As most small business owners will tell you, some form of liability coverage is required if you want to protect yourself and your employees from potential legal action. However, for business owners who run a sole proprietorship, purchasing insurance is more than a precaution. It’s an absolute necessity. Unlike other types of small businesses, there is no legal division between you as the owner and your business as an entity within the context of a sole proprietorship, so any lawsuit could prove financially devastating. This being the case, how do you as a sole proprietor determine which insurance policies would best serve your business? Gene Marks, Elizabeth Larkin and special guest, Steve Jones, discuss several strategies for finding the right liability coverage for your sole proprietorship.

Executive Summary

1:03—Today’s Topic: What Kind of Liability Insurance Do Sole Proprietors Need?

2:03—Every small business will require some form of liability insurance to legally protect themselves.

3:05—Sole proprietors are a type of small business, in which there is no legal division between owner and the business as an entity. The insurance they’ll require will be dependent upon the needs of their specific services.

5:43—One important question to consider when you’re trying to decide what kind of insurance your sole proprietorship will require is “What kinds of liabilities will my business face, both professionally and in general?”

9:13—The most successful sole proprietors are the ones who fully understand their client base.

10:38—The two biggest mistakes that most small businesses make are attempting to implement a questionable business model and taking on more work than they can handle.

12:30—You as a sole proprietor need to use every available resource you have to determine if there is an actual market for your business.

14:19—On the other hand, you shouldn’t become paralyzed by all the potential risks. If you have doubts, test the waters with a smaller version of your business and modify accordingly.

17:38—To maximize your business’s productivity, take the time to research and invest in time-saving apps.


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Gene: Hey everybody and welcome to Small Biz Ahead. My name is Gene Marks. This is a special episode that we are doing. I am here with Steve Jones. Steve is the Chief Marketing Officer of Small Commercial here at The Hartford. And we’ve got some great things that are gonna come up. We’re gonna talk about business owners and small proprietors as well. And we’re looking forward to that conversation. So, let’s take a break first, we’ll hear a word from our sponsor, then we’ll be right back.

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QUESTION: What type of business insurance do sole proprietors need?

Gene: Alright, we’re back! And this is Gene. So Steve, I’ve introduced you in our opening that you are the Chief Marketing Officer, the CMO of Small Commercial. First off, what exactly does that mean?

Steve: What DOES that mean? Now is my chance to define myself. The Chief Marketing Officer means I’m responsible for all the marketing that comes out of my line of business which is Small Commercial. Small Commercial, now that’s got a lot of different definitions. For us I think it’s easy to think about commercial business as really really big, very very large businesses. Many years ago The Hartford formed a small commercial group specifically to take care of those businesses that had really under 100 employees. Fact of the matter is, most of the customers that we deal with are under 10 employees. So we’re talking very small. And, you know, that actually makes up most of the businesses in America. So we know a thing or two about them.

Gene: Got it. So, commercial itself, when you talk about the products… just so I’ve got this right. Cause my company’s a Hartford customer…

Steve: Thank you.

Gene: We have professional liability insurance. There’s property insurance. There’s general liability insurance. Correct? So, are those the main products? Am I missing anything?

Steve: Now you think about most people start off, they have a need for some kind of liability. Professional liability which kind of takes care of mistakes that you might make or… General liability or worker’s compensation is probably the biggest product.

Gene: Worker’s comp.

Steve: And then commercial.

Gene: Got it. Okay, so, you mentioned that you sell to small businesses and so many, I mean the lion’s share of businesses that you sell to are less than 10 employees. So first of all, I’m gonna knock you out with this fact, okay? Cause I just wrote about this recently. The number that people bandy around is that there are 30 million small businesses in this country. That’s what the Small Business Administration says. And by the way, they define a small business as having 500 employees or less, which to me feels like a giant business.

Steve: That’s a big business.

Gene: That’s a big business. But okay, if they say it’s 30 million. But the real, when you dig into the numbers, the real fact is that around 7 to 8 million of those businesses are the ones that actually employ people. And the remainder of those are NOT employing people. Not that they’re little businesses but they’re not proprietorship. They really are. That doesn’t turn you away as somebody involved in business and you must have a lot of experience dealing with proprietorship.

