|Average General Liability Premium Quote
|Average Business Owner's Policy Premium Quote
|All Sole Proprietor Insurance Types Average Premium Quote
|United States Liability Insurance Group (USLI)
|Liberty Mutual Insurance Company
|CNA Insurance Companies
|Contractors Bonding & Insurance Company (RLI)
The typical coverage limits of the policies listed above were $1 million per claim and $2 million aggregate in total insurance protection.
Insurance Company Factors
Even though the policies offered the same amount of coverage, there were significant differences between what each insurance company charged. There are several reasons for this.
First, insurance companies have different approval rates for covering sole proprietors. An insurer quoting a low price might only accept business owners with a low risk of making claims. A selective insurer may reject your business if you’re in a more dangerous industry or have had past claims.
Insurers could include additional benefits with their business insurance for sole proprietors, and that’s why they charge more. For example, one business owner's policy (BOP) might include crime insurance to protect your business against fraud and theft, while others make it an optional add-on.
Finally, insurers specialize in different products. An insurer may quote a lower premium for general liability only because it wants to sell more of these policies. The insurer could quote a higher premium for a BOP because it’s less interested in this market.
Compare sole proprietor business insurance quotes on Insureon.
Factors Influencing Cost
Besides the insurance companies themselves, several factors could influence how much you need to pay. The cost factors depend on the type of sole proprietor insurance.
General Liability Coverage and Cost Factors
Annually, businesses spend an average of $1.2 million fighting litigation. General liability insurance covers potential financial losses from a wide variety of damages resulting from:
- Bodily injury
- Property damage
- Medical expenses
- Libel and slander
- Defending lawsuits
- Settlement bonds or judgments
For example, if a client falls while visiting your office, they could sue you to pay their medical bills. General insurance liability would likely cover their bills and your legal expenses.
Your sole proprietor liability premiums depend on your sales and payroll estimates. Your business type is important. A carpenter working in construction is more likely to accidentally hurt someone than a graphic designer. If you work from home and rarely see people in person, someone is less likely to get hurt, versus if you have a storefront.
Other factors include:
- Number of employees: More employees may lead to a higher premium.
- State law: Laws in your state that influence risks, claims, liability, and operations can affect your premium.
- Claims history: Insurers will likely charge more if you filed claims for past issues or if your industry has many claims. This may be counterbalanced by how you handle and prevent potential risks.
- Your business history: Your business’s financial stability and time in operation may influence your premium.
- Coverage limits and deductibles: Higher general liability coverage will lead to a more expensive policy. You may pay less with a larger deductible. When you file a claim, you pay a deductible out-of-pocket first.
What General Liability Doesn’t Cover
General liability doesn’t cover everything that can happen, which is why it can be helpful to have the following optional coverage types:
- Product liability insurance: This type of insurance provides coverage if you’re sued because you created a defective product that causes injury or financial harm
- Commercial property insurance: This protects your physical building, equipment, and inventory against damage and loss, including fire, smoke, wind and hail, and vandalism.
- Workers' compensation: Many states require workers' comp if you have employees, and even if you’re a sole proprietor. The coverage helps pay for lost wages and medical bills.
- Professional liability: This coverage is good to have if someone sues you because they feel you did a subpar job. Also known as “errors and omissions” (E&O) insurance, it’s common among attorneys, engineers, medical practitioners, and other professionals.
BOP Coverage and Cost Factors
A BOP packages multiple types of business insurance into one policy. A typical BOP includes general liability, commercial property, and business interruption insurance. The policies have strict maximum allowable square footage for office, retail, or apartment risks.
A BOP is most appropriate for a small to midsize business such as a florist, hair salon, accountant's office, or low-density apartment building.
A BOP won’t include auto insurance, disability insurance, professional liability insurance, or workers’ compensation.
Some factors influencing a BOP’s costs include:
- Business type and claims history: Higher-risk industries pay more for a BOP than lower-risk industries, like private, professional services. Due to higher risks, you may pay more if you have a storefront with employees or frequent customers. A clean record can also qualify you for a lower rate.
- Your income: For business interruption coverage, increased earnings may lead to more expensive insurance.
- Property value: You may pay more for a BOP’s property coverage if you have expensive equipment and other property. Most insurers require you to insure your property for 80% to 100% of the replacement cost.
- Coverage limits and deductible: More protection leads to a higher BOP premium. A lower deductible also raises your premium because you pay less out-of-pocket for a claim.
