Insurance For Sole Proprietors: How To Get The Coverage Your Business Needs

Sole proprietors may run their businesses on their own, but they may still need expert guidance. If you’re a sole proprietor looking for business insurance, this is one of those times.

Choosing the best business insurance can be challenging if you’re new to insurance. Understanding your coverage options is the first step.

What Is Sole Proprietor Business Insurance?

Insurance for sole proprietors is not a single policy, but a combination of coverage tailored to your business’s risks.

For most sole proprietors, business insurance typically starts with general liability and commercial property coverage. You may be able to bundle those two types of coverage into a single policy known as a business owner’s policy or BOP.

Depending on your industry, size, location, and number of employees, additional types of coverage might be recommended.

Why Do Sole Proprietors Need Business Insurance?

Without adequate business insurance, you could face significant financial risk.

Some business structures, like a limited liability company (LLC), legally shield the business owner from personal liability for lawsuits, bankruptcy, or claims of negligence.

Sole proprietors do not have that protection, because a sole proprietorship is not considered a separate legal entity. So without insurance, your personal assets may be at risk.

6 Types Of Business Insurance For Sole Proprietors

Before contacting an insurance company in person, over the phone, or online, it helps to understand the different types of business policies so you can be prepared to discuss the coverage your business will need.

These are the most common policies to start with. You may see the first two, general liability and commercial property, combined into a bundle known as a business owner’s policy. When purchased as a bundle, you may be offered a discounted rate.

1. General Liability Insurance: A business run as a sole proprietorship is not a separate entity. That means you could be on the hook for damages following a lawsuit or accident. General liability adds an important layer of protection. Our list of the best liability insurance for small businesses shows you some good options.
2. Commercial Property: If your business property is stolen or damaged, you may need coverage to replace it. The best commercial property insurance protects all your business property and your physical building as well. (If you rent your space, you might prefer a commercial renter’s policy instead.)
3. Commercial Auto Insurance: Do you or any employees use business-owned vehicles to transport goods and provide services? If so, you’ll need to add a business car insurance policy. Your personal auto insurance probably doesn’t cover you for accidents and losses while your vehicle is used for business purposes. Our guide to the best commercial auto insurance helps make sure you’ve got the coverage you need.
4. Cybersecurity Coverage: If you’re handling personally identifiable information like Social Security numbers or credit card numbers, you may need coverage to protect yourself in case of a data breach or malicious hack that exposes this data. Coverage may include legal fees, notification costs, and credit monitoring.
5. Workers’ Compensation: Most states require businesses with employees to carry workers’ compensation, though requirements vary. This type of insurance pays benefits directly to employees who are injured on the job.
6. Health Insurance: Offering health insurance may allow you to qualify for a small group plan, depending on your state and insurer. You may find an affordable plan on our list of the best health insurance for small businesses.

These policies provide a strong foundation and offer the basic protections you’ll need as you grow.

Additional policies to consider, depending on your business type and your budget, include product liability, business interruption, and errors and omissions coverage.

If you operate your business from home, be sure to inform your insurer. Operating a business from home without alerting your insurance company may invalidate important parts of your homeowner’s insurance policy.

Although your homeowner’s policy probably does provide some business property protection, you may need additional home-based business insurance to ensure complete coverage.

How Much Does Insurance For Sole Proprietors Cost?

The cost of business insurance depends on factors such as your industry, the types of coverage you purchase, your annual revenue, the number of employees, and so on.

As a result, many insurers provide price information by personal quote only.

According to Embroker, most companies will pay between $500-$2,000 a year for a business owner’s policy that combines general liability and commercial property insurance.

That’s about $40 a month or about $1.40 a day for one of the most important types of business insurance.

Many sole proprietors can find policies that cost less than that. Some insurers, such as Thimble and NEXT, offer affordable options, instant online quotes, easy terms, and instant coverage.

How To Get Business Insurance For A Sole Proprietorship

Most insurers make it easy to buy coverage, allowing you to apply online or by phone.

Be prepared to provide basic business information, including the number of employees, your industry, location, revenue, and so on.

Many insurers will issue coverage almost instantly. But take time to compare options to make sure you find the company that offers the best coverage.

We recommend getting at least a couple of price quotes and comparing your coverage options. Make sure you understand your business insurance quotes to ensure accurate comparisons between them. Look for differences in deductible amounts, endorsements and exclusions, and premium costs.

Also, review how claims are handled. Choose an insurer who will support you after a loss or covered incident and help you recover quickly.

The Bottom Line On Business Insurance For Sole Proprietors

Your next step is to start contacting insurance providers and asking for quotes.

We’ve outlined the steps to getting business insurance to guide you along the way. You may choose a well-known national provider like Nationwide, Liberty Mutual, or Travelers Insurance. You might start with an insurance broker like Simply or CoverWallet. Or you might prefer a small company like biBERK, NEXT, or Thimble.

Regardless of the option you choose, make sure to do your research, compare your options, and pick the best insurer for your business.