What Insurance Does a Sole Trader Need?
Insurance Requirements for Sole Traders
As a sole trader, you wear many hats—you’re the boss, the worker, the accountant, and often the marketer too. With so much responsibility in the day-to-day running of your business, it’s important to consider protection against risks that may threaten your business’ livelihood. Whether your small business is just starting or you’ve been operating for years, understanding what insurance is needed as a sole trader, especially as your business grows, is essential.
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Why Might Sole Traders Need Insurance?
Insurance isn’t just a box to tick; it’s your first line of defence against unexpected events that could disrupt your business. Without the safety of a larger organisation behind you, even minor accidents may have major consequences. Insurance offers the security business owners need to navigate these challenges, whether it’s a lawsuit from a dissatisfied client, damage to your tools or an illness that keeps you from work. Putting legal requirements aside, insurance as a sole trader provides peace of mind that your business will continue through unexpected events. This gives you more time and energy to put towards the growth of your business, with the knowledge that you’ll be protected against common risks.
Types of Insurance Sole Traders May Need
Public Liability Insurance
This policy may cover you if a third party suffers injury or property damage because of your business activities. Whether you work from home, on-site or in a public space, accidents are known to happen. Public liability can protect you against the financial implications of these accidents.
Professional Indemnity Insurance
For sole traders who provide advice or professional services, this coverage is highly recommended. Professional indemnity may cover legal costs and damages if a client claims your advice caused them financial loss.
Personal Accident and Sickness Insurance
As a sole trader being able to rely on your ability to work is everything. If you happen to get sick or injured, personal accident and sickness insurance provide financial support throughout this period. This is a particularly important coverage as sole traders don’t have paid sick leave.
Product Liability Insurance
If you manufacture, sell or distribute any products, product liability insurance is highly recommended. This may cover you in situations where a product causes harm or injures someone.
Tools and Equipment Insurance
For tradespeople and similar businesses, tools and equipment are a direct connection to your business’s ability to operate. Tools insurance may cover replacing or repairing tools if they’re stolen, damaged or lost.
Business Insurance Pack
For comprehensive protection, a business insurance pack might be the ideal solution for sole traders. This pack can safeguard your business’s assets, including tools, equipment, and premises, against damage from events like fires, storms, vandalism, and accidental damage. It typically also includes public and product liability coverage, providing peace of mind as you focus on growing your business. Additionally, you can customise your coverage by adding options such as glass, money, business interruption, and marine and cargo insurance.
Cyber Insurance
Cyber liability insurance can protect you against the financial impact of data breaches, hacking and other online threats. If your business relies on technology, even if it’s only for one aspect of your business, it’s worth considering this coverage.
How to Choose Suitable Insurance
When choosing suitable insurance coverage it’s important to look at the risks and needs specific to your business and how they may change in the future. Look for policies relative to certain risks and industries while comparing these options to stay within budget. It’s advisable to read the Product Disclosure Statement (PDS) to understand what may or may not be covered by your chosen insurance. If unsure, a broker may help guide you through the process.
Business insurance is a vital safety net for sole traders, protecting your business from unexpected risks and ensuring your livelihood is secure. From public liability to professional liability insurance, discovering suitable coverage for your business can be an important step. For tailored advice and quotes, contact Smart Business Insurance today. With over 800 5-star reviews^ and 11 years of experience, we can guide you towards a suitable insurance solution for your business.
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FAQs
How much does insurance for a sole trader cost?
The cost varies depending on the type of coverage, your industry, and the level of risk. It’s advisable to get a quote from an insurance professional who is familiar with your circumstances.
Can I operate without insurance?
While it’s not legally required, operating with suitable insurