Sole Proprietor Business Insurance

Insuranceopedia lets sole proprietors review business insurance quotes from leading insurance companies. This allows you to find the perfect fit for general liability, property damage, and employee coverage.

Why Do Sole Proprietors Need Insurance?

Running a business as a sole proprietor comes with specific risks based on your industry. You are personally liable for mistakes, accidents, and negligence claims. Unlike a corporation, there is no legal separation between your business assets and your private wealth.

This makes insurance critical for protecting your financial future. A single lawsuit could otherwise drain your personal accounts. Consider an accountant who makes a calculation error that costs a client money. That client could sue for damages. Without coverage, a court judgment could force you to liquidate personal assets like your home or car to pay the debt.

You also need to consider your staff. If you hire employees, you likely need workers’ compensation to cover medical costs if they get hurt while working. Additionally, businesses in high-risk fields often need protection against property damage or income loss caused by natural disasters.

Finally, carrying insurance builds trust. Many clients will not hire a professional unless they provide proof of coverage. This allows you to operate your business with confidence, knowing you have a safety net if something goes wrong.

What Insurance Do Sole Proprietors Need?

As a sole proprietor, you are the backbone of your business. This means you reap the rewards, but you also carry the risks. From client accidents to unexpected storms, threats to your livelihood can appear anywhere. The following guide outlines the specific types of business insurance policies available to protect you, your reputation, and your assets.

Business Owner’s Policy (BOP)

A BOP is a package deal designed for small businesses. It combines general liability and commercial property insurance into a single bundle. This is often cheaper than purchasing the policies separately. It safeguards your physical business location, your equipment, and covers liability issues.

Scenario: A fire damages your office and destroys your inventory. A BOP helps cover the cost of repairs and replaces your lost goods.

General Liability Insurance

This is often the first policy a sole proprietor buys. It covers third-party claims regarding bodily injury or property damage. It pays for legal defense, settlement fees, and medical bills if a non-employee gets hurt or if you damage someone else’s property.

Scenario: A client visits your home office and trips over a loose rug. General liability pays for their medical treatment and protects you if they decide to sue.

Professional Liability Insurance (Errors and Omissions)

Sometimes called malpractice insurance, this covers you if you make a mistake in your professional services. It is vital for consultants, healthcare providers, and accountants. It covers claims of negligence, inaccurate advice, or failure to deliver promised services.

Scenario: A client claims your consulting advice caused them to lose revenue. They sue you for damages. Professional liability insurance covers your legal costs and any resulting settlements.

Commercial Auto Insurance

Personal car insurance usually excludes business activities. If you drive a vehicle specifically for work tasks, you need a commercial policy. It covers liability and physical damage if you or an employee gets into an accident while driving a company vehicle.

Scenario: You represent your business while driving a company van to a meeting and hit another car. Commercial auto insurance pays for the repairs and medical costs for the other driver.

Hired and Non-Owned Auto (HNOA) Insurance

This policy is for vehicles your business uses but does not own. This includes rented cars or employees driving their personal cars for work errands. It covers liability claims against your business if an accident occurs in a non-company vehicle.

Scenario: You send an assistant to the bank in their own car, and they cause a collision. HNOA steps in to cover the liability costs that personal insurance might deny.

Workers’ Compensation Insurance

If you hire staff, most states require this coverage by law. It protects your employees if they get hurt on the job. It pays for medical bills, rehabilitation, and lost wages for injured workers.

Scenario: An employee injures their back while lifting a heavy box. Workers’ comp covers their hospital bills and pays a portion of their salary while they recover.

Commercial Property Insurance

If you own or lease a workspace, this policy protects the physical structure and its contents. It covers damage from events like fire, theft, vandalism, and certain weather events.

Scenario: A severe storm damages the roof of your workshop and ruins supplies. Commercial property insurance pays to fix the building and replace the ruined stock.

Business Personal Property (BPP) Insurance

This focuses specifically on the movable items you use to run your business, such as furniture, electronics, and inventory. It pays to repair or replace movable assets if they are stolen or damaged by a covered event.

Scenario: Burglars break into your office and steal all the computers. BPP covers the cost of buying new machines so you can get back to work.

Inland Marine Insurance

Despite the name, this has nothing to do with boats. It protects property that is in transit or movable equipment that travels with you. It covers tools, photography gear, or construction equipment while it is being transported or used at a job site.

Scenario: You leave your expensive tools at a client’s job site overnight, and they are stolen. Inland marine insurance provides the funds to replace them.

