When you buy something using?links found on our site, we may earn a small affiliate commission. This content?is reviewed &?supervised by?The?Los Angeles Times Commerce Team.
Based on our research, the best business insurance plans for sole proprietors in 2024 come from:?BiBerk, Hiscox, Harborway, Travelers, USG, and Cerity (skip ahead to see plans).
As a sole proprietor, there is?no separation between your business assets and your personal assets. This can leave you personally exposed to lawsuits and on the hook for large payouts and damages.
Sole proprietorship insurance is specially designed for single-person enterprises and?can cover things like property damage, lost wages, legal fees, and payouts from lawsuits –?which would normally be personally responsible for otherwise.
Your exact coverage will depend on the type of insurance plan you purchase and the provider, but the two of the?most important types of insurance for sole proprietors are professional liability insurance and general liability insurance.
When looking for coverage, we recommend using a comparison tool to get get matched with a provider that meets the needs of your individual business.
If you are just starting on a path to launch your own business, or have been in operation for several years, it can be a daunting task. One area that shouldn’t stress you is business insurance.
Business insurance is a vital tool for all entrepreneurs. It can protect you in the worst-case scenario, and allow you to remain focused on the day-to-day runnings of your company without worrying about the “what ifs”.
This is especially true for sole proprietors. If you are a one-man show or are starting a business, it’s important to note that in a sole proprietorship, you bear all responsibility personally. Therefore, in the unlikely event you are sued, your personal assets could be up for grabs. That’s where business insurance comes in.
In a sole proprietorship, the business and the person are considered one legal entity. Therefore, there is no distinction between your assets and the assets of the business.
Since you don’t have separate business and personal assets, it could be disastrous for you and the company if someone files a lawsuit against you. Therefore, all sole proprietors need business insurance as a safeguard from a slew of potential risks.
Typically, sole proprietors are not legally required to have business insurance as they usually don’t have employees. However, you may regret not having it if you are ever in a legal bind.
The exception to this rule can be workers’s compensation, specifically if you have an employee. In most states, you are required to have workers comp for one or more employees. Also, if you work in a specific industry, like healthcare, you may be required to have liability insurance. It’s best to check with your state’s Department of Labor for specific requirements.
Why should you get sole proprietorship insurance?
Since there is no legal distinction between you and your business, it’s easy for business liabilities to become personal liabilities. In essence, your personal assets are at risk if you are ever sued.
For this reason, it’s crucial to have sole proprietorship insurance to protect yourself.
In fact, ensuring you have appropriate and adequate coverage should be one of the first things you do when starting your business.
What does business insurance for sole proprietors cover?
Sole proprietorship business insurance protects you against potentially devastating threats, such as property damage, medical expenses, and legal costs.
If you ever find yourself unable to work due to illness or injury and you don’t have business insurance to cover you, your business could suffer serious financial ramifications.
Depending on the policy, sole proprietors’ insurance can cover the following:
Property damage
Employee or customer injury
Breach of contract
Discrimination against employees
Auto accidents
Improper use of intellectual property
Errors and omissions
Legal fees
Other risks
Note that even large amounts of business insurance do not protect you and your business against all risks. For example, business insurance does not protect against losses stemming from malfeasance, gross negligence or illegal activities.
For help understanding your coverage needs, speak to an insurance professional before buying coverage.
If you need help, or have questions, an operator can assist you.
Best types of business insurance for sole proprietors
There are several types of insurance coverage that sole proprietors can benefit from.
Each type offers different levels of risk management for various aspects related to running your business. The best type for you will depend on the types of services you provide.
Covers damage, loss, and theft of physical assets at a business’ primary location. It covers items like inventory, furniture, and equipment, but does not cover the building.
Protects companies’ data & intellectual property from cyber-related risks such as financial losses caused by cyber-attacks, external data breaches, etc.
General liability insurance is the most common type of business insurance. It protects you from financial losses associated with third-party accidents, property damage, and bodily injury to another person. Depending on the policy, general liability can also cover court costs and reputation damage.
