General Liability Coverage for Sole Proprietorships: What You Should Consider

Business owner working at their sole proprietorship

Did you know that there were 33.2 million businesses in the United States during 2022? However, many of these companies fail within the first few years. One of the most important obligations you have as a business owner is having the right type of insurance coverage for your business.

General liability insurance for sole proprietorship owners is considered crucial when it comes to helping to protect your company. We've put together a guide to general liability insurance for sole proprietorship owners.

Let's explore what you should consider when it comes to general liability coverage.

What Is General Liability Insurance?

General liability insurance is a type of insurance coverage that business owners can purchase to help protect themselves against third-party claims of bodily injury, property damage, and personal injury.

In other words, if someone sues your business or you are held liable for damages caused by your company, your general liability insurance policy can help cover the costs.

There are a number of different circumstances in which general liability insurance can come in handy for sole proprietorships.

For example, if a customer slips and falls in your store, or if you damage someone's property while working on a job site, your general liability insurance policy could pay for resulting medical bills or repairs.

General liability insurance helps to protect your finances from third-party claims.

What Type of Claims Does General Liability Insurance Not Cover?

In order to make the most of this coverage, you need to understand what you cannot use it for.

Employee injuries and damage to your own property are not covered under a general liability insurance policy.

For example, if your business property is stolen or becomes damaged, your general liability insurance policy typically would not cover the costs.

The same goes for if an employee is injured on the job and files a Workers’ Compensation claim — this would not be covered by your general liability insurance policy.

This is something that you should take into consideration, as it could help avoid a situation where you incur additional legal expenses.

What Should I Look For in an Insurance Provider?

Now that you know a little more about general liability insurance and how it can benefit your business, it's time to start shopping for a policy. Choosing an insurance provider is crucial when it comes to finding the coverage you are looking for.

Here are a few key factors to keep in mind as you search for an insurance provider.

The Amount of Coverage You Need

This amount of coverage your business might need could depend on the size and scope of your business, as well as the specific industry you are in.

You may need to get a policy with more coverage if you have a higher risk of being sued or facing damages. The total amount of coverage you need can depend upon the business that you run.

In the event that you own a company that includes a large number of risks, this is simply an expense you might need to budget for.

The Premiums

Of course, you might want to take into account the premium amount when considering a policy.

Be sure to look at the big picture and not only the bottom line. A lower premium doesn't necessarily mean a better deal if the coverage is not sufficient for your needs.

If you have any questions about coverage or the premium, don't hesitate to contact us for assistance.

The Claims Process

You might also want to know how easy (or difficult) it is to file a claim with the provider.

Find out what the process entails and how long it typically takes for claims to be processed. The easier it is to file a claim, the more pleasant your experience might be working with that particular insurance provider.

Have They Worked With Businesses Like Yours in the Past?

Make sure the provider has experience working with businesses in your industry. They will likely have a better understanding of the risks involved and can tailor a policy to help meet your specific needs.

See the Types of Businesses We Cover >

What Happens if I Don't Have General Liability Insurance?

If you are found to be at fault for damages or injuries, you could be on the hook for some hefty expenses. These costs can quickly add up and put your business in a difficult financial position. In some cases, you may even have to close your doors for good.

For instance, if an accident occurs and a client becomes injured, they could sue you for a variety of costs. These costs could include medical bills, legal fees, emotional distress associated with the injury, and a loss of income from being unable to work.

Although every case is different, you could find yourself being ordered to pay a large amount of money to an injured party. Most entrepreneurs simply do not have much extra cash lying around.

How Much Does General Liability Insurance Cost?

The answer to this question will depend on a handful of factors.

For example, some sole proprietorships are inherently riskier than others. There is a significant difference in risk between a graphic designer and a cleaning business.

Other factors can include the physical location of your business. The number of employees you have, and your claims history could also play a role.

Your prospective insurance provider will likely ask you a series of questions. This can help them get an accurate picture of your business risks and the amount of coverage you might need.

They can then use this information, along with their own company data, to come up with a quote for your policy.

How PolicySweet® Can Help

We offer general liability coverage as part of our Business Owners Policy (BOP) coverage. This also includes business property and cyber-risk coverage.

BOP coverage could provide protection for your business against several liabilities.

It's important to keep in mind that general liability insurance for sole proprietorships is not the same thing as business property insurance.

Business property insurance helps protect your company's physical assets (office equipment, inventory, etc.) from damage or theft. Whereas general liability helps to protect your business against claims for third-party property damage.

Cyber-risk coverage is an additional coverage added to BOP insurance from PolicySweet. It could cover costs associated with computer-related crimes and losses.

What Type of Business Needs a Business Owners Policy?

If there's any chance that you could experience a lawsuit, it's a good idea to have a Business Owners Policy in place.

This type of coverage is recommended for businesses with expensive equipment and assets, as well as companies that interact with the public on a regular basis. The same holds true for businesses that store sensitive customer data.

Learn More About BOP Coverage >

You Can't Overlook General Liability Insurance For Sole Proprietorship Owners

General liability insurance for sole proprietorship might seem complicated at first. It's much more straightforward than most people believe, though. Just be sure you keep the above information in mind so that you can make the decision that is best for you and the future of your company.

Want to learn more about insurance coverage? Reach out to us today and see how we can help you.

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