How Much Does Sole Proprietor Business Insurance Cost

On average, sole proprietor business insurance incurs an annual cost of $1,384, as determined from quoted premiums obtained through the prominent business insurance marketplace, “Insureon”.

Nevertheless, the specific amount you’ll be charged for your business insurance is contingent upon various factors such as:

  1. Your industry
  2. The type of sole proprietor insurance selected
  3. The extent of coverage required
  4. Your historical claims record
  5. The insurance company chosen

We’ve conducted research to provide insights into the costs of sole proprietorship business insurance across the most popular options, offering you an estimate of potential expenses.

How Much Does Sole Proprietor Business Insurance Cost
How Much Does Sole Proprietor Business Insurance Cost: Photo source (Insureon)

Average Cost of Sole Proprietor Business Insurance

We employed Insureon, the foremost commercial insurance marketplace, to analyze the typical expenses associated with sole proprietor insurance across eight prominent companies in this industry.

Over a span of seven months, Insureon compiled the quote data to determine the average premium quoted by each company.

Insurance Company Average General Liability Premium Quote Average Business Owner’s Policy Premium Quote All Sole Proprietor Insurance Types Average Premium Quote
The Hartford $1,075 $1,526 $1,238
United States Liability Insurance Group (USLI) $614 $412 $655
Liberty Mutual Insurance Company $1,616 $1,331 $1,606
ACUITY $926 $500 $839
Hiscox $405 $503 $910
Travelers $2,075 $250 $3,439
CNA Insurance Companies $1,483 $500 $1,048
Contractors Bonding & Insurance Company (RLI) $1,333 N/A $1,333
Average $1,191 $717 $1,384

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.

Selectivity

Initially, sole proprietors encounter varying approval rates from insurance companies.

When an insurer provides a lower quote, it may indicate a preference for business owners with minimal risk of filing claims.

A discerning insurer might decline coverage for your business, especially if it operates in a high-risk industry or has a history of previous claims.

Benefits

Insurers may incorporate extra advantages into their sole proprietor business insurance policies, leading to higher costs.

For instance, a Business Owner’s Policy (BOP) from one provider might encompass crime insurance as a standard feature, safeguarding your business from fraud and theft, whereas alternative insurers may offer it as an optional supplement.

Also read: How To Get Clients For Insurance Business

Specialization

Insurers focus on distinct product specialties. A lower premium quote for general liability coverage might be offered by an insurer aiming to boost sales in this specific policy category.

Conversely, a higher premium quote for a Business Owner’s Policy (BOP) could signify a lesser interest from the insurer in this particular market.

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

Businesses spend an average of $1.2 million annually on litigation.

General liability insurance covers various damages, including bodily injury, property damage, medical expenses, libel, slander, defending lawsuits, and settlement bonds.

For instance, if a client sues for injuries sustained in your office, the insurance can cover medical bills and legal expenses.

Premiums for sole proprietor liability depend on sales, payroll estimates, and business type; risk factors vary, with occupations like construction carrying higher risks than those like graphic design.

Working from home reduces the likelihood of injuries compared to having a storefront with in-person interactions.

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

While general liability insurance offers coverage for various incidents, it may not encompass all potential risks. Therefore, considering additional optional coverage types can be beneficial:

  1. Product Liability Insurance: This insurance option comes into play if legal action is taken against you due to a defective product that results in injury or financial loss.
  2. Commercial Property Insurance: Safeguarding your physical assets such as buildings, equipment, and inventory, this insurance provides protection against a range of perils including fire, smoke, wind and hail, as well as vandalism.
  3. Workers’ Compensation: Mandatory in many states for businesses with employees, and recommended for sole proprietors, workers’ compensation coverage assists in covering lost wages and medical expenses in the event of work-related injuries.
  4. Professional Liability: Also known as “errors and omissions” (E&O) insurance, this coverage is crucial if legal action arises due to perceived subpar performance in your professional duties. Professions such as law, engineering, medicine, and others commonly opt for this additional layer of protection

BOP Coverage and Cost Factors

A Business Owner’s Policy (BOP) combines various business insurances like general liability, commercial property, and business interruption in one package.

Tailored for small to midsize businesses like florists, hair salons, accountants, or low-density apartments, BOPs have specific square footage limits for office, retail, or apartment risks.

Some factors influencing a BOP’s costs include

The cost of a Business Owner’s Policy (BOP) is influenced by factors such as business type, claims history, income, property value, and coverage limits:

    1. Business Type and Claims History: Industries with higher risks, like those with storefronts and frequent customers, generally pay more for a BOP. However, a clean claims record can qualify you for a lower rate.
    2. Income: Increased earnings may result in higher premiums for business interruption coverage.
    3. Property Value: If your business has expensive equipment and property, you may pay more for the property coverage in a BOP. Insurers often require you to insure your property for 80% to 100% of the replacement cost.
    4. Coverage Limits and Deductible: Higher coverage limits contribute to a higher BOP premium. Additionally, opting for a lower deductible increases your premium, as 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
  • ACUITY
  • Hiscox
  • Travelers
  • CNA Insurance Companies
  • Contractors Bonding & Insurance Company (RLI)
Can a Sole Proprietor Get Business Insurance?

Certainly! A sole proprietor can obtain business insurance, including liability coverage for lawsuits and a business owner’s policy for protection against legal action, damages, or loss related to business property.

 

Do Sole Proprietors Need Business Insurance?

States often mandate insurance, especially for businesses with two or more employees.

Minimum liability coverage is typically required for both business and personal use.

Sole proprietors hiring employees may need workers’ compensation insurance, available through the state or private insurers.

In specific states like California, Hawaii, New Jersey, New York, or Rhode Island, disability insurance for employees might also be compulsory.

 

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.

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