Imagine you’re a caterer, and you serve food to a client’s guests. The next day, several guests are ill with food poisoning. General liability insurance can help cover the costs of medical expenses, legal fees, and damages.
2. Professional liability insurance
Professional liability insurance, also known as errors and omissions insurance, safeguards a sole proprietorship from claims of negligence, mistakes, misrepresentation or failure to deliver services. Without it, you’re at risk of having to pay legal fees and damages if someone sues you for making a mistake in your services.
This type of insurance is essential for any business that gives advice or recommendations to customers, as well as those providing professional services or design work. It is commonly used by accountants, attorneys, architects, consultants, and engineers.
3. Sole proprietorship liability insurance
Some insurance providers offer specific plans for sole proprietors. Sole proprietorship liability insurance is the most common.
Sole proprietor liability insurance is typically a combination of general liability and professional liability coverage that is structured according to your business’s specific risks.
It can provide coverage if you’re sued or held liable for damages caused by your business activities. This type of coverage will protect your personal assets from being used to pay for these damages.
However, some insurance companies market sole proprietorship insurance specifically for business owners operating without an incorporated entity.
4. Workers’ compensation
As a sole proprietor, you may be interested in workers’ comp for yourself or if you have an employee working under you.
Workers’ compensationprovides financial protection if an employee suffers a work-related illness or injury. It can help cover medical bills, lost wages, and even disability-related expenses.
While Workers’ comp is a legal requirement for companies with employees, it’s not typically required if you are the only one employed through your sole proprietorship. That said, sole proprietors can still have employees, and therefore most states would require you to have a workers’ comp policy. When in doubt, check with your state’s Department of Labor.
5. Commercial property insurance
Commercial property insurance, such as business property insurance, can protect your business’s physical assets, such as furniture, equipment, inventory, and sometimes buildings.
It provides coverage in the case of natural disasters, theft, or other unfortunate events that may cause damage to your business’s physical assets. Without this kind of coverage, you may face major financial losses if something happens to your business property.
6. Business interruption insurance
Business interruption insurance protects business owners, including sole proprietors, against loss of income due to an interruption or suspension of their business activities due to an unforeseen event.
For example, if a natural disaster strikes and makes your place of work temporarily inaccessible, this policy will cover the business against lost profits as long as it is properly insured.
This may be especially useful for businesses that run on thin margins or operate in areas where flooding, hurricanes, or earthquakes are common. For businesses such as these, business interruption insurance can provide a critical cushion to get back up and running after an interruption.
7. Business owner’s policy
A business owner’s policy (BOP) combines business property and business liability insurance. This type of insurance protects you from claims that arise from things like fire, theft, vandalism, and natural disasters.
BOP insurance can also protect you from claims of bodily injury, property damage, and personal injury that arise from your business operations.
To fit your specific business needs, you can also customize your BOP policy by adding additional coverage options, such as workers’ compensation or professional liability insurance. Combining these coverages into one policy usually costs less than if they were bought separately.
8. Cyber liability insurance
Cyber liability insuranceprotects you from cyber threats, such as data breaches, network security intrusions, and malware. It can help cover the costs associated with restoring lost data, improving security measures, or informing clients of a data breach.
If you routinely handle or store sensitive customer information digitally, getting cyber coverage is a good idea. If your business does not handle sensitive information or operate digitally, then this type of coverage may not be as important. Businesses conducting most of their trading online may also be inclined to purchase e-commerce insurance.
If you aren’t sure which type you need, an operator can assist you.
How much does sole proprietor liability insurance cost?
Ultimately, the final cost of sole proprietor liability insurance is dictated by your specific business’s parameters and the type of coverage you opt for.
Premiums can range anywhere from a few hundred dollars up to a few thousands of dollars per year, depending on how big your business is, and its individual business needs and circumstances.
The main factors that affect how much you’ll pay for liability insurance as a sole proprietor include:
Your location
The services you provide
Your annual income
The number of employees you have
Your claims history
Your policy limits and deductible
Is Insurance for insurance for sole proprietors worth it?
