it provides liability coverage if you injure someone or damage property in an accident. Coverage amounts vary based on factors like the type of vehicle, its use, and your driving record.

    Commercial Umbrella Insurance

    A commercial umbrella insurance policy offers extra financial protection beyond the limits of your other liability policies. If a claim exceeds the coverage limit of your underlying BOP or general liability insurance, the commercial umbrella policy steps in to cover the remaining costs.

    Cyber Liability Insurance

    Cyber liability insurance helps cover costs resulting from cyberattacks and data breaches affecting your business’s computer systems and networks. Also known as cyber risk or cybersecurity insurance, it can pay for data recovery, identity recovery, and investigative services after an attack.

    This coverage extends financial protection to your vendors, business partners, and customers, covering expenses like legal fees, settlement costs, and mass notifications.

    Professional Liability Insurance

    Suppose there’s a claim of a mistake in your professional services, even if it’s unfounded. In that case, professional liability insurance can cover legal fees, settlements, and judgments against your business up to the policy limits.

    Also called errors and omissions insurance, this coverage protects you financially if you’re sued for negligence, misrepresentation, or copyright infringement.

    Workers’ Compensation Insurance

    Workers’ compensation insurance provides benefits, lost wages, and medical care if an employee gets hurt or sick. Even if you’re a solo business owner, you might consider this coverage for yourself.

    In some states, independent contractors must have workers’ compensation insurance, even if they are the only employees in their business.

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    What’s Not Covered by Sole Proprietor Business Insurance?

    Sole proprietor business insurance doesn’t cover every possible issue. Here’s what’s typically excluded in a standard Business Owner’s Policy (BOP):

    • Auto accidents
    • Employee injuries
    • Intentional acts or mistakes
    • Punitive damages
    • Workmanship
    • Wrongful termination (You can get employee practice liability insurance to cover this.)

    How Much Does Sole Proprietor Business Insurance Cost?

    Many types of businesses operate as sole proprietorships, so the cost of sole proprietor insurance varies based on several factors:

    • Exposure to Risk: Industries with higher risks will have higher insurance costs.
    • Location: Living in an area with higher crime rates can increase your insurance rates.
    • Coverage Limits: Higher policy limits mean higher premiums.
    • Insurance Claims History: More past claims lead to higher rates. An insurance loss run report can help you review your claims history.

    How to Get Sole Proprietor Business Insurance

    You can buy sole proprietor business insurance online or over the phone from an insurance company or consult an agent for help. To find the right coverage for your needs:

    • Gather Your Information: Before starting the application, collect your contact details, business description, number of workers, business address, proof of business duration, and projected annual revenue for the current year.
    • Select Coverage Types: A Business Owner’s Policy (BOP) is a great starting point for bundling general liability, business interruption, and commercial property insurance. This package is usually more cost-effective than buying each policy separately. You can tailor your coverage to fit your specific needs. For instance, if you use a vehicle for business, you can add commercial auto insurance to your BOP.
    • Compare Quotes: Coverage details and costs vary between insurance companies. Comparing quotes from multiple providers is a smart way to find the best policy for your business.

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    Where Can I Get Sole Proprietorship?

    You can purchase insurance for a sole proprietorship from companies specializing in small business insurance. Start with a Business Owner’s Policy (BOP) and add additional coverage as needed. The top business insurance providers for sole proprietors make it simple and quick to get the necessary coverage.

    Next logo


    Best Overall Insurance Provider for Sole Proprietors

    NEXT Insurance tailors policies and responses to your industry during the quote process. They offer common types of business insurance online, such as general liability, professional liability, and commercial auto insurance. Whether you need coverage for a cleaning business, personal training, or other professions, NEXT is a great option.

    NEXT provides various digital policy management tools, like sharing a live certificate of insurance and adding additional insured parties for free. It offers monthly payment plans, and eligible customers can save up to 25% with discounts.

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    The Hartford logo

    The Hartford

    Best Business Owner’s Policy for Sole Proprietors

    You can enhance Hartford’s Business Owner’s Policy by adding data breach and professional liability insurance, making it a convenient choice for small-business owners who prefer not to manage multiple policies. Some business owners can purchase a policy online, while others may be connected to a staff member for assistance in completing the purchase.

    >> Get Insured Today With Hartford! >>

    Chubb logo


    Best General Liability Insurance for Sole Proprietors

    Chubb has received fewer complaints about general liability insurance relative to its market share than other business insurance companies, making it our top pick for small-business general liability insurance.

    You can purchase business insurance online from Chubb if your business earns $1 million or less in annual revenue. Chubb also offers a Business Owner’s Policy (BOP), errors and omissions insurance, and cybersecurity insurance online.

    >> Get Insured Today With Chubb! >>

    Sole Proprietor Business Insurance – FAQs

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    Bottom Line – Sole Proprietor Business Insurance

    Choosing the right business insurance isn’t just a precaution for sole proprietors. It’s vital for protecting your livelihood. Since sole proprietorships uniquely expose owners to personal liability, selecting suitable insurance helps mitigate risks from legal issues, property damage, and unforeseen challenges. 

    When exploring insurance options, prioritize policies offering comprehensive coverage tailored to your specific industry and operational risks. Seek out insurers who understand small business challenges and provide flexible, affordable coverage that can grow with your business. 

    Whether you’re a consultant, retailer, or service provider, investing in the right insurance ensures you’re protected, allowing you to focus confidently on growing your business.

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