The Costs and Types You Need – Forbes Advisor

The Costs and Types You Need – Forbes Advisor

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As a sole proprietor, you may face unforeseen events while running your business that may jeopardize your financial security. For example, you may be sued because you made a mistake that resulted in damage to a client’s reputation, or a client may be injured while at your workplace and have expensive medical bills that you are responsible for paying.

Insurance for sole proprietors can help pay for unexpected events that could potentially bankrupt your personal and business assets.

What is sole proprietor business insurance?

Sole proprietor business insurance refers to a combination of small business insurance policies
packaged together specifically for businesses operated by sole proprietors. A sole proprietorship is a type of business structure in which the business is owned and operated by one person.

Do Sole Proprietors Need Business Insurance?

Regardless of your business structure, business insurance is essential, but it’s especially important for sole proprietors. That’s because when you operate your business as a sole proprietorship, your personal and business assets are treated as one.

On the other hand, you will be personally on the hook for any mistakes or accidents related to your business.

When you carry business insurance, it can pay for financial losses such as legal costs, lawsuits and property repairs caused by problems covered by your policy.

What does sole proprietor business insurance cover?

Sole proprietor insurance groups together different types of small business coverage that cover your small business for a variety of issues, such as accidental damage to property and injuries to others, damage to your business property, and lawsuits.

A business owners policy is a great start to meeting your insurance needs and can serve as a sound foundation for sole proprietor business insurance. It groups together three important types of small business insurance. Plus, it’s usually less expensive than buying each type of insurance separately.

Here’s what a business owners policy, or BOP, typically covers:

Business Liability Insurance

Also known as general liability insurance, business liability insurance helps pay for accidental property damage and injuries caused to others. For example, if a customer misses a step on a ladder and takes a fall in your flower shop, your business liability insurance may pay for your customer’s medical bills.

It can also pay for legal costs in the event that you are hit with a lawsuit for damage to advertising, damage to reputation, copyright infringement, libel and slander. Business liability insurance can also compensate you for legal fees if you are sued for an accident or copyright infringement.

Commercial property insurance

Commercial property insurance is also known as business property coverage. It’s a type of coverage that describes how you’ll be compensated if your business’s physical assets are stolen, damaged, or destroyed by a problem covered in your policy.

For example, equipment was stolen from your brick-and-mortar during a burglary, or your business suffered from damaged inventory during a fire. In either case, commercial property insurance can help foot the bill to replace or repair your assets.

Business Interruption Insurance

If your business is forced to close due to an unexpected problem covered by your policy, business interruption insurance covers you financially by helping to replace lost income. Let’s say a car crashes into the side of your building and you’re forced to close for a month. In this case, business interruption insurance can provide lost wages to tide you over until you can reopen your doors.

Types of business insurance that sole proprietors need

Beyond a basic BOP, let’s look at other types of coverage that sole proprietor businesses may need.

Commercial Vehicle Insurance

Commercial auto insurance works a lot like a personal auto insurance policy, but for the vehicles you use for work. For example, a delivery truck or van that you use to transport goods or company cars. And like a personal car insurance policy, a commercial auto insurance policy provides liability coverage if you injure others or damage property in an accident. Coverage amounts depend on factors such as the type of car, what it is used for and your driving record.

Commercial umbrella insurance

A commercial umbrella insurance policy can provide financial compensation beyond the limits of liability in other policies. Once a claim reaches its limit on a basic BOP or general liability insurance policy, a commercial umbrella policy can cover the shortfall.

Cyber ​​Liability Insurance

Cyber ​​liability insurance can compensate you for costs resulting from business-related cyber attacks and data breaches if data stored on your computers and networks suffers such an incident. Also called cyber risk insurance or cyber security insurance, cyber liability insurance can help cover the costs of data recovery, identity recovery and investigative services if your business is hit by a cyber attack.

The type of coverage can also provide financial protection that affects your vendors, business partners or customers and can pay for legal fees, settlement costs and mass notices.

Professional Liability Insurance

If there is a claim for an error in your professional services, even if the claim has no merit, professional liability insurance can cover legal fees, settlements and judgments against your business up to the covered limits.

Also known as errors and omissions insurance, professional liability insurance can provide financial protection if you are sued for negligence, misrepresentation, and copyright infringement.

Workers’ Compensation Insurance

Workers’ compensation insurance can cover benefits, lost wages and medical care if one of your workers is injured or becomes ill on the job. Even if you are a sole proprietorship, in some cases, you may want to obtain workers’ compensation coverage for yourself.

Some states require independent contractors to have workers’ compensation insurance, even if they are the only employee of their company.

What is not covered by sole proprietor business insurance?

Sole proprietorship business insurance does not provide coverage for every type of issue. Here’s what’s typically excluded in a standard BOP:

Examples of Sole Proprietorship Business Insurance Claims

Here are examples of claims sole proprietors may have and related coverage:

How much does sole proprietorship business insurance cost?

Sole proprietorship business insurance costs an average of $42 per month for general liability insurance, according to Insureon. The average cost of professional liability insurance for sole proprietors is $61 per month and workers’ compensation costs an average of $45 per month.
Your sole proprietorship business insurance costs will depend on factors such as:

  • Business income
  • Coverage limits and deductible
  • Your business location
  • Number of employees
  • Your industry
  • The size of your business

How to get sole proprietor business insurance

You can buy sole proprietor business insurance online or over the phone from an insurance company, or you can call an agent who can help you. To find sole proprietorship business insurance that suits your needs:

Gather your information together. Before you start the application process, gather all your information. You’ll want to have your contact information, a description of your business activities, the number of employees, your business address, proof of how long you’ve been in business, and projected annual business revenue for the current year.

Choose coverage types. A BOP is a great starting point when deciding on business insurance that suits your needs as a sole proprietor. A BOP brings together three essential types of coverage—general liability insurance, business interruption insurance, and commercial property insurance. This simplifies your insurance and is often more cost effective than purchasing these policies individually. You can further tailor your coverage to suit your specific business. For example, if you use a business vehicle for workshops and customer visits, you can add commercial auto insurance to your BOP.

Compare quotes. The details and costs of coverage can vary significantly between insurance companies. That’s why comparing quotes from multiple small business insurance companies is a smart approach to finding the best policy.

Business insurance made simple

Compare free quotes from leading insurers at Simply Business. Get a policy in less than 10 minutes.

Where can I get sole proprietor insurance?

You can buy sole proprietorship insurance from companies that sell small business insurance. You can start with a BOP and add more coverage if needed. Companies that sell small business insurance include:

  • insight
  • Allianz
  • Allstate
  • American Family Insurance
  • AmTrust Financial
  • Auto-Owners Insurance
  • Chab
  • Insurance of Cincinnati
  • Clear blue insurance
  • CNA
  • Erie Insurance
  • Farmers Insurance
  • Frankenmuth Insurance
  • Hanover
  • Hartford
  • Mutual freedom
  • On a national scale
  • State Farm
  • Utica First Insurance
  • Westfield Insurance

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