Does a Sole Proprietor Need Business Insurance?

Are you self-employed or running a business as a sole proprietor?

You may have employees, or simply be working on your own, but even solo, you are still considered a business. It is in your best interests to strongly consider investing in business insurance.

Professional Liability Insurance

This is the first place you should look. If a customer or client files a lawsuit against you for not fulfilling professional obligations, this insurance will help protect you. The insurance company will often take care of the payout if your customer wins in court.

There are limits, as with all policies, but facing a business lawsuit without at least professional liability insurance puts you on the hook for the costs, even if you have to pay out from personal assets.

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Do You Service Clients?

Most sole proprietors and self-employed business owners service clients. If you perform services, such as home improvements, office cleaning, landscaping, computer services and consulting, auto repairs, etc., you’ll need insurance. Some states require it by law, so check with your state law guide.

Get with your lawyer to assess risk of potential lawsuits, then choose a coverage that fits your need.

  • Remember, it only takes one lawsuit to bankrupt a small business, especially in the early years. While investing in insurance will cost a bit up front, it could literally save your business later.

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Do You Sell Products from Home?

If you sell products rather than services, you may not need professional liability insurance because it doesn’t protect you from issues resulting from defective or harmful products.

Do You Have Employees?

If you employ anyone, you’ll need to strongly consider workman’s comp insurance. Even if you’re running a small business among friends, accidents can happen. In a service business, injuries occur and insurance will protect you from having to personally pay for medical expenses.

When in Doubt, Consult a Great Agent

If you’re not sure if insurance is worth the investment, or you are unsure of which type is best for you, consult a qualified insurance agent. Ask your fellow small business owners for a list of names. They’ll help guide you to an agent who has a business’ best interest at heart, rather than their own bottom line.


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