Steve: We do. And I definitely spend a lot of time trying to understand them and you kinda have to. For those businesses that are larger, there are certain characteristics that are almost universally true and there’s generally somebody who’s in charge of certain kinds of decisions. But for the kind of businesses that you’re talking about… The kind of businesses that make up the majority of businesses in America, they’re all different. One sole proprietor consultant is different than the next sole proprietor consultant. Or maybe not even a legal classification of sole proprietor, but just no employee.

Gene: Right.

Steve: No one is the same. There is always something unique about the business and that actually causes them, as business owners, a little bit of anxiety. Because you can’t cookie cutter me. Because my business is not cookie cutter. And you have got to really work to understand what makes them tick and what you need to do to make them happy. And we’re pretty good at it. It’s one of my great joys is actually doing customer research. I do a lot of it. I sit and listen to customers a lot. I do all kinds of research and it’s fascinating. So I have spent a lot of time trying to understand these really really small businesses.

Gene: And when we talk about proprietors, do you lump in freelancers among with this? How do you define a proprietor?

Steve: Well sure, so, I think for insurance purposes, and there’s no one else in the universe who thinks in insurance purposes, but I’ll talk about that. There IS a difference between someone who might be a freelancer or a contractor. And independent worker, and somebody who owns a business. There’s a whole system in place that tries to deal with 10-99s. Independent contractors like that. We think of anyone who is a small business owner, including those independent contractors because frequently if you’re a 10-99 you have to have your own insurance. Whereas, if you’re a business owner, you’re insuring your business, maybe yourself, and maybe a group of employees and that’s kind of how we think about the difference.

Gene: Got it. My wife is actually losing her job. She’s been a school teacher for like, 20 years. She’s starting up her own business which is gonna be like, a proprietorship where she’s gonna provide basically tutoring to individuals and she’s gonna be looking for some funding to provide it to lower income individuals as well. But she’ll be the sole proprietor. So she is, true story, she’s in the market. She’s gonna need some type of liability insurance because, god forbid if she teaches some kid how to read the wrong way.

Steve: Of course.

Gene: My goodness. So she comes to you. You now know that she’s a sole proprietor. She’s an individual like the other 21 million… 22 million other people like her out there. What are some of the issues that come to your mind about a business like this? Some of the headaches. Things that you think they should be…

Steve: You think about outside of what she’s gotta think of to be successful kind of in her craft. But years of teaching have taught her how to do that. That’s kinda where her expertise is. Everything else she’s about to encounter, she’s fortunate cause she’s got you, one of America’s foremost experts in small businesses.

Gene: Absolutely. And a fantastic husband and father as well.

Steve: But she’s probably not gonna listen to you all that much. She’s likely not going to. You’ve met her, right?

Gene: I know that I’ve met mine.

Steve: You’ve met me. She has to think about so many things now and that world of “what is my exposure?” When you’re that kind of small business owner. What liabilities might I face? Those kinds of questions are often the last ones. Nobody wants to spend their time thinking abut this. She wants to think about her business itself.

Gene: Right.

Steve: Which is why so often, even when you’re that small you wind up recognizing “I’ve got somebody I talk to about my books. I’ve got somebody I talk to about my legal issues.” That’s why somebody does go to an insurance agent to figure out “what do I need?” More and more these days people start that journey online, they start to learn about what they need. And she’s gonna encounter both kinds of liability. Both her professional liability. “What kinds of things am I offering that if I do wrong will create exposure for me?” Or general liability if somebody gets hurt. Those are gonna be her two early concerns and I assume she’s working on it at home.

She might have some property. Business property. A laptop. That’s the kind of stuff she’s gonna want to get covered and she’s gonna want to understand that the good news is as unique as she is she can find the right coverage for herself so that she can just do what she wants to do which is run that company and teach kids. It sounds like it’s a good mission too. Like she’s trying to figure out a way to offer it beyond the norm. That’ a nice social mission.

