Sole Proprietor Business Insurance

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Business insurance for sole proprietors

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.

What is a sole proprietor?

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.

Why does a sole proprietor need insurance?

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.

What type of insurance do sole proprietors need?

Business liability insurance for sole proprietors is where many business owners start with their insurance coverage. But the best business insurance for sole proprietors typically includes a few different types of coverage.
Here’s a guide to some of the most common types of business insurance for sole proprietors:
General Liability
General Liability Insurance

General liability insurance for sole proprietors is made up of several components, but the most important ones are:

Bodily injury

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.

Property damage

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.

Learn more about general liability insurance.
Workers Compensation
Workers’ Compensation insurance

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.

Learn more about workers’ compensation insurance.
Commercial Auto
Commercial Auto insurance

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.

Learn more about commercial auto insurance.
Commercial Property
Commercial Property insurance

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.

Learn more about commercial property insurance.
Errors & Omissions
Professional Liability insurance (E&O insurance)

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.

Learn more about professional liability insurance.
How much does business insurance for sole proprietors cost?

How much does business insurance for sole proprietors cost?

The cost of business insurance for sole proprietors varies, depending on the kinds of risks your business faces. Some of these risks can include:

  • Where your business is located
  • What kind of work you do
  • How long you’ve been in business
  • How many vehicles you use for work
  • Your claims history
  • How high you set your coverage limits

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.

How do you choose business insurance for a sole proprietorship?

How do you choose business insurance for a sole proprietorship?

Here’s what you should consider when comparing sole proprietor insurance policies:

Determine what insurance coverage you need

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.

Compare coverage prices

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.

Consider legal requirements

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.

Understand deductibles and limits

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.

How do you get sole proprietor business insurance?

How do you get sole proprietor business insurance?

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.

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Issuance of coverage is subject to underwriting. Not available in all states. Please see the policy for full terms, conditions and exclusions. Coverage examples are for illustrative purposes only. Your policy documents govern, terms and exclusions apply. Coverage is dependent on actual facts and circumstances giving rise to a claim. Next Insurance, Inc. and/or its affiliates is an insurance agency licensed to sell certain insurance products and may receive compensation from insurance companies for such sales. Policy obligations are the sole responsibility of the issuing insurance company. Refer to Legal Notices section for additional information.

Any starting prices or premiums represented before an actual customer quote are not guaranteed and are representations of existing premiums of active policies as of December 6, 2023. To the extent permitted by law, applicants are individually underwritten, not all applicants may qualify. Individual rates and savings vary and are subject to change. Discounts and savings are available where state laws and regulations allow, and may vary by state. Certain discounts apply to specific coverages only.