Sole Proprietors – Business Insurance Recommendations
Large technology companies, acting as sole proprietors, face risks daily. These risks range from oversights to mishaps. Regardless of how strong your safety protocols and employee training courses are, the risks will not go away. Knowing your options when it comes to business insurance is a great way to protect your company in the event a client, employee, or competitor decides to sue you. With a customized sole proprietor business insurance policy in-hand, your financial responsibilities will be minimized to the lowest level. What type of business insurance policies are recommended for a sole proprietor? Is it really necessary to carry all of these policies? Are customized business insurance policies better than traditional policies? Find the answers to these questions and much more in the article below.
Sole Proprietor – What You Must Know
What is a sole proprietor? An individual who owns and operates a business is classified as a sole proprietor. Sole proprietor businesses operate in the same manner as an LLC, INC, corporation, and partnership. The only difference is there is no paperwork involved. Unlike other types of business owners, a sole proprietor is not responsible for filing paperwork like other business owners.
Sole Proprietor – Is Business Insurance Necessary?
All businesses, regardless of the type, size, or number of employees, should be fully insured. While the risks for each business type differ, they are risks nonetheless. Even if you do not have any employees, your business faces hourly risks, which is why business insurance is so important. Do you know your risks? If not, you should start researching to find out what they are as soon as possible. The sooner you know your risks, the easier it will be to customize an insurance policy for your business.
The most common and biggest risk businesses face today is a lawsuit. Believe it or not, lawsuits can pop up out of nowhere. For example, a customer who found your customer service unsatisfactory files a lawsuit against your company without consultation. While this is a rare case, anything is possible in the business world. Being prepared for the inevitable is a great way to handle unexpected and expected third-party claims and lawsuits.
Sole Proprietors Are United With Their Business
Unlike some businesses and owners, sole proprietors are united with their businesses. This basically means if the business is facing a lawsuit, the sole proprietor is facing a lawsuit. Sole proprietors can lose their assets to a lawsuit that was filed against their companies. While this is unfair in the eyes of a sole proprietor, it is lawful.
When you think about the risks a sole proprietor faces on a daily basis, it only makes sense to obtain business insurance. How can business insurance protect a sole proprietor and his/her business in a lawsuit or claim? Lawsuits are financially, emotionally, and physically damaging to all sole proprietors. Not only will an uninsured sole proprietor experience a financial loss but all a physical loss, resulting in a mental breakdown if you are not very careful.
In the same situation, the insured sole proprietor will not experience as many losses. Depending on your business policy, you may be able to get by unscathed (unharmed). The business policy will cover part or all of the monetary court judgment or out-of-court settlement. If the lawsuit was regarding a workplace or customer injury or property damage, all medical expenses should be covered as well. Of course, this will depend on the type of coverage included in your business policy.
Below, a list of recommended business insurance policies for sole proprietors.
Cyber Liability Insurance For Sole Proprietors – Should Be Included In Business Policy
Depending on the type of business you own and operate, cyber liability coverage should be part of your business insurance. This definitely applies to technology, computer repair, and IT consulting companies. Too many sole proprietors opt to bury their heads in the sand when it comes to data breach risks. Whether you own a type of business listed above or not, you most likely store your customers’ data on a computer system. Today, Canadian sole proprietors and other business owners rely on the Internet and some type of computer software to manage their inventory, debits, and customer data. With this said, the risk of a data breach is looming overhead 24 hours a day, seven days a week just because you opt to utilize the Internet for your business operations.
What type of insurance coverage can fight against the financial loss associated with data breaches? Cyber liability insurance is and always will be the best tool for fighting damages caused by a data breach. Since you are utilizing the Internet for your business operations, you must know there are risks involved. For example, an online hacker tapped into your computer system and retrieved all of your business data, resulting in a wall-to-wall data breach. The data breach exposed your customer and other business data, leading to a mass lawsuit against your company.
With cyber liability coverage, financial responsibility will be drastically minimized. You will be able to operate as usual even though your company is facing a mass lawsuit associated with the data breach. This is a diverse policy, as it protects against third-party lawsuits and first-party security breach damage. As soon as you discover the data breach, you will need to file a claim against your cybersecurity policy. From here, you will be required to notify your customers, financial institution, and employees.
Errors And Omissions (E&O) Insurance – Coverage For Damage Caused By Oversight And Mishaps
E&O also referred to as professional liability insurance, is a must-have for all Canadian sole proprietors. This policy covers third-party lawsuits and claims associated with mishaps and oversights. While it may be difficult to admit, you have received reports of mishaps and oversights, most of which are minimal, resulting in minimal damage. For example, a security guard forgot to conduct a thorough walk-through of a client’s professional office building, resulting in a theft of expensive medical equipment. Who do you believe will be responsible for this oversight? You are right, your company will be the sole responsible party.
If your business is covered under an E&O policy when the mishap was reported, you will not be forced to pay out-of-pocket to cover the millions of dollars in damage. Depending on the policy coverage amount, you may need to cover a small or large fraction of the expenses. In some cases, companies have reported not paying a cent out-of-pocket when covered by E&O insurance.
Some Canadian territories and provinces require sole proprietors to obtain and carry E&O insurance. If you are unsure about your legal responsibilities, you can contact your local insurance regulator. This professional will help you determine if it is your legal responsibility to obtain an E&O policy. The laws are different in each territory and province. You may be required to have at least $2 million in E&O coverage. Some laws require more while others require less.
Knowing this information will jumpstart your effort in obtaining the right E&O policy for your company.