Top Companies for Sole Proprietor Business Insurance
- The Hartford
- United States Liability Insurance Group (USLI)
- Liberty Mutual Insurance Company
- CNA Insurance Companies
- Contractors Bonding & Insurance Company (RLI)
How to Save Money on Sole Proprietor Business Insurance
If you’d like to save money on business insurance for sole proprietorships, these tips can help you qualify for lower premiums today and in the future.
- Collect multiple quotes: The insurance company can make a big difference in the cost of business insurance. Before signing up, collect a few quotes from the top insurance companies.
- Look for a package deal: Insurers offer discounts if you buy multiple types of sole proprietor business insurance from them, especially if you package them under a BOP. Insurers may offer additional discounts for business insurance, like if you pay the entire annual premium at once versus monthly.
- Maintain a safe workspace: Offer employee safety classes, or install protective devices such as security and sprinkler systems. Talk to your insurer about any loss control or risk reduction services you can take advantage of to lower your premiums.
- Buy only the coverage you need: For example, you might skip business interruption insurance because you have enough cash in your emergency fund to cover a short-term closure. Make sure the coverage limits match what your business needs.
- Raise your deductible: If you have a higher deductible, you typically pay a lower premium. However, there’s a tradeoff—you'll usually owe more out-of-pocket when you file a claim. Raising your deductible could make sense, though, if your workplace is safe and you’re unlikely to file a claim.
- Protect your credit score: Insurers may offer better rates for a good credit score. Pay your loans and credit cards on time, and if your score has increased, see if you qualify for a better rate.
Can a Sole Proprietor Get Business Insurance?
Yes, a sole proprietor can get business insurance. Liability coverage protects against lawsuits, while a business owner's policy can protect you against legal action and any damages or loss related to your business property.
Do Sole Proprietors Need Business Insurance?
Many states require insurance coverage in several situations, particularly for businesses with two or more employees. States will require you to insure at minimum liability amounts for business or personal use. Even sole proprietors may be required to have workers' compensation insurance if they hire employees; it can be purchased through your state or from a private insurance company. You may also be required to purchase disability insurance if you have employees in California, Hawaii, New Jersey, New York, or Rhode Island.
How Much Does Sole Proprietor Insurance Cost?
Sole proprietor insurance costs, on average, $1,384 per year, according to data from Insureon. The type of sole proprietor insurance matters, however. General liability only for sole proprietors costs $1,191 per year on average, while a BOP policy costs $717 annually.
As someone deeply immersed in the realm of insurance and risk management, I can provide comprehensive insights into the intricacies of business insurance for sole proprietors. Let's delve into the wealth of information provided in the article you've shared.
The data presented outlines the average premium quotes for various types of insurance policies offered by different insurance companies. For instance, The Hartford, United States Liability Insurance Group (USLI), Liberty Mutual Insurance Company, ACUITY, Hiscox, Travelers, CNA Insurance Companies, and Contractors Bonding & Insurance Company (RLI) are among the prominent insurers mentioned, each offering different premium quotes for general liability and business owner's policy (BOP) coverage.
Factors influencing these premium quotes include selectivity, benefits, and specialization of insurers. Selectivity refers to insurers' varying approval rates for covering sole proprietors based on risk assessment, industry type, and claims history. Benefits, on the other hand, encompass additional coverages included in the policies, such as crime insurance or optional add-ons like product liability insurance. Insurers may also specialize in particular products, leading to differing premium rates based on the type of policy being offered.
Moreover, several factors contribute to the overall cost of sole proprietor insurance, including the type of coverage, business type, number of employees, state laws, claims history, business history, coverage limits, and deductibles. For instance, general liability coverage protects against bodily injury, property damage, medical expenses, and other liabilities, with premiums varying based on sales and payroll estimates, business type, and risk factors. Similarly, BOP coverage combines multiple insurance types into one policy, with costs influenced by business type, claims history, income, property value, coverage limits, and deductibles.
To save money on sole proprietor business insurance, various strategies are recommended, such as collecting multiple quotes, seeking package deals, maintaining a safe workspace, buying only necessary coverage, raising deductibles, and protecting one's credit score.
Lastly, the article addresses common questions regarding sole proprietor insurance, such as eligibility, necessity, and cost. It emphasizes that sole proprietors can indeed obtain business insurance, which can be essential for protecting against lawsuits and property-related losses. The cost of sole proprietor insurance varies depending on the type of coverage, with general liability insurance typically costing more than a BOP policy.
In essence, this comprehensive overview underscores the importance of understanding the nuances of business insurance for sole proprietors and highlights key factors and strategies to consider when evaluating insurance options.