5 Insurance Policies Every Solopreneur Should Have Using various insurance policies is one of the best ways solopreneurs can protect their business and personal finances from potentially devastating risks.
By Laura D. Adams •
Opinions expressed by Entrepreneur contributors are their own.
Starting a business is exciting. But all the things you love about being a solopreneur, such as flexible hours and high earning potential, come with some risk. Dangers like contract disputes, injuries and theft could be enough to wipe out your small business before it has the chance to succeed.
In fact, one in three small-business owners said they had experienced an event that insurance might have covered in the past year, according to an Insureon survey. Fortunately, several insurance products can help business owners protect against these risks.
Here are five insurance policies that will benefit solopreneurs and who should use them.
Related: The Solo Entrepreneur Experience
1. Homeowners insurance
Most homeowners insurance policies cover up to $2,500 worth of business equipment inside the home and $500 when you take it off the premises. This type of insurance is a good fit for business owners who only need to cover a few items, such as laptops and a few furniture items in a home office.
To take advantage of this coverage, go through your policy documents or call your insurer to double-check whether business equipment is included in your homeowners policy. Find out if you can increase the coverage amount if needed.
2. Business owner's policy (BOP)
A business owner's policy is a catch-all insurance product that bundles business-property coverage, general-liability coverage and business-interruption coverage. You can customize your policy by adding endorsements such as data-breach coverage and professional-liability coverage, too. Even better, the cost of one BOP usually costs less than getting each policy separately.
Consider getting a BOP if your business has a physical location, you have any chance of getting sued while doing business or you have assets that could get stolen or damaged. But keep in mind, BOPs usually don't include other coverages you may need, such as commercial auto, workers' compensation or life insurance.
3. Commerical auto insurance
Personal car insurance typically includes liability coverage, personal-injury protection and uninsured and underinsured motorist coverage. But when you use your car for business purposes, such as being an Uber Eats driver or delivering groceries for Instacart, your existing auto insurance may not extend to you (or your passengers) when on the job. In an accident, you'd be on the hook for all the costs, which puts your finances at serious risk.
But commercial auto insurance can cover you and your passengers during business hours. Some products are specifically designed for ride-share drivers, while delivery drivers might need to add business insurance to their personal policies.
To find out the best business auto insurance for your needs, speak with an insurance representative or broker about your options. Be prepared to explain how you use your car for business.
4. Professional liability lnsurance
This type of coverage is also known as errors and omission insurance because it helps business owners cover the costs of a lawsuit if they:
- Miss deadlines.
- Submit incomplete work.
- Breach a business contract.
- Fail to deliver services.
- Go over budget.
- Generally neglect a project.
Professional liability insurance differs from general liability coverage, which protects your business against third-party claims such as bodily injury, product liability or property damage. Consider professional liability coverage if you offer a service rather than sell a product.
Related: How to Run a Paperless Solo Business
5. Life insurance
Life insurance pays one or more beneficiaries if the policyholder dies within the specified term. Business owners may need two types of life insurance policies:
Key-person insurance provides a death benefit to a business if the owner or another key employee dies. It could make sense if a company's reputation is tied to an employee, or the employee's death would threaten its finances. This type of policy may include a buy-sell agreement, which dictates what happens to your share in the company when you die.
Personal life insurance provides money to your family and other dependents after you die. It can help them cover household bills and pay off debt, which can be critical if they rely on your income. To figure out how much coverage to buy, consider how much savings you have and your family's future financial needs, such as paying school tuition, eliminating debts (such as a mortgage and auto loan) and saving for retirement.
Talk with a life-insurance agent or broker to go through your options, manage the application process and figure out how much coverage you'll need to protect your business partners and family. Life-insurance rates can be surprisingly affordable if you're relatively young and in good health.
While your business might only need one or two of these policies, it's a good idea to consider your risks and how to insure against them. That can help you stay in business for the long term, instead of falling apart at the first sign of trouble.