Worker’s Compensation Insurance – A Legal Business Requirement In Canada
While you want to protect your company to the fullest, you also need to protect your employees in the same manner. In Canada, all business owners are required to obtain and carry worker’s compensation insurance. However, this only applies to companies with employees. If you employ one or 100 employees, worker’s compensation coverage is a legal requirement for your company.
What exactly is worker’s compensation insurance? This is a diverse policy that protects sole proprietors and their companies and employees. The policy coverage workplace accidents that result in bodily injury and property damage. In addition to this coverage, worker’s compensation insurance protects workers in the event they are unable to return to work. To qualify for this coverage, a worker’s compensation physician must provide an injured worker with a medical excuse associated with a workplace injury.
Once the injured worker is deemed unable to return to work, the company must file a claim against its worker’s compensation policy. In return, the insurer will investigate the claim to determine if it is fraudulent or legit. Once the claim is processed, the injured worker will be qualified to receive worker’s compensation payments. It is not unusual for some Canadian provinces to cap worker’s compensation benefits. The benefit amount will depend on these caps. For example, a Canadian territory caps worker’s compensation benefits at 60 percent of an injured worker’s weekly wage prior to the workplace injury. Before the workplace injury, the injured worker was earning $1,000 per week. If the worker’s compensation benefits are capped at 60 percent, the injured worker will receive $600 per week.
Worker’s compensation also covers an injured worker’s health care expenses, including prescription medication, rehabilitation (physical therapy), inpatient medical care, and outpatient medical care. Without the worker’s compensation, your company would be responsible for all of these expenses. Imagine you were not covered when the accident was reported, you and your company would be at risk of losing everything.
Business Owner’s Policy (BOP) – Sole Proprietors Qualify
BOP insurance is unique, as it is not available to all companies. However, it is available to sole proprietors who own and operate computer repair, web design, and IT consulting firms. If your company falls within one of these categories, you qualify for BOP insurance. Why is this policy so important? Should I or should I not carry BOP coverage? Well, it really depends on your exposure risks and the type of business you own. For example, sole proprietors who provide work-from-home writing services, BOP is not recommended. In this case, it would serve you better to have a traditional general liability insurance policy.
If your company qualifies for BOP, you will need to determine if it would pay off in the long run. However, this policy is highly recommended for sole proprietors who provide computer repair, IT consulting, and web design services to Canadian consumers.
Sole proprietors who operate brick-and-mortar or land-based businesses in Canada should definitely consider BOP coverage. It cannot be stressed enough the importance of this policy for these businesses. A BOP covers third-party claims and lawsuits associated with first-party (business) property damage, third-party bodily injury, and copyright infringement.
It is not unusual for land-based businesses to serve hundreds of customers daily. These companies rely on their customers for nearly every aspect, especially funding. Without consumers, no company would survive, which is why it is crucial to carry a BOP. A customer entering your land-based computer repair shop, slips on an entrance rug, resulting in a large laceration on the kneecap. The client is rushed to the hospital for medical care. After an extensive evaluation, the attending physician decides that the laceration should be sutured to prevent infection and speed up the healing process. At this point, the injured customer has already experienced fear, pain, and an unexpected injury. Who is responsible for this damage?
It really is no big surprise that your company is the responsible party. The accident could have contributed to the position of the throw rug.
Slips and falls are commonly reported in land-based businesses daily. Between 2016 and 2017, emergency rooms across the country reported approximately 654,000 injuries related to “accidental” falls. All of these falls resulted in a trip to the emergency room, like the aforementioned client.
Canadian health care costs are continuously increasing. If the injured client’s medical bills total up to $10,000 now, just imagine what they will be a year from now. With BOP insurance, you may get by paying nothing or a minimum. You must understand the importance of this policy before diving in headfirst. The more you know, the better off you and your company will be in the long run.
Contact Us Today!
Need to protect your business as a sole proprietor? If so, look no further than ProfessionalsCoverage. These sole proprietor business insurance experts can help you customize a policy that will match or exceed your insurance needs. We are available during business hours to step up to the task. Contact us today to learn more about information technology business insurance needs or request help with policy customization.
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Helpful resources for IT professionals and their companies
- Why do I need IT insurance for my business?
- What types of insurance do I need for my IT business?
- Will I be legally required to get insurance to operate as an IT company?
- How do I get the cheapest rate possible as an IT business?
- As an online business, what liability insurance coverages will I need?
- How do I handle a lawsuit that is frivolous or completely fake?
- Want to cancel insurance for your IT Company? Here are reasons to consider!
- Using a change control board for tracking.
- Acceptable use policy – Every business needs it and here is how to write one!
- Want to start an IT consulting business? Awesome! Here is a small guide!
- How much insurance will I need to operate my tech company?
- I am a sole proprietor, how will business insurance work for my IT business?
- How do I choose the right legal corporate structure for my technology company?
Other types of IT Businesses we insure:
If your specializing is not mentioned below, have no worries. Our insurance markets can provide liability coverage for the majority of information technology related businesses.
- Telecom Cabling Installers Insurance
- Network Designer Insurance
- Cyber Security Insurance
- Business Intelligence Insurance
- Data Analysis Insurance
- Database Administration Insurance
- Web Hosting Service Insurance
- Network Security Company Insurance
- Mobile App Developers Insurance
- IT Staffing Agency Insurance
- IT Project Management Insurance
- IT Consultants Insurance
- Data Scientist Insurance
- Computer Repair Business Insurance
- Digital Marketing Agency Insurance
- SEO & SEM Consultants Insurance
- Software Developers Insurance
- Technical Writers Insurance