Business Interruption Insurance

This protects your income if an external disaster forces you to pause operations. It replaces lost net income and helps pay ongoing bills like rent or payroll during the closure.

Scenario: A tornado hits your area, and you cannot open your shop for three weeks. Business interruption insurance compensates you for the income you would have made during that time.

Cyber Liability Insurance

If you store digital records or process payments, this coverage is essential. It protects against digital threats. It covers the costs associated with data breaches, including legal fees, notifying customers, and credit monitoring.

Scenario: A hacker steals credit card numbers from your database. Cyber liability pays for the required notifications and helps manage the legal fallout.

Technology Errors and Omissions Insurance (Tech E&O)

This is a hybrid policy for tech professionals. It blends professional liability with cyber protection. It covers liability arising from technology products, service failures, and data breaches.

Scenario: A software bug in a program you wrote causes a client to lose their data. Tech E&O covers the cost of the lawsuit and the damages.

Umbrella Insurance

This is a safety net that sits on top of your other liability policies. It provides extra coverage when other policy limits are reached. It pays the difference when a claim exceeds the dollar limit of your general liability or auto insurance.

Scenario: You are sued for $1.5 million after a major accident, but your general liability policy only covers up to $1 million. Umbrella insurance pays the remaining $500,000.

Navigating insurance can feel overwhelming, but the right mix of policies ensures your sole proprietorship can survive the unexpected. By identifying your specific risks, you can build a shield that protects both your business and your personal financial future.

Cheapest Sole Proprietor General Liability Insurance

The cheapest option for General Liability insurance is Next Insurance, with an estimated average annual cost of $315.

Note: These estimates are based on a standard sole proprietorship profile (e.g., home-based or small office) seeking protection against third-party bodily injury and property damage claims (slip-and-fall). Actual premiums will vary based on your location (state laws), foot traffic, and the physical risks associated with your business premises.

Cheapest Sole Proprietor Professional Liability Insurance

The cheapest option for Professional Liability insurance is Hiscox, with an estimated average annual cost of $342.

Note: These estimates are based on 2024-2025 rate data for a low-risk sole proprietor (e.g., a marketing consultant or IT contractor) with a standard limit of $1 million per occurrence. Actual premiums will vary depending on your specific industry, client contract requirements, and history of past negligence claims.

Cheapest Sole Proprietor Business Owner’s Policy

The cheapest option for a Business Owner’s Policy (BOP) is Hiscox, with an estimated average annual cost of $510.

Note: These estimates are based on a bundled policy that includes General Liability and Commercial Property coverage for a sole proprietor with minimal business property (e.g., standard office equipment or electronics). Actual premiums will vary significantly based on the value of the equipment you insure, your deductible choice, and your geographic exposure to natural disasters.

How Much Does Sole Proprietor Business Insurance Cost?

Business insurance rates for a sole proprietor depend heavily on the specific services you provide. On average, you can expect to pay about $43 per month for general liability coverage.

However, your actual premium may increase based on your risk profile and where your business is located. Insurance providers also look at your policy limits and whether you bundle multiple coverages together. It is often tempting to pick the cheapest option available. Yet it is much more important to select a plan that fully covers your business against likely risks.

Note: The estimates above are based on 2024-2025 national averages for small business and sole proprietorship policies in the United States. Costs for “Commercial Auto” and “Cyber Liability” heavily depend on the nature of the work (e.g., physical transport vs. digital services). Actual premiums will vary significantly based on your specific location, claims history, industry risk profile, and coverage limits selected.

How Is Your Sole Proprietor Business Insurance Cost Calculated?

Insurers determine your premium by analyzing several specific risk factors attached to your business.

The size of your operation is a primary detail. Even as a sole proprietor running a one-person shop, relying on subcontractors or specialized consultants can change your liability and increase costs.

Your industry and specific trade heavily influence the price. Insurance providers assign risk levels to different professions. A sole proprietor who runs a tree trimming service faces physical dangers that a freelance web designer does not. Consequently, the tree trimmer will likely pay a much higher rate.

Location is another key component. Rates are often higher in zip codes with high crime rates or frequent severe weather. A consultant working from a home office in a wildfire zone might pay more for property coverage than a landscaper operating in a quiet rural town.

Finally, underwriters review your track record. If you have filed insurance claims in the past, you are viewed as a higher risk. Other variables include whether you use a vehicle for work, the coverage limits you select, and the deductibles you choose.

Following these steps helps ensure you’re properly insured and set up to handle risks confidently and professionally.