As a sole proprietor, there’s no legal separation between you and your business, which means your personal assets could be on the line if something goes wrong. That’s why sole proprietor business insurance matters. It helps protect you from the unexpected — whether it’s property damage, a lawsuit, or a simple mistake that turns into a costly problem. In this guide, I’ll walk through the types of insurance you might need, how much they usually cost, and which companies offer the best coverage.
Key takeaways:
- Sole proprietors have personal financial risk because there’s no legal separation between business and personal assets, so insurance is a smart way to protect what you’ve built.
- Basic coverage, like general liability and professional liability, is often affordable, with many policies starting under $500 a year, depending on your business type.
- Companies like Simply Business, Next Insurance, and Thimble make it easy for sole proprietors to compare quotes and get coverage that fits their needs and budget.
Why sole proprietors need business insurance
When you have a sole proprietorship, you’re personally responsible for everything your business does, as there’s no legal separation between you and your business. That means your home, savings, and even car could be at risk if your business gets sued or suffers a major loss. Small business insurance doesn’t just protect your clients or equipment — it protects you. Even a basic policy can make a big difference if something goes wrong.
Picture this: A client comes by your workspace and gets hurt, or you accidentally damage their equipment while working. If someone says your work cost them money, you’re the one responsible. Without insurance, those costs fall on you, and they can add up fast.
Even if you work from home, meet clients online, or run a small side hustle, the risk is still there. You might not see it coming, and that’s exactly why insurance matters. It helps cover those unexpected moments that could otherwise cause serious financial damage.
In the end, insurance is about protecting everything you’ve built. You’ve invested time, energy, and probably a good chunk of your savings. One accident shouldn’t be enough to take it all away.
Types of sole proprietor insurance coverage
As a sole proprietor, you wear every hat in the business, which means you also carry all the risk. The good news is that you don’t need a dozen policies to get solid protection. A few key types of insurance can go a long way.
Here are the main ones to consider:
- General liability insurance covers common situations like someone getting hurt at your place of business or you accidentally damaging someone’s property. If a client trips over a power cord at your location or you spill coffee on their laptop, this policy can help cover the costs.
- Professional liability insurance, also known as errors and omissions (E&O), covers you if a client claims your work caused them financial harm. It’s especially useful for consultants, freelancers, designers, and anyone who gives advice or services.
- Commercial property insurance helps protect your business property (e.g., if you own tools, equipment, inventory, or use a workspace) from things like fire, theft, or certain types of weather damage. Even if you work from home, your homeowner’s policy may not cover business-related losses.
- Business owner’s policy (BOP) bundles general liability and property insurance into one policy, often at a lower cost than buying them separately. Some insurers also let you add coverage for business interruption or cyber liability.
- Cyber liability insurance helps cover you if your data (e.g., if you store client information, process payments, or run your business online) is hacked or exposed.
- Commercial auto insurance may be needed if you drive for work, even just to deliver products or meet clients. Personal car insurance doesn’t always cover business-related trips.
How to choose sole proprietor insurance coverage
Choosing the right insurance doesn’t have to be complicated. The key is knowing what you actually need, not just what sounds good on paper. Start with what matters most — general liability and professional liability are good starting points for most sole proprietors. From there, think about what tools you rely on, where you work, and how much risk you’re comfortable with.
What to consider | Why it matters |
|---|---|
What kind of work you do | Different types of work come with different risks. A web designer may need professional liability, while a handyperson may need property or tools coverage. Think about what could realistically go wrong in your daily work. |
Where and how you work | Your location and setup affect coverage. If you work from home, visit client sites, or sell online, ensure your policy covers those scenarios. |
What clients or partners require | Some clients won't work with you unless you show a certificate of insurance. Check if you need specific coverage, like general or professional liability, to meet contract requirements. |
What your financial comfort zone is | A higher business insurance deductible lowers your premium, but you'll pay more out of pocket if something happens. Ensure your policy limits cover worst-case scenarios. |
How flexible the policy is | If your business is seasonal or part-time, you may want a policy that you can pause, adjust, or cancel without a hassle. |
At the end of the day, the right insurance for your sole proprietorship is the one that fits your work, your risk, and your peace of mind. Get a few quotes, read the fine print, and don’t be afraid to ask questions before you commit.
How much does sole proprietor business insurance cost?
The cost of insurance for sole proprietors can range widely depending on what you do, where you work, and how much coverage you need. On the low end, you might pay a few hundred dollars a year. On the high end, it could be in the thousands.
Here’s a look at average annual premiums by profession:
Typical coverage limits | Estimated annual cost | |
|---|---|---|
Freelance writer | $1M per occurrence / $2M total | $300 to $700 |
Web designer | $1M per occurrence / $2M total | $350 to $1,000 |
Marketing consultant | $1M per occurrence / $2M total | $400 to $1,200 |
Photographer | $1M per occurrence / $2M total | $500 to $1,600 |
Personal trainer | $1M per occurrence / $2M total | $400 to $1,800 |
Handyperson | $1M per occurrence / $2M total | $900 to $2,500 |
These numbers are ballpark estimates. The only way to know what you’ll actually pay is to get quotes based on your business, location, and risk profile. But this should give you a solid starting point.
