Sole proprietors need insurance policies to protect both physical and financial assets of their businesses, including commercial auto coverage if you drive for work purposes, data breach coverage to notify and monitor customer incidents due to hacks or breaches and fidelity bonds that cover theft of funds from company accounts. Check the recommended insurance for a sole trader, and also read on for further information.
General Liability
As a sole proprietorship isn’t considered an independent legal entity like an LLC or S-Corp, any liabilities could easily affect your personal assets. Therefore, small business insurance for sole proprietors should be provided to protect personal assets while keeping your business running successfully.
General liability policies for sole proprietors provide crucial coverage against property damage or bodily injuries caused to third parties – for instance customers or vendors. Say you’re pressure washing someone’s house when an unexpected brushstroke knocks over their shutters; in such an instance they could sue you for damages, and general liability coverage might help cover their claims against you.
Commercial property insurance provides protection for your equipment, inventory and building against fire, water damage or other threats to its integrity, such as earthquakes. In addition, it can cover losses of business income in case operations are interrupted due to covered perils. NerdWallet recommends Next due to their customizability, ease of use, coverage options and price – Next can even provide quotes online in minutes for multiple types of business insurance policies!
Employers’ Liability
Even if you are the sole employee at your business, employers’ liability insurance is still legally required by UK law. It provides protection from compensation claims that arise as a result of an employee being injured at work and can help avoid potential compensation payments to them – as per UK regulations it must cover anyone working under an implied or written contract of service or apprenticeship agreement with you.
Imagine one of your apprentices trips over a cord and suffers a back injury; legal costs from an injury claim could be considerable, while customers or clients might sue due to poor workmanship; in this instance a professional indemnity insurance policy might cover this loss of income caused by poor work done on your apprentices’ part.
Many sole traders opt for combined business insurance policies to meet all their coverage needs, including public and product liability and employers’ liability, which can both simplify administration and lower premium costs when compared to purchasing individual policies individually.
Public Liability
As a sole trader, your business and personal assets are considered one entity under law, making you vulnerable should anything go wrong in your business or with its operations. Therefore, public liability insurance should always be maintained.
Your liability coverage protects against compensation claims filed by customers, suppliers and members of the public who are injured due to your business activities, as well as landlords that require this coverage for leasing office or workspace space.
Additionally, income protection or personal accident insurance could provide much-needed coverage should an injury or illness prevent you from working, helping keep living expenses covered and supporting any family members who may require financial help. You could also consider professional indemnity insurance as protection against allegations of negligent service or advice that you provide.
Business Interruption
Business interruption insurance (also referred to as business income coverage) provides coverage against losses you suffer should your property become damaged and force you to close down, typically as part of a commercial property policy or business owner’s policy (BOP).
Your insurer will specify the basis on which you can make a claim; this could involve either the reduction in gross profit due to decreased turnover, or more complex factors like “loss of productive capacity”.
A typical policy will typically have a 48-72 hour waiting period before it starts paying out income, including payments such as rental/mortgage payments, loan payments and expenses such as advertising costs incurred while operating the business. Relocation expenses may also be covered if forced relocation during restoration process is necessary; however it will not cover stock purchases prior to damage occurring or expenses not related directly to it.
