Does a sole proprietor need business insurance?
Wondering if you need business insurance as a sole proprietor? When you’re your own boss and only employee, looking into your insurance options may take a back seat to all the many things you have to accomplish each day as a business owner. That’s why we compiled this short list of types of insurance that sole proprietors need. You’re welcome!
What is a sole proprietor?
A sole proprietor is a person who works for themselves as a single-person company. Sole proprietors generally do business under their own names and pay personal income taxes on their business profits.
Professionals who often operate as sole proprietors include:
- Independent contractors
- Real estate agents
- Business owners of a single-person business
The pros and cons of being a sole proprietor
Sole proprietorships are the easiest type of business to start because they do not require a labyrinth of government oversight to like other types of businesses. No federal or state forms are required to start a sole proprietorship, and there are few regulatory burdens.
The downside of operating as a sole proprietor is that if the business is liable for damages as a result of a lawsuit, the owner is liable for those damages. There is no separate business entity to separate the owner’s assets and the business’ assets. Additionally, sole proprietors often lack the financial resources to fight a lawsuit in court, making them more likely to find themselves on the business end of a financial judgment that could spell disaster for their businesses.
Because of this, it is imperative that sole proprietors carry adequate insurance to protect themselves. There are several types of insurance that a sole proprietor should carry. Such as:
General liability insurance
General liability insurance covers you in the instance that you are at fault for:
- Damages to someone’s property
- Injuries to a person or persons
- Libel or slander of another party
But, you’re thinking, “How in the world would I ever damage someone’s property or hurt someone as a sole proprietor?” But it can happen. For example:
- Slip and fall accidents in your store
- A customer gets food poisoning from your food product
- A customer has an allergic reaction to a skincare product you sell
- You accidentally break a customer’s car window while loading a product into their vehicle
Hired and non-owned auto coverage
If you use your personal vehicle to run errands for your business, make deliveries, or meet clients, you need to purchase a hired and non-owned auto policy to protect your vehicle when it’s being used for business purposes.
Your personal auto insurance does not cover the use of your vehicle for business purposes. If you’re at fault in an accident while conducting business activities, you can be held personally liable for damages that your personal car insurance would not cover.
Errors and omissions insurance for sole proprietors
Errors and omissions insurance is particularly important for sole proprietors who work in fields such as consulting and intellectual property. Errors and omissions can protect you against claims of negligence, misrepresentation and inaccurate advice. If you make a mistake in your work that causes your customer money, clients, or reputation, errors and omissions insurance would cover any damages brought in a lawsuit.
Sole proprietors workers’ comp
If you were injured at your business, how would you make ends meet? If you don’t have sole proprietor workers’ compensation insurance, the answer would most likely be your savings … until it runs out.
Sole proprietor workers’ comp pays for your medical bills, lost wages, and future care in case you are injured while working. As the one and only person that can captain the ship of your business, this type of insurance can be a godsend for your family in case of disaster.
Need sole proprietor insurance?
Edwards Insurance Agency in Taylors, S.C. helps sole proprietors all over South Carolina and the southeast protect themselves with business insurance. We’d be happy to answer all your questions. Give us a call today!