Best Sole Proprietor Insurance of March 2024 (2024)

FAQs

What type of insurance should a sole proprietor have? ›

One important coverage you may want to consider is professional liability insurance for sole proprietorships. Professional liability insurance, or errors and omissions insurance, helps protect your business in case you get sued for mistakes in the professional services you've provided.

Sole proprietorship insurance isn't a specific thing, but you can purchase general business insurance like any other company. That way, you can help protect yourself if a client or customer sues you, someone steals your inventory, you experience a cyber-attack, or an employee becomes injured.

Sole proprietors should at least carry general liability insurance. This coverage protects you if someone files a lawsuit accusing you of damaging their property, injuring them or harming their reputation. As a sole proprietorship, a lawsuit could jeopardize your personal assets, not just your business finances.

Sole proprietors don't have separate business assets and personal assets, which means a lawsuit could prove devastating to both. Business insurance provides crucial protection against legal costs, medical bills, and property repairs, so you can get back to work fast.

As a general rule, you'll want to get business insurance quotes from at least three different companies. To the greatest extent possible, the prospective policies should offer similar coverage so that you can clearly compare price.

At minimum, you should start with these types of small business insurance: General liability coverage. Workers' compensation coverage. Commercial auto coverage.

A personal insurance policy typically provides coverage for homes and their contents, whereas a commercial insurance policy is designed to safeguard the structures and assets associated with a business, such as an office, warehouse, or other commercial property.

Social Security and Medicare. Unemployment insurance. Workers' compensation insurance. Family and Medical Leave Act (FMLA) protections.

What are the two most important insurance options available to a business? ›

Commercial insurance is divided into two main categories: property insurance and casualty insurance. Property insurance provides coverage for property that is stolen, damaged, or destroyed by a covered peril. The term "property insurance" includes many lines of available insurance.

Insurance companies are classified as either stock or mutual depending on the ownership structure of the organization. There are also some exceptions, such as Blue Cross/Blue Shield and fraternal groups which have yet a different structure.

The life span of a sole proprietorship can be uncertain. The owner may lose interest, experience ill health, retire, or die. The business will cease to exist unless the owner makes provisions for it to continue operating or puts it up for sale. Losses are the owner's responsibility.

A sole proprietor may also choose to form a limited liability company (LLC). Both S corporations and LLCs have incredible advantages. These business forms give limited liability to their owners, meaning your personal assets are not in jeopardy as they are with a sole proprietorship.

Sole proprietors have unlimited liability and are legally responsible for all debts against the business. Their business and personal assets are at risk. May be at a disadvantage in raising funds and are often limited to using funds from personal savings or consumer loans.

Sole proprietorships do not produce a separate business entity. This means your business assets and liabilities are not separate from your personal assets and liabilities. You can be held personally liable for the debts and obligations of the business.

Self-employed people who qualify are allowed to deduct 100% of their health insurance premiums (including dental and long-term care coverage) for themselves, their spouses, their dependents, and any nondependent children aged 26 or younger at the end of the year.

You are a sole proprietor if you own and run an unincorporated business by yourself. The difference between sole proprietorship and self-employed is that the latter is a broader category. There are many types of self-employed individuals, including independent contractors and partners.

Premiums are ineligible for a deduction if: You're self-employed, also known as a sole proprietor. Even though you can deduct other expenses, like health insurance, life insurance is excluded if you're paying for your own policy.