Sole Proprietorship Insurance (2024)

Do I Need Business Insurance for Sole Proprietors?

Sole proprietorships are one of the most simple business structures. They’re owned and run by one person, and there’s no distinction between the owner and the business.

However, sole proprietors can face similar risks to other small businesses, like:

• Lawsuits
• Property damage
• Auto accidents with a company-owned car

It’s important to remember that unlike other business structures, business liabilities can easily become personal liabilities for sole proprietors. To help protect your sole proprietorship, you’ll want to make sure you carry the right small business insurance.

Pros and Cons of a Sole Proprietorship

Not sure if becoming a sole proprietor is right for your business? Some advantages to running a sole proprietorship include:¹

• They’re simple to start
• You have control over decisions for the business
• Tax preparations are easy
• Business owners receive all the revenue

There are also several disadvantages to sole proprietorships, like:

• Difficulty getting money from banks
• Lawsuits can cost the owner their personal assets
• Responsibilities for all the decisions made

If you do decide to become a sole proprietor, you’ll want to make sure you have the right insurance coverage. To learn more about the policies you’ll need, get a quotetoday.

Important Types of Sole Proprietorship Liability Insurance

Sole proprietorship liability insurance can help cover claims made against your business for:

• Customer injuries or illnesses that took place at your business
• Lawsuits
• Data breaches
• Loss of income from damages to your business’ building

Without this coverage, you’d have to pay out of pocket for these expenses.

Sole Proprietor Workers' Comp

Workers’ compensation insurance helps provide benefits to employees if they get work-related injuries or illnesses. These benefits can help cover:

• Medical care
• Disability benefits
• Funeral expenses
• Lost wages

However, if you work as a subcontractor, you may need workers’ comp. If you hire any independent contractors to work for your business, you’ll need to check your state’s requirements. In some areas, you may need to buy them workers’ comp coverage.

General Liability for Sole Proprietorships

• Property damage
• Bodily injury
• Lawsuits

So, if a customer gets injured in your business, this liability coverage can help pay their medical expenses. Otherwise, you’ll have to pay for them out of pocket.Liability claims resulting from work done away from your location can also be covered under what is also known as products-completed operations coverage.

Errors and Omissions for Sole Proprietors

Errors and omissions insurance, also known as professional liability insurance for a sole proprietorship, is important for covering mistakes or errors in the professional services you provide your clients. It can help cover claims of:

• Negligence
• Misrepresentation
• Inaccurate advice

For example, if you give bad advice to your clients at your accounting business, and they sue you, this coverage can help pay your legal costs. On top of errors and omissions insurance, accounting firms can also benefit from other accounting insurancecoverages, like business income insurance. This can help pay for lost wages if you need to temporarily shut down due to property damage.

The best way to find the right coverage is to get multiple insurance quotes from various insurance companies. To get started, get a quotefrom us today.

Additional Business Insurance for Sole Proprietors

Some additional insurance coverages you may want for your sole proprietorship include:

• Commercial auto insurancefor help paying for damaged property and medical expenses if you’re at fault for an auto accident in a company-owned car.
• Business Owner’s Policy(BOP), which bundles business property and business liability insurance into one policy.
• Commercial property insuranceto help protect your business and its physical assets from fire, theft or other covered losses.
• Data breach insurance, which helps protect your sole proprietorship from hacking and other data breaches. It can help you respond to a breach by paying to notify impacted customers or patients.
• Commercial umbrella insuranceto help extend your liability coverage beyond your policy limits.

How Much Is Liability Insurance for a Sole Proprietor?

There are many different types of businesses that are considered sole proprietorships. So, there is no one set cost for sole proprietorship insurance, because it depends on several factors, like your:

• Exposure to risk: Industries that experience more risk will pay more for insurance.
• Location: If you live in an area with more crime, you may have higher insurance rates.
• Coverage limits: The higher your policy limits are, the more you’ll pay for coverage.
• Insurance claims history: Generally, the more claims you’ve had in the past, the higher your rates will be.Requesting aninsurance loss run report can help you view past claims.

Get a Quote for Sole Proprietorship Insurance From The Hartford

We’ve been helping our customers get the coverage they need for over 200 years. You can count on us to help you get the policies that fit your sole proprietorship best. To get started,get a quote today.

¹ Small Business Administration (SBA), “Sole Proprietorship.”