Sole proprietor insurance is definitely worth it if you choose the right plan and make sure to use the benefits when the time comes.
Ultimately, insurance is one of those things whose value is only seen when it comes time to use it. While liability insurance can be expensive for sole proprietors, it’s important to remember the protection you get in exchange for the premiums.
The right combination of coverage will protect your business and your personal assets in the event of an accident — ultimately protecting your livelihood as a sole proprietor.
Call to speak to an operator for help calculating the cost of insurance for your business.
Tips for buying sole proprietor business insurance
When buying any type of business insurance, start by taking an honest look at your business and assessing the specific risks you need to protect yourself against.
1. Establish your needs and limits
Decide what types of insurance and coverage limits are appropriate and necessary for your particular business and the risks associated with your type of operations.
2. Get quotes from several providers.
One great resource for sole proprietors looking for coverage is insurance aggregators, which allow you to easily source quotes from multiple insurers at once, quickly compare various aspects of each proposal and choose the best fit. This makes it easier to get comprehensive coverage without straining your budget.
3. Look to comparison and quote tools for help
Tools like the LA Times Comparison Tool can match you with policy options based on parameters like your personal and business details, desired coverage type, limits, deductibles, and premiums. This way you can get plans tailored specifically to your business needs.
4. Read the Fine Print
Policy language varies by provider, and insurance is notorious for having vague language when it comes to inclusions and exclusions. Make sure you understand what events are covered by each provider.
5. Compare the premiums and deductibles for each of your policy options.
Your premium and deductible will ultimately determine how much you have to pay out-of-pocket when making a claim. Make sure that you are comfortable covering the out-of-pocket costs should you need to file a claim.
Once you pick a policy or policies, go ahead and bind coverage and begin paying your premiums.
Our top picks for sole proprietor business insurance
Compare quotes from participating carriers via Simplybusiness.com
AMB Financial Strength
A- (Excellent)
Specialized for:
Workers’ Compensation
Why We Like It
Cerity offers affordable workers’ compensation policies and can cover various types of businesses and industries. As a major insurance provider in the US, Cerity is known for its:
Low prices
Simple policies
Same-day coverage
When you sign up for a workers’ comp policy through Cerifty, you get same-day coverage and proof of insurance. This means you can get your business started faster with very little lag time.
Cerity is a well-known provider in the insurance industry and has an AM Best financial strength rating of A- (Excellent), as well as 4.4 stars on Trustpilot. Cerity is offered nationwide in all states except Ohio, North Dakota, Washington, and Wyoming (where private worker’s comp is not legally sold).
Coverage Highlights
Workers’ comp coverage through Cerity offers access to:
Bodily Injury by Accident at $1M per accident
Bodily Injury by Disease at $1M per each employee, subject to a $1M policy limit
Other coverage highlights for workers’ comp from Cerity include:
Statutory Workers’ Compensation coverage
Customers have the option to include or exclude the owner in coverage when permitted under state law
Compare quotes from participating carriers via Simplybusiness.com
AMB Financial Strength
A++ (Superior)
Specialized for:
Workers’ Compensation
Why We Like It
biBerk is a subsidiary of the famous Berkshire Hathaway Insurance Group. As part of Berkshire Hathaway, biBerk is automatically backed by an A++ AM Best financial rating and over 75 years of experience in the insurance industry. This ensures you will get reputable service and solid coverage you can rely on.
The provider specializes in Workers’ Compensation coverage for small businesses across all US states except OH, ND, WA, and WY.
A major highlight of biBerk is that workers’ comp is available to sole proprietors and multi-employee businesses.
Coverage Highlights
Workers’ Comp coverage through biBerk includes Employers’ liability limits for:
Total policy limit of $500k
Bodily Injury by Accident at $100k/accident limit
Bodily Injury by Disease at $100k/employee limit
Coverage for the owner (optional depending on state law)
Other plan highlights:
biBerk’s Workers’ Comp plans offer statutory Workers’ Compensation coverage. This means that the employee is not required to prove that their employer is at fault to receive compensation.
