There are many benefits to working as a sole proprietor. Establishing your business is often simple, as there’s just one person you need to worry about (yourself!). You also have the flexibility of being your own boss and the advantage of getting to keep all the profits.
This is not to say that running a business as a sole proprietor is easy. You still face many of the challenges that other small businesses do, but without help from anyone else. Everything is on you, and if something goes wrong it’s your responsibility alone to fix the problem.
So what happens when a client is unhappy with the work you’ve done for them? If a mistake you’ve made or a deadline you missed has caused them to lose money, they may decide to seek compensation through a lawsuit.
This is where sole proprietors, who offer professional services or advice may need support from Professional Liability insurance to help protect their livelihood and professional reputation.
What is Professional Liability insurance?
Professional Liability, also known as Errors and Omissions (E&O) insurance, protects your business against claims of negligence, misrepresentations, or mistakes. Professional Liability claims are typically made by clients who allege some form of financial damage as a result of your services, products or employees.
This form of coverage helps protect sole proprietors and other small businesses against claims of:
- Error or mistake
- Breach of contract
- Undelivered services
- Missed deadlines
These types of claims are common across a variety of industries and occupations, from architects to yoga instructors.
How Professional Liability insurance can protect sole proprietors
Small businesses of all sizes purchase Professional Liability insurance to protect business. However, sole proprietors may especially benefit from the protection that a policy can provide.
When you work alone, as sole proprietors do, the responsibility for all parts of the business fall on your shoulders. This sometimes means that business liabilities become personal liabilities. Lawsuits targeting your professional reputation call you out by name and legal expenses can quickly diminish your savings (both business and personal).
Professional Liability insurance can help remove some of these burdens. A policy helps you defend yourself in court by paying attorney’s fees, court costs, settlements, and judgements. This creates a safety net for your financial accounts, helping you stay in business and protecting your personal savings. This protection also extends to meritless claims, which can be just as costly to defend against.
What types of sole proprietors might need this insurance?
Professional Liability insurance is typically purchased by individuals and small businesses who provide professional services to clients or customers. This typically includes common white-collar occupations like accountants, lawyers, engineers, and consultants.
However, there is a wide range of professionals who might need Professional Liability insurance. People like personal trainers, home health care workers, and even event planners may also consider having a policy.
If you’re unsure if Professional Liability insurance is right for you, it may help to think about the type of work you do. If it involves any of the following, you might want to consider a Professional Liability policy:
- You offer clients or customers specialized services.
- You give your clients or customers advice that they rely on the make decisions
- You represent your clients’ or customers’ needs on their behalf
Is Professional Liability insurance ever required by law?
In some instances, sole proprietors may be required by law to have a Professional Liability policy.
Some states require sole proprietors and other small business owners in certain professions to have Professional Liability insurance before they can work in the state. Additionally, some professional associations require their members to have minimum levels of coverage to become licensed or otherwise practice their profession.
Is Professional Liability the only protection that sole proprietors may need?
Depending on your occupation, there may be other risks sole proprietors face that Professional Liability insurance does not cover. Other common forms of insurance that you consider include:
- General Liability – Protects you against any claim by an outside party regarding injury or damage to their property. In these instances, your policy will cover your legal expenses as well as your cost to replace or remedy the situation.
- Business Owner’s Policy – A convenient and affordable way for small business owners to protect against several of their most common exposures. These policies combine General Liability insurance with other types of coverage, such as business interruption and business property damage.
Find Professional Liability insurance for sole proprietors
Professional Liability insurance can help sole proprietors protect their business, so they can focus on running it instead. With that in mind, BizInsure has made it simple for sole proprietors and small business owners of all types to find the coverage they need.
We’ve removed the hassle from buying business insurance, by using technology to simplify the process and offer competitive pricing from top-tier insurers. You could have a Professional Liability policy in 10 minutes (maybe even less!) to help protect your growing business.