Gene: That’s great. That’s great. How long have you been at The Hartford?

Steve: I’ve been at The Hartford, which has slightly more than 500 employees, for almost 20 years.

Gene: Okay. So that’s a long time.

Steve: A long time.

Gene: So I’m going to make the assumption that you have met quite a few small business owners and proprietors over the course of your lifetime doing this. What is it about some of the business owners you have met, the successful ones, that struck you as habits that have made them successful?

Steve: I think all of them, the ones who are most successful, quickly realize that the thing that brought me here, if it’s a passion it’s not the thing that ultimately drives my success. It’s everything that surrounds that business. The ones who are most successful work the hardest at communicating. And this one I can’t stress enough and especially as I think we’re talking about these smaller small businesses where every small business owner, when you talk to them, will eventually say “I wear many hats. I got a lot of plates spinning. I got a lot of balls in the air.” They will all eventually get to that. What they can sometimes lose sight of is basic customer service.

Gene: Sure.

Steve: The ones that are the most successful have taken care of everything else about their business so they can focus on getting back to the customer. Setting expectations for their customer. Following up with their customer. That is the trait, that I would say, more than anything else, that drives the successful from the unsuccessful.

Gene: And out of all the businesses that you’ve been dealing with over the years, what mistakes have you seen made where you’re like “geez, this guy. I’ve seen this happen 100 times and this should be something that should be avoided.”

Steve: Two things. One: questionable business model. So trying to sell something that there isn’t a lot of demand for. Or in a place where there isn’t a lot of demand. Where they may have a passion for it but have not factored in “does anybody else care?” And that could be a service, could be retail, could be anything.

The second is, and this is a really fine line so I wanna try and punctuate this correctly and you can help me, is biting off more than you can chew.

Gene: Right.

Steve: So there is a very fine line between ambition and wanting to be even more successful, and taking on too much. One thing that contributes to that is this idea that I DO have to do it all myself and an inability to farm out the things that can be farmed out safely because I cannot trust anybody else. If you find yourself in a position, especially on big things, that you have to do it all, and you can’t farm out even the vacuuming of your office, you’ve got to stop and think for a second. If I’m taking on this big thing and that is where I need my mind focused, what other things can I get rid of, farm out, have somebody else do so I really am freed up to do it? Who can I trust? Well if you find yourself thinking “I can’t trust anybody” that is a time to take a big pause and think about who you can get that you do and WHY don’t you trust anybody.

Gene: So we’ll go back to the first point. Both points are great and I have questions on both but on the first point you’re talking about business models you’re driving a stake in my heart cause we just launched a website about a year ago where on a wing and a prayer and a hunch I thought that it would be a lot more successful. And have a lot more subscribers and visitors to the site than reality is now showing. So now we’re scrambling and trying to change and fix and whatever. My biggest problem is, Steve, is that I don’t have the resources I want for this. You know, like, I, how can I do market testing that I think is necessary? What do you say if a client asks you those kinds of questions?

Steve: It’s funny how creative people get. You know, I know you and I know you’ve done a lot of successful things and I know you have steps you take. You probably are at the place where sometimes you can go on a gut feeling and maybe it burns you every once in a while…

Gene: Sometimes I think I am and then am like “I guess I’m an idiot”.

Steve: That happens to me 6-7 times a day. But I think the best way to go about these things is, it doesn’t take too long to do some basic market scans and if you don’t have those skills you’ve got to find somebody who does.

Gene: Right.

Steve: And I believe in the idea that there’s always a way to verify if there’s a market or an audience if you just slow down. Just take your time a little bit. And if you feel like you don’t have the ability to kinda figure out does this thing have some teeth? Pause and find a way. There are a lot of ways to examine a market. There are a lot of places out there that can help you to figure out for this idea for this kind of website. What sort of traffic might we see? Even some basic Google tools that let you do that kind of stuff. And I’d always say, and this is why I said before, it’s a fine line. You had an idea and you probably will shape the thing eventually to do something for you you’ll just say “that’s it, we gave it a run”.