Compare quotes from participating carriers via Simplybusiness.com
AMB Financial Strength
A (Excellent)
Specialized for:
General Liability, Professional Liability, Business Personal Property
Why We Like It
Hiscox is one of the largest insurance providers in the US and operates in all 50 states. It offers serval types of coverage options to suit your needs including:
General liability insurance
Professional liability insurance
Business personal property insurance (add-on)
Hiscox specializes in insurance for small and micro-businesses and its robust coverage options are available for tons of business types & trades.
Hiscox also has over 120 years of experience behind its name as part of the original Lloyds group from 1901. This long track record speaks volumes for how trustworthy Hiscox is.
Coverage Highlights
General Liability Coverage through Hiscox offers your choice of access to:
$1 million occurrence limit & $2 million aggregate limit
$2 million occurrence limit & $3 million aggregate limit
Other coverage highlights for General Liability include:
Compare quotes from participating carriers via Simplybusiness.com
AMB Financial Strength
A+ Superior)
Specialized for:
General Liability, Inland Marine
Why We Like It
Harborway is a lesser-known provider that offers specialized coverage for:
General liability insurance
Business personal property insurance
Inland marine insurance
This provider offers great coverage for equipment and items you transport or store off-premises makng is great for companies that send employees to work off-site or occaisionally do field work.
While Harborway isn’t an AM Best rated company, it is reinsured by Munich Re which has an AM Best financial strength rating of A+.
Coverage Highlights
General Liability Coverage through Harborway offers access to:
$1 million occurrence limit & $2 million aggregate limit
Other coverage highlights for General Liability include:
Business Personal Property Coverage through Harborway offers access to:
*Property limits of $5k, $10k, $15k, $20k, $25k, and $50k
*Blanket Additional Insured endorsement (automatically included)
Inland Marine Coverage through Harborway offers access to:
$5k or $10k coverage limits on inland marine property
Compare quotes from participating carriers via Simplybusiness.com
AMB Financial Strength
A- (Excellent)
Specialized for:
General Liability
Why We Like It
Accredited Insurance is backed by the massively-known Travelers Insurance with whom it co-built a General Liability policy tailored specifically for small businesses.
Accredited offers insurance in all 50 states as well as Washington DC and has been in business for over 50 years. The company has proven itself for its high-quality service, stability, and integrity.
Accredited also has a strong financial strength rating of A- from AM Best. This means you can rest easy knowing that you will be supported by a strong company should anything go wrong.
Coverage Highlights
Contractors opting for General Liability through Accredited gain access to:
$1M Occurrence limit & $2M Aggregate limit
Non-contractors have the option of plans ranging from:
$100k occurrence limit & $300k Aggregate limit
$1 million occurrence limit & $2 million aggregate limit
Compare quotes from participating carriers via Simplybusiness.com
AMB Financial Strength
A++ (Superior)
Specialized for:
Professional Liability
Why We Like It
Travelers is one of the largest insurance providers in the US and offers nationwide business insurance coverage.
Travelers can offer many different types of coverage for businesses of all sizes but is specifically well suited for Professional Liability plans for companies in the fields of:
Accounting
Bookkeeping
Tax Preparation
Travelers is a great choice for professional liability backing thanks to the brand’s nationwide coverage, 160 years of expertise, and top financial rating of A++ from AM Best.
Coverage Highlights
Professional Liability Coverage through Travelers offers access to:
$1 million occurrence limit & $1 million aggregate limit
Compare quotes from participating carriers via Simplybusiness.com
AMB Financial Strength
A- (Excellent)
Specialized for:
Cyber Liability
Why We Like It
With the growing need for cyber security coverage, look no further than USG Insurance Services, Inc.
USG offers top-notch Cyber Liability insurance to protect small and micro-businesses from cyber-attacks and data breaches originating from outside your company.
Plans are available for a broad range of business types and come backed by North American Data Security as well as a solid AM Best financial rating of A-.
USG operates 20+ branches across the country, meaning you’re sure to have a regional or local office nearby to support you with queries and account management help when needed.
