Sole Proprietor Business Insurance

Sole proprietor business insurance is designed for companies that are owned and operated by only one person. Unlike corporations or LLCs that provide legal separation between the business itself and the owner(s), as a sole proprietor, you are solely accountable for liabilities, debts and profits. This means it’s even more important to protect your company and assets with sole proprietor business insurance, since you have so much at stake. 

 

Jump To: 

• What is a Sole Proprietorship?

• What is Sole Proprietor Business Insurance?

• Why Do Sole Proprietors Need Business Insurance?

• Types of Sole Proprietor Business Insurance

• How Much Does Business Insurance Cost for Sole Proprietors?

• FAQs

• Get Sole Proprietor Business Insurance Today

What is a Sole Proprietorship?

A sole proprietorship is the most basic type of business structure and is defined as a single individual owning and operating a business. Since sole proprietors hold all of the business risk, there is no legal distinction between themselves and their business. In other words, all liabilities, profits and debts are directly tied to the owner of a sole proprietorship, unlike LLCs or corporations. 

 

Many entrepreneurs opt to establish their own sole proprietorship because the structure provides flexibility and there is a minimal amount of required paperwork, but they also come with an increased level of personal financial risk. That’s where sole proprietor business insurance comes in. 

What is Sole Proprietor Business Insurance? 

Sole proprietor business insurance is a term that encompasses a combination of policies, all of which aim to protect sole proprietors from financial risks. Common financial risks can include lawsuits, property damage, business interruptions and more. Because of the fact that sole proprietors don’t have the separation from risk that owners of LLCs and corporations have, sole proprietor insurance plays a vital role in protecting your personal assets like savings and investments. 

Why Do Sole Proprietors Need Business Insurance? 

Sole proprietor business insurance is essential in protecting a unique class of business owners against financial risks. Financial risks and liabilities come in a variety of forms such as property damage, employees or customers getting sick or injured, vehicle damage, and much more.

 

If one of these incidents occur, sole proprietor business insurance will help you by covering associated costs such as repairs, settlements, court and legal fees. Additionally, having adequate coverage provides clients with peace of mind, since they know you’re protected in the case of a costly accident. Not to mention that some clients even require a proof of insurance (POI) before signing contracts and establishing partnerships. 

Types of Sole Proprietor Business Insurance

There are a variety of coverage types that sole proprietors should consider getting. Depending on your business model, industry, and risk level, policies may include: 

 

• General Liability Insurance: Protects business against any claims relating to property damage or bodily injury. This includes accidents occurring on the business premises, damage to someone else’s property or personal injury caused by their services. 
• Professional Liability Insurance (Errors and Omissions Insurance): Covers business owners against claims of negligence, professional errors or failure to deliver promised services. This coverage is common for consultants, accountants, attorneys, freelancers, or any service-based business.
• Commercial Property Insurance: Protects business property such as buildings, offices, equipment, inventory, and furniture in the case of an incident such as natural disasters, theft, vandalism or fires. 
• Business Owner’s Policy (BOP): A comprehensive insurance policy that combines general liability and commercial property insurance. Combining the two coverages under one policy, is generally cheaper than purchasing them individually. 
• Commercial Auto Insurance: A type of policy that provides coverage for vehicles used for business purposes. This includes collision accidents, property damage and liability. If you use a vehicle for work purposes, this insurance is legally required. 
• Workers’ Compensation Insurance: While sole proprietorships are owned and operated by one individual, they can still have employees. If this is the case for you, you’re legally required (in all states except Texas) to provide workers’ compensation. It works by covering medical expenses or lost wages if an employee gets sick or injured on the job. 
• Cyber Liability Insurance: Cyber liability protects businesses against the high costs associated with hacking, fraud and data breaches. If your business deals with sensitive information or data, this policy can help you pay for the costs of data recovery, customer notification, legal expenses and more, in the case of a cyber-related threat.
• Business Interruption Insurance: If a business is forced to shutdown temporarily due to an event like a fire or natural disaster, business interruption coverage helps replace the lost income. This includes employee wages, lost income, taxes, relocation costs and more.
• Small Business Health Insurance: Commonly referred to as group health insurance, this policy provides essential health benefits to sole proprietorships with one or more employees. For sole proprietors operating alone, an individual health insurance plan may be a better option. Common benefits include doctors visits, hospital stays, emergency care, preventative care, mental health services, maternity care, and much more. Additionally, many small business health plans give employers the option to add on vision and dental services.

 

 

How Much Does Business Insurance Cost for Sole Proprietors?

The cost of sole proprietor business insurance varies depending on factors such as geographic location, industry, business size, and coverage needs. The following outlined costs are the average monthly ranges for small businesses: 

 

• General Liability Insurance: Between $30 and $75 per month.

• Professional Liability Insurance: Between $40 and $150 per month.

• Business Owner’s Policy (BOP): Between $50 and $200 per month.

• Commercial Auto Insurance: Between $100 and $200 per month.

• Commercial Property Insurance: Between $60 and $200 per month.

• Cyber Liability Insurance: Between $60 and $150 per month.

• Workers’ Compensation: Between $40 and $100 per month.

• Business Interruption Insurance: Between $40 and $150 per month.

FAQs

Do sole proprietors need business insurance if they work from home? 

Yes. Home-based sole proprietors face the same risks that other business owners face, including client lawsuits, cyber threats, property damage and more, all of which a typical homeowners policy won’t cover. 

 

Can sole proprietors be personally sued for business-related claims?

Yes, since sole proprietorships aren’t considered separate legal entities, if sued your personal assets like savings, investments, and property could be at risk. Having sufficient business insurance helps protect you against these liabilities. 

 

How much does a $1,000,000 liability insurance policy cost? 

For small business owners, a general liability insurance policy costs roughly $69 per month or $824 per year. With that being said, every business’s needs and circumstances are different, so costs may vary greatly. 

 

How do I protect myself as a sole proprietor? 

In addition to obtaining business insurance that covers the risks of your company, other rules of thumb include:

 

• Keep your business and personal finances separate.
• Avoid personal guarantees when it comes to debts or your own funds.
• Seek professional advice when dealing with lawsuits or legal issues.
• Comply with all state and federal industry standards.
• Maintain accurate and complete records of financial transactions like income, expenses or client contracts. 

Get Sole Proprietor Business Insurance with EZ.Insure!

As a sole proprietor, all of your personal assets are directly tied to your business, making it essential to get a coverage plan that protects both. EZ.Insure makes it simple to compare policies side-by-side, access free quotes, and get paired with the best protection for the unique needs of your business. 

 

To get your free quote, click below or talk to a licensed agent by calling (844)-770-0876.