Gene: We’re working on it right now.

Steve: You don’t wanna give up and you don’t want to avoid all risk.

Gene: Right.

Steve: Do not become paralyzed by the sense of “I haven’t checked enough to see if there’s a market for this.” If you can launch small, launch small. And that’s how you can do a market test. You should be pushing yourself to see “what else can I do? What risks can I take?” So you don’t wanna just stop all growth thinking but I do think that sometimes it’s okay to take a quick pause or find a way to say “Can I launch in a small market? Can I, before I invest in a full blown e-retail model can I try it smaller?

Gene: And this is a CMO of a Fortune 500 company. That’s standard operating procedure for people that are senior marketers right? They don’t jump whole hog into something. They test market stuff, right?

Steve: Yeah, let’s think about that for a second. I’m proud to work for the company that I work for and I think that we’re a forward thinking innovative company. But we are a 200 year old institute. The definition of conservative, right? We have made it this long and been able to deliver for our customers for so long because we are careful. It doesn’t mean we’re slow, we’re careful. The benefit of working for yourself or working for a smaller model is listen the buck stops with you. You described something that you pursued. You thought it was a good idea. It hasn’t quite worked out. You’re not blaming somebody. You’re saying “Okay what did I do? But you’re gonna keep trying.” That is a major advantage. The idea to see something and go after it. Whereas, yes, before I launch anything for this company, I’m very careful. I have a lot of systems that can help me be even more careful about it. And it’s to the benefit of our shareholders and the company that I do that.

For someone who’s out looking to get a small business, the buck stops with them. Two things that I would say: Be careful up front, take your time. Second, do not be afraid to stop. Stop it completely and modify. That is what it’s all about. It’s what you’re describing you deal with this model. Okay, we’re gonna try and make this work. If you see right away it’s not working, I might have to run that through some people and have some meetings to talk about what is and isn’t working. Put together a plan to kinda get after it again. You get to meet with yourself and the folks that you trust around you to do it and come up with a new way a little bit faster than I can.

Gene: The biggest mistake I think I made launching the site was that I did not take, I don’t think I was hard enough on myself. You know when you come up with a great idea? You don’t wanna hear otherwise. And I think that a lot of business owners suffer that cause we’re sort of the glass is half full people so “this is gonna be a winner”. It’s like you almost shut your ears and your eyes to anybody who might be like “well, have you considered this?” Or you might think about that and that would be my two cents to add. And one more thing before we wrap things up. We are talking about proprietorship. You mentioned also about sort of things that people do really well. And that’s that they delegate or they outsource or they try not to do everything themselves. Right? So just as a final question, what is some of your advice to a sole proprietor for maximizing their own productivity?

Steve: I think today more than ever, by the way this is the portion of the podcast that we’ll call The Internet is Gonna Catch On, there are so many time saving and productivity apps. A couple of things come to mind. When you’re a sole prop or a little bit smaller of a company, you don’t have to worry about payroll or HR and those things but you may have to worry about how you manage your customers. How do they book appointments? How do you remember who they are and how to get back to them?

Gene: Sure.

Steve: If I’m a sole prop or I’m a small business if I’m a consultant or something, I still want a customer relationship management system so that I can manage my own time and how to organize myself, who my customers are, what they want and when I should be getting back to them. And if I’ve got ANY kind of appointments necessary, I want an appointment app that’s gonna help me do that. My customers can make appointments with me right from their phone anytime.

Gene: Got it. So technology is key. And finding people that you, if you can afford to, outsource stuff to, is also key. Steve this was great. I appreciate that. So if you’re a small proprietor these are some thoughts, some advice on managing yourself and making sure that you’re productive and just remember that you’re one of the majority that’s out there when it comes to small business owners. So nothing wrong with being on your own and being a proprietor or a freelancer. This has been another episode of The Hartford’s Small Biz Ahead. Again, Steve, thanks for your time and I look forward to talking with you again soon.

Steve: Thanks a lot Gene. I appreciate the time.

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