Coverage Highlights
Cyber Liability Coverage through USG offers access to:
$250k occurrence limit & $250k aggregate limit
Other coverage highlights for Cyber Liability include:
Sole proprietor insurance is not typically required by law unless you have employees working under you. However, this rule can vary by state. Regardless, it is highly recommended to have insurance to protect you and your business from potential risks associated with owning and operating a sole proprietorship.
Insurance can provide invaluable protection against unexpected losses due to lawsuits, property damage or injury, auto accidents, and other covered events. It can also cover associated legal costs and help safeguard your income if you are unable to work due to illness or injury.
Can a sole proprietorship limit its liability by buying insurance?
Absolutely! Sole proprietorships are a type of business that operates without liability protection typically offered by incorporated entities, such as LLCs. As such, business insurance is an alternate way for sole proprietors to limit their liability in certain cases.
Different kinds of insurance are available for sole proprietorships, such as general liability and professional liability, each of which protects against different types of losses. General liability insurance covers third parties and things such as property damage and personal injury, while professional liability covers malpractice claims or errors and omissions.
Does personal umbrella insurance cover sole proprietorship?
Personal umbrella insurance does not typically cover sole proprietorship businesses. Although business insurance can cover you from personal liability, it does not work the other way around in regard to personal insurance.
If you run a sole proprietorship, you are likely personally liable for any negligence claims against your business. Personal umbrella insurance may help protect you from damages if you’re found personally liable in certain cases. However, it is most useful for providing additional coverage separate from a homeowner or auto policy — which do not typically apply to sole proprietorships.
How do you limit liability in a sole proprietorship?
Business insurance and proper risk management are the best ways to limit your liability in a sole proprietorship.
As a sole proprietor, you will be held personally liable for any debts or liabilities incurred by your business. As such, you should take steps to limit your legal responsibility should anything go wrong. One way to achieve this is by incorporating (using an LLC, for example), which separates your business assets and finances from your personal finances and thus shields them from legal action in case of a lawsuit. Another way is to purchase liability insurance to protect various aspects of the business.
Does sole proprietorship have liability protection?
Sole proprietorships have minimal restrictions and are relatively easy to establish. However, they also provide little to no liability protection. Since a sole proprietorship does not create a legal separation between the owner and the business, you’re exposed to financial and legal vulnerability.
This means that as a sole proprietor, your personal assets are at risk if the business is sued or unable to pay its debts. Buying insurance can reduce this risk, so it’s critical for you to understand the risks of your businesses and protect yourself accordingly.
Do I need sole proprietor medical insurance?
As a sole proprietor, you are responsible for obtaining your own health insurance coverage. Since you do not qualify for group health insurance coverage offered by larger employers or organizations, you are responsible for shopping around to identify individual health insurance plans that best fit your budget and needs.
Kiah Treece is a business finance expert with more than five years of editorial experience. Through her experience as?a small business owner, real estate investor, and lawyer, she’s knowledgeable in the areas of banking, loans, financing, and insurance for small businesses. Her first-hand experience has enabled her to?break down complex?financial topics to help?consumers make informed decisions so they can spend their money wisely.
LA Times Compare is committed to helping you compare products and services in a safe and helpful manner. It’s our goal to help you make sound financial decisions and choose financial products with confidence. Although we don’t feature all of the products and services available on the market, we are confident in our ability to sound advice and guidance. We work to ensure that the information and advice we offer on our website is objective, unbiased, verifiable, easy to understand for all audiences, and free of charge to our users. We are able to offer this and our services thanks to partners that compensate us. This may affect which products we write about as well as where and how product offers appear on our website – such as the order in which they appear. This does not affect our ability to offer unbiased reviews and information about these products and all partner offers are clearly marked. Given our collaboration with top providers, it’s important to note that our partners are not involved in deciding the order in which brands and products appear. We leave this to our editorial team who reviews and rates each product independently.
Why Trust Us?
At the LA Times Compare our mission is to help our readers reach their financial goals by making smarter choices. As such we follow stringent editorial guidelines to ensure we offer accurate, fact-checked and unbiased information to all readers. Learn how we are compensated by our partners.