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Why do sole proprietors need insurance?
Sole proprietors don’t have separate business assets and personal assets, which means a lawsuit could prove devastating to both. Business insurance provides crucial protection against legal costs, medical bills, and property repairs, so you can get back to work fast.
What types of insurance do sole proprietors need?
These insurance policies cover common risks faced by sole proprietors.
General liability insurance
General liability insurance covers the cost of everyday accidents, such as a client who trips and suffers a bodily injury at your office. It may be required for a commercial lease.
BEST FOR
- Slip-and-fall accidents
- Accidents that damage client property
- Accidental copyright infringement
Professional liability insurance
Also known as errors and omissions insurance (E&O), this policy covers legal costs when a sole proprietor makes a mistake that negatively affects a client.
BEST FOR
- Mistakes that cause a client to lose money
- Missed deadlines
- Accusations of negligence
Workers' compensation insurance
Workers’ comp shields sole proprietors from work-related medical bills that health insurance might deny. Most states require it for businesses with employees.
BEST FOR
- Work-related medical expenses
- Disability benefits
- Legal fees from employee injuries
Cyber insurance
Cyber insurance helps sole proprietors recover financially from data breaches and cyberattacks. It's strongly recommended for any small business that stores personal information.
BEST FOR
- Data breach notification costs
- Data breach investigations
- PR costs for reputational harm
Business owner's policy
A BOP bundles general liability coverage and commercial property insurance at a discount. It protects against the most common lawsuits and business property damage.
BEST FOR
- Accidents that harm clients
- Stolen or damaged business property
- Business interruption insurance
Commercial auto insurance
This policy covers costs when a sole proprietor's business vehicle is involved in an accident. Each state has its own requirements for auto liability insurance.
BEST FOR
- Auto accident injuries
- Property damage caused by your vehicle
- Vehicle theft and vandalism
Looking for different coverage? See more policies.
How much does sole proprietor insurance cost?
Sole proprietors often qualify for discounts on business insurance. Factors that affect your premium include your profession, business income, and the policy's limits and deductible.
Here are the average costs for top policies sold by Insureon:
General liability insurance: $42 per month
Professional liability: $61 per month
Workers' comp: $45 per month
State insurance requirements
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Common questions about insurance for sole proprietors
Why is insurance important for sole proprietors?
Here are a few reasons why insurance is crucial for sole proprietors, independent contractors, limited liability companies (LLCs), franchises, and other small business structures.
You may need insurance coverage to sign a contract or a lease. Clients 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 small business owners an edge over their competitors.
Insurance protects your own business from catastrophic losses. 43% percent 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 sole proprietorship withstand unexpected costs from customer injuries, fires, and other incidents that might otherwise prove devastating.
How do I get a certificate of insurance?
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:
- Fill out our easy online application.
- Compare free quotes from top-rated insurance providers.
- 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.
Does my profession affect what type of insurance I need?
Yes, the type of work you do can affect which business insurance policies you need.
For example, the law in several states requires 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 and electricians may need a general liability policy to obtain a license.
It may take a little research to find out which type of business insurance coverage you need, or simply ask a licensed insurance agent.
How can I save money on business insurance?
Insurance is usually affordable for sole proprietors and low-risk small businesses. There are a few ways to find cheaper insurance:
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. It's sometimes possible to bundle other policies as well, depending on your profession.
Shop around. Compare insurance options from different providers to make sure you're not paying too much for insurance. Insureon provides an easy way to achieve this with our free online application.
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.
What other types of coverage do sole proprietors need?
The policies you need depend on the specifics of your business, such as whether you drive for work or have a client who requires a certain type of coverage.
Other insurance policies you may need include:
Business interruption insurance: This policy covers financial losses 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 sole proprietors and other self-employed business owners who drive their own vehicle for work, or a leased or rented vehicle.
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. Sole proprietors may need this coverage to meet client requirements for higher liability limits.
Fidelity bond: A fidelity bond reimburses clients for employee theft, and may be required in a client contract.