Business Insurance for Sole Proprietors

Understanding Business Insurance for Sole Proprietors

A sole proprietorship is a business entity type without legal distinction between the owner and the business itself, as it is owned exclusively by a single person. Sole proprietorships are one of the simplest and easiest business structures to form and are extremely common. 70% of small businesses in the U.S. are individually operated. Like other business types, sole proprietorships can face certain risks, and to help mitigate liabilities, sole proprietors should consider business insurance.

Different kinds of business insurance types may be available for sole proprietorships to help provide financial protection against claims arising from certain covered events. For example, sole proprietor business insurance can cover certain business property damage and can respond to lawsuits arising from car accidents with a company-owned car. It is also important to remember that, unlike other business entity types, business-related liabilities can potentially become personal liabilities for a sole proprietorship. To help protect your sole proprietorship from the financial consequences of loss and damages, be sure to have the right insurance for sole proprietors in place for your specific needs.

What Are Some Business Insurance Types Which May Be Suitable for a Sole Proprietorship?

Business insurance can be an important risk management tool if you are self-employed.  Depending on the specific policies obtained, business insurance can provide coverage for claims made against your sole proprietorship arising from:

• Lawsuits
• Data breaches
• Injuries that occur at or as a result of your business
• Loss of income from damage to your business space

If you do not have sufficient insurance coverage in place for your sole proprietorship, you may ultimately be responsible for paying for claims out of your own pocket. There are various types of business insurance suitable for sole proprietorships, each providing a specific type of coverage.

Some of the most common types of business insurance for sole proprietorships include:

Commercial General Liability Insurance

Commercial general liability (CGL) insurance is one of the most important types of business insurance that a sole proprietor should consider. While the terms and conditions of each particular policy may vary, this type of insurance generally helps protect your business against liability arising from claims that it caused property damage or bodily injury to others. Without such coverage, a sole proprietor may be responsible for paying these claims out of pocket. CGL insurance can also cover liability arising from certain types of advertising injury or allegations of reputational harm.

Commercial Auto Insurance

Commercial auto insurance typically covers claims for damages arising from an auto accident involving a company-owned vehicle. While the terms and conditions of each policy may vary, commercial auto insurance generally covers liability claims as well as property damage expenses. Similar to a personal auto insurance policy, it can provide bodily injury and property damage liability coverage, medical payments coverage, uninsured motorist coverage, comprehensive physical damage coverage and collusion coverage. 

Errors and Omissions Insurance

Errors and omissions insurance is a type of liability insurance that typically helps protect sole proprietors against claims of negligence or malpractice. This type of coverage can be particularly important for occupations which provide professional services or give advice such as accountants, lawyers, and insurance agents.

Commercial Property Insurance

Commercial property insurance can typically provide coverage for a sole proprietor’s owned building, as well as the equipment and tools inside it that are used to run the business. It generally provides coverage for losses resulting from covered events, which may include fire, theft, lightning, and wind.

Cyber Insurance

Sole proprietors may also want to consider cyber insurance. This type of insurance typically covers loss and damages resulting from a cybersecurity attack or data breach. Since businesses of all sizes may be susceptible to data breaches and hacking, sole proprietors may want to consider available cyber insurance options.

Business Owner's Policy (BOP)

Business owner's insurance, also known as BOP insurance, typically combines commercial general liability and commercial property insurance into a single policy. It can cover a business for loss and damages arising from certain covered events such as natural disasters or theft, for example. Many business owners consider BOP insurance for their insurance needs.

Health Insurance

Sole proprietors should also consider obtaining health insurance and may want to explore options which offer coverage for preventive care and major medical expenses. Find health insurance for yourself as a sole proprietor on the insurance marketplace or let us help you find the right health insurance solutions for your needs.

Do I Need Business Insurance for My Sole Proprietorship?

Certain types of business insurance may be required for a sole proprietorship depending on the laws of a given state.  For example, some states require that a sole proprietorship maintain commercial auto insurance if the business leases or owns a vehicle. Other types of business insurance, such as E&O, may be required by certain state licensing boards.

Ultimately, business insurance coverage is essential for any business, particularly sole proprietorships.  Without insurance coverage, the out-of-pocket costs associated with one catastrophic claim — or even a few minor losses — could be enough to halt or even close a business’s operations. 

With personal assets potentially at stake, insurance policy solutions designed explicitly for your business’s needs can be a commonsense business strategy. Such insurance solutions should address the unique risks of your enterprise and industry. 

Need Help Getting Business Insurance for Your Sole Proprietorship?

Having the right insurance in place for sole proprietorships can be vital if you are self-employed.  

Acrisure’s insurance professionals can help you find a policy that fits your needs and budget. Contact us today to find a provider or request a small business insurance quote online now.