When you’re launching a business, one of the options you might consider is a sole proprietorship.
But how does being the only person responsible for a business affect what kind of insurance you might need?
Here, we explain everything you need to know about business insurance for sole proprietors.
A sole proprietorship is a business owned by one person. As the sole business owner, you are responsible for all of the business’s debts, taxes and legal liabilities.
You’re also responsible for losses and accidents that happen because of the business, but if you have the right business insurance you won’t have to pay entirely out of pocket.
A sole proprietorship is the most common and simplest structure to use when starting a business. In legal terms, it means that a business owner is not part of a corporation or limited liability company (LLC). There is no difference between the business and the owner.
If you’re asking yourself: do I need business insurance for a sole proprietorship? The short answer is yes.
Unlike an LLC or a corporation, which have a built-in layer of protection, a sole proprietorship exposes you to personal liability if there is an accident or mistake involving your business.
For example, if you own a small business and a customer sues you after slipping and falling on a wet floor, as a sole proprietor you’d be personally responsible for all the legal fees and payouts.
That’s where business insurance can help. If someone gets hurt or property is damaged as a result of your work, you’ll have financial backup to cover medical expenses and repairs.
General liability insurance for sole proprietors is made up of several components, but the most important ones are:
Sometimes it’s called “slip and fall insurance.” This is the section of your liability policy covering injuries to someone else that involve your business.
For example, if someone trips over your photography equipment and requires medical attention, your insurance will help pay the bills.
General liability also covers property damage to items that don’t belong to you. Accidents happen. If you accidentally ruin a client’s expensive carpet or cause damage that needs repair, your coverage will cover expenses up to your policy limit.
Workers’ compensation insurance can help pay for medical care and lost wages after a workplace injury. It’s almost always required if you have employees (maybe you’ll hire some later on). It’s also wise to have business owner’s coverage for yourself.
Commercial auto insurance provides coverage if you are involved in an accident in a business-owned vehicle. It can also provide coverage for accidents in your personal vehicle while it’s being used for work-related purposes.
Commercial property insurance can help protect your business equipment, inventory and the building you work in. If something happens to your property — like a fire or water damage — property insurance can help with replacement costs or repairs.
It can also help with the loss of business income while you get back up and running.
If you make a mistake or a customer makes a claim against you, professional liability insurance for a sole proprietorship can help provide the financial protection you need to defend yourself.
The cost of business insurance for sole proprietors varies, depending on the kinds of risks your business faces. Some of these risks can include:
NEXT calculates your premium (that is, your insurance costs) instantly with our online quote process by taking into consideration all of the factors listed above. Generally, jobs that include working on other people’s property often have higher insurance costs.
Note: It’s important to provide the most accurate information about your business when you get a quote for insurance to make sure you get the coverage that is right for you, your claims are covered by your policy and so that any claims you might make are processed without delays.
Here’s what you should consider when comparing sole proprietor insurance policies:
It’s important to consider all the potential risks your business faces and where there is the greatest potential for an accident, injury or lawsuit before you get your insurance quote.
Make sure that the price you’re paying for your insurance and any deductible fits within your budget. Most insurance companies will give you free quotes. At NEXT, you also have the option to pay monthly or annually.
Some states require sole proprietors to have workers’ comp insurance (even if you don’t have any employees). Others will enforce general liability insurance. The industry and the state in which you work will have its own mandates for what’s required.
A deductible is the amount you’ll pay in the event of an incident before your insurance kicks in to pay the rest. You’ve probably paid a deductible for health insurance.
If you have a lower-risk business — for example, you’re a graphic designer — you might choose a higher deductible. If you’re in an occupation where incidents are more common, you may want to opt for a higher premium/lower deductible route to get insurance working for you faster.
Choosing the right balance between deductibles and premiums will save you a considerable amount of cash.
NEXT is a one-stop shop for helping sole proprietors find the right insurance at affordable prices. Since we only help small business owners like you, we can create a customized and affordable business insurance package tailored to your exact needs.
Everything is online, so you can get an instant quote, review options and buy coverage in less than 10 minutes. You’ll have immediate 24/7 access to your certificate of insurance (COI) as soon as you buy your insurance.
Get an instant quote today to get started.