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Running a business as a sole proprietor offers flexibility and independence, but it also comes with personal liability risks. Unlike corporations or LLCs, sole proprietors do not have legal separation between their personal and business assets. This means that any legal claims, debts, or liabilities from the business can directly impact personal finances.
One way to mitigate these risks is through business insurance. Here’s everything you need to know about sole proprietor business insurance in the US, including coverage options, costs, and how to choose the right policy for your business.
Top Sole Proprietor Business Insurance Providers
1. NEXT Insurance
NEXT Insurance is a digital-first insurance provider specializing in small business coverage, making it a great fit for sole proprietors.
Coverage Options:
- General liability insurance
- Professional liability insurance
- Business owner’s policy (BOP)
- Workers’ compensation
- Commercial auto insurance
Key Features:
- 100% online quotes and policy management
- Instant proof of insurance
- Monthly payment options with no extra fees
- Custom-tailored policies for different industries
Best For: Freelancers, contractors, and small business owners looking for an easy and affordable online insurance solution.
2. Thimble
- Overview: Thimble is known for its flexible, on-demand business insurance, allowing sole proprietors to get coverage by the hour, day, or month.
- Coverage Options:
- General liability insurance
- Professional liability insurance
- Business equipment protection
- Event insurance
- Key Features:
- On-demand policies—get coverage only when you need it
- Ideal for gig workers and part-time business owners
- Instant online quotes and certificates of insurance (COI)
- No long-term commitment
- Best For: Freelancers, consultants, and gig workers who don’t need year-round coverage.
3. Tivly
Tivly is an insurance marketplace that connects small business owners with the best coverage from multiple insurance carriers.
Coverage Options:
- General liability insurance
- Professional liability insurance
- Commercial property insurance
- Business owner’s policy (BOP)
- Cyber liability insurance
Key Features:
- Access to multiple insurance providers for competitive pricing
- Personalized service with expert advisors
- Industry-specific coverage options
- Simple quote comparison process
Best For: Sole proprietors who want to compare multiple insurance quotes and find the most cost-effective solution.
4. InsuranceBee
InsuranceBee focuses on providing small business insurance, particularly for consultants, freelancers, and self-employed professionals.
Coverage Options:
- General liability insurance
- Professional liability insurance (Errors & Omissions – E&O)
- Cyber liability insurance
- Business equipment insurance
Key Features:
- Simple online application process
- Instant coverage and policy documents
- Affordable pricing for self-employed professionals
- Focus on service-based businesses
Best For: Independent contractors, consultants, and small professional service businesses.
5. Hiscox
Hiscox is a well-established insurer that specializes in coverage for small businesses, including sole proprietors.
Coverage Options:
- General liability insurance
- Professional liability insurance
- Business owner’s policy (BOP)
- Cyber liability insurance
Key Features:
- Customizable policies tailored to specific industries
- Competitive pricing with flexible payment options
Why Do Sole Proprietors Need Business Insurance?
Since sole proprietors are personally responsible for all aspects of their business, they are exposed to financial risks such as:
- Lawsuits: A customer or client could sue for damages caused by your business operations.
- Property Damage: If you own business equipment or rent office space, damage from fire, theft, or natural disasters can be costly.
- Injuries: If someone is injured while on your business premises, you may be liable for medical expenses and legal fees.
- Professional Errors: Mistakes in professional services (such as consulting or accounting errors) can lead to expensive claims.
Types of Insurance for Sole Proprietors
Several types of business insurance policies can protect sole proprietors from financial losses:
1. General Liability Insurance
- Covers third-party bodily injury, property damage, and legal defense costs.
- Essential for businesses that interact with customers, vendors, or the public.
- Example: A client slips and falls in your office and sues for medical bills.
2. Professional Liability Insurance (Errors & Omissions – E&O)
- Protects against negligence claims related to professional services or advice.
- Common for consultants, freelancers, financial advisors, and healthcare professionals.
- Example: A consultant provides incorrect business advice, leading to financial loss for a client.
3. Business Property Insurance
- Covers damage to business equipment, furniture, or inventory due to fire, theft, or disasters.
- Important if you operate from an office or own expensive equipment.
- Example: A fire destroys your work laptop and office furniture.
4. Business Owner’s Policy (BOP)
- Combines general liability and property insurance into a single package.
- Often more affordable than purchasing individual policies.
- Ideal for small businesses with physical locations.
5. Workers’ Compensation Insurance
- Required by law if you have employees.
- Covers medical expenses and lost wages if an employee gets injured on the job.
- Even sole proprietors can purchase it for themselves if they perform risky work.
6. Commercial Auto Insurance
- Covers business-related vehicle accidents and damage.
- Required if you use your car for business purposes (such as deliveries or client meetings).
- Example: You get into an accident while driving to a client site.
7. Cyber Liability Insurance
- Protects against data breaches, cyberattacks, and online fraud.
- Important for businesses handling customer data, such as e-commerce or consulting firms.
- Example: A hacker steals customer payment information from your website.
How Much Does Sole Proprietor Business Insurance Cost?
The cost of business insurance for sole proprietors varies based on factors such as industry, coverage limits, location, and business size. Here’s a rough estimate of typical annual premiums:
| Insurance Type | Estimated Annual Cost |
|---|---|
| General Liability | $300 – $1,500 |
| Professional Liability | $500 – $3,000 |
| Business Property | $500 – $2,500 |
| Business Owner’s Policy (BOP) | $500 – $3,500 |
| Workers’ Compensation | Varies by state & payroll |
| Commercial Auto | $750 – $2,500 |
| Cyber Liability | $500 – $5,000 |
Prices can vary significantly based on your business risk level. A home-based freelancer may pay less than a contractor working on high-risk job sites.
How to Choose the Right Insurance Policy
To find the best insurance policy for your sole proprietorship, consider the following steps:
- Assess Your Risks – Identify the biggest risks your business faces (e.g., customer lawsuits, property damage, data breaches).
- Check Legal Requirements – Some industries require specific insurance (e.g., contractors may need liability insurance to get licensed).
- Compare Quotes – Get quotes from multiple insurers to find the best coverage at an affordable price.
- Bundle Policies – A Business Owner’s Policy (BOP) can save money by combining multiple coverages.
- Read the Fine Print – Understand exclusions, coverage limits, and claim procedures before purchasing.
Where to Buy Sole Proprietor Business Insurance?
Many insurance companies, like the top 5 ones covered earlier in this article, offer coverage tailored for sole proprietors. Some of the top providers include:
- Hiscox – Specializes in small business insurance with flexible coverage options.
- Progressive – Offers commercial auto and general liability coverage.
- Next Insurance – Digital-first provider with competitive rates.
- The Hartford – Well-known for comprehensive business insurance.
- State Farm – Provides customizable small business insurance plans.
Final Thoughts
Sole proprietors face unique risks since their personal and business assets are intertwined. Having the right business insurance ensures protection against financial loss from lawsuits, accidents, and property damage. While insurance is an additional expense, it’s a crucial investment in securing your business’s future. By assessing risks and selecting the right coverage, sole proprietors can operate with confidence and financial security.
Also, please keep in mind that state laws impact business insurance requirements for sole proprietors in various ways. Some states mandate workers’ compensation insurance for high-risk industries (e.g., construction in California), while others, like Texas, don’t require it at all. Certain professions, such as contractors in Florida and accountants in New York, must carry general liability or professional liability insurance to operate legally. Commercial auto insurance is required in states like New York and California for business-use vehicles, including rideshare and delivery drivers. Business Owner’s Policies (BOPs) may exclude coverage for specific risks, such as hurricanes in Florida or extreme weather in Texas. Additionally, states like California and New York have strict cyber liability laws, requiring businesses to protect customer data and notify them of breaches. Since requirements vary widely by location and industry, sole proprietors should ensure their coverage complies with state laws before purchasing a policy.
Need insurance for your business? Start comparing quotes today to find the best coverage for your needs!
Mark Turner is an author and editor at Sophisticated Investor. He has over two decades of experience in the financial industry as a broker in both Chicago and New York and has written for several top tier publications. He currently covers the topics of alternative investments, geopolitical events, US economy, portfolio diversification and others.
