Working as a sole proprietor generally presents some business-related risks. Whether actual small business insurance is needed, however, depends upon a sole proprietor’s work and homeowners insurance. Here’s how to think about whether you should purchase business insurance as a sold proprietor in Vermont.
Should sole proprietors in Vermont purchase small business insurance?
Sole proprietors have at least some risk exposure. Even though they might operate small businesses with no employees and limited operations, virtually no business is complete free of risk. Depending upon what a sole proprietor does, the following are a few examples of what could happen:
- Client could trip and become injured while visiting an office
- Business owner could be in a car accident while driving for work
- Business owner’s laptop could be stolen while working at a cafe
- Specialized equipment could be destroyed in a fire
- Client could sue alleging that they received bad advice
These incidents can cause loss of property, liability lawsuits and other costs, and some of the incidents can even happen if a business is run from home.
Personal insurance don’t necessarily cover business dealings
Personal insurance policies are primarily for safeguarding against personal risks, such as a house fire, home burglary, car accident (not when driving for work), dog bite, ATV accident or similar incidents. These policies don’t necessarily protect against business-related risks.
Occasionally, a personal insurance policy may offer limited coverage for business dealings. This is rarely a standard feature, but sometimes can be added on through an endorsement.
Not all personal policies offer an endorsement for work, however, and those that do frequently provide only limited coverage. The coverage may be sufficient for a small business run from a home office or dining room table, but they’re unlikely to be enough for a moderate business, one with more complex operations, or one with a physical location.
Small business insurance can be affordable
When sufficient insurance can’t be obtained through a personal policy endorsement, a small business insurance plan is probably necessary. Several coverages may be needed:
- Auto Coverage: Typically covers vehicles owned by the business, or otherwise used for work.
- General Liability Coverage: Typically covers common workplace accidents and defamation lawsuits.
- Errors and Omissions Coverage: Typically covers professional errors when advice is given (E&O coverage).
- Umbrella Liability Coverage: Typically provides additional liability protection beyond primary coverages.
- Business Interruption Coverage: Typically covers certain decreases in revenue due to specified disruptions.
- Commercial Property Coverage: Typically covers business-owned equipment and supplies.
- Other Coverages: Many other coverage options are available to meet specific needs.
These coverages might be obtained through a business owners policy (BOP) or commercial package policy:
- Business Owners Policy: A basic and affordable option for home businesses and other small businesses. Usually includes commercial property, business income and general liability coverages, and perhaps some other basic options (e.g. auto coverage).
- Commercial Package Policy: A more extensive and customizable option for slightly more sizeable small businesses, and those with more particular coverage needs. Still usually has affordable premiums.
An agent specializing in insurance for small businesses will be able to assist in determining which of these policies would be better for a business.