Opening a dedicated business bank account can help you separate personal and business finances, which is especially important for sole proprietors when it comes to taxes and insurance. If you’re not sure where to start, check out our list of the best business bank accounts for sole proprietors.
Factors that determine sole proprietor insurance coverage cost
Every sole proprietorship is a little different, and insurers look at several factors to decide how much you’ll pay. Even two businesses in the same field can end up with very different premiums depending on how they operate.
Here are some of the key things that affect your insurance cost:
- Type of work you do: High-risk professions like contracting or fitness training tend to cost more to insure than lower-risk work like writing or virtual consulting.
- Business location: Your ZIP code matters. Areas with higher crime rates, severe weather, or more lawsuits can increase your premium, especially for property or general liability coverage.
- Claims history: If you’ve had past insurance claims, even under a different business name, that can push your rates higher.
- Coverage limits and deductibles: Choosing higher limits will give you more protection, but that usually comes with a higher premium. You can lower your cost by increasing your deductible, but that means you’ll pay more out of pocket if something happens.
- Annual revenue and business size: Even for sole proprietors, insurers sometimes ask about income or the number of clients. Higher revenue may increase your liability exposure in their eyes.
- Policy type and bundling: A BOP that combines general liability and property insurance is often cheaper than buying each separately. Some insurers also offer discounts for bundling multiple policies.
Top sole proprietor business insurance companies
Plenty of insurance companies that work with small businesses also offer solid options for sole proprietors. Some make it easy to get quick quotes online, while others stand out for low prices or profession-specific coverage. The best choice really comes down to what kind of support you want and whether you care more about speed, simplicity, or variety.
My list of the best sole proprietor insurance companies includes an online broker (Simply Business) that connects you with multiple carriers and two direct insurers known for serving freelancers, consultants, and independent workers.
- Next Insurance: Best for fast, affordable coverage for freelancers and solo professionals
- Simply Business: Best for comparing quotes and buying insurance online
- Thimble: Best for part-time, seasonal, or short-term business insurance
Next Insurance: Best for fast, affordable coverage for freelancers and solo professionals
Pros
- Purchase insurance online in less than 10 minutes
- Discounts when you bundle policies
- Licensed agents to advise you
Cons
- No 24/7 claims call center
- Coverage options are not as extensive as a larger carrier
- Not ideal for high-risk industries
Standout features |
|
|---|---|
Financial rating | Next Insurance's AM Best rating is A- (Excellent) |
Why I like it | I like Next Insurance because it makes buying coverage simple and fast, especially if you're a sole proprietor who doesn't have time to deal with complicated paperwork. Everything happens online, from getting a quote to downloading your COI. It’s also affordable, which matters if you’re running a business on your own budget. |
Simply Business: Best for comparing quotes and buying insurance online
Pros
- Quickly compare quotes
- Purchase same-day coverage
- Fast online application process
Cons
- Not a direct insurer
- Limited online customization
- Coverage options vary by provider
Standout features |
|
|---|---|
Financial rating | AM Best rated Travelers, which owns Simply Business, an A++ (Superior) |
Why I like it | I like Simply Business because it saves time and hassle when shopping for insurance. Instead of filling out forms on multiple sites, you can compare quotes from several top carriers all in one place. It’s perfect if you want to see your options side by side before making a decision. |
Thimble: Best for part-time, seasonal, or short-term business insurance
Pros
- Short-term coverage available
- Customizable liability limits
- Quickly adjust limits for venue requirements
Cons
- Not ideal for full-time businesses
- No 24/7 call center for claims
- Can be difficult to reach a person during regular business hours
Standout features |
|
|---|---|
Financial rating | Most policies are written through Markel or National Specialty Insurance Company (NSIC); Markel's AM Best rating and NSIC's AM Best rating are both A (Excellent) |
Why I like it | I recommend Thimble if you're a sole proprietor who doesn't work full time or takes on projects here and there. You can buy insurance just for the days you need it, which keeps costs low. It’s quick, flexible, and great if your business runs on a freelance or seasonal schedule. |
Frequently asked questions (FAQs)
No, business insurance is not legally required for most sole proprietors. However, certain industries or states may require specific coverage, like workers’ compensation or commercial auto. Even when insurance is not required, clients may ask for proof of insurance before hiring you.
A sole proprietor usually doesn’t need workers’ comp insurance if they don’t have any employees. However, some states may still require it in certain industries or if subcontractors are hired. It’s always a good idea to check your state’s rules to be sure.
Yes, business insurance premiums are typically tax-deductible for sole proprietors. As long as the coverage is used for your business, you can usually write it off as a business expense on your Schedule C. Always check with a tax professional to ensure it applies to your situation.
Bottom line
Business insurance isn’t just for big companies. If you’re a sole proprietor, it’s one of the smartest ways to protect yourself from the unexpected. A small monthly premium can keep a simple mistake or accident from turning into a financial disaster.
Once you know what you need, get a few quotes from providers like Simply Business, Next Insurance, or Thimble. Each one offers different strengths depending on how you run your business. Taking the time to get the right coverage now can save you from much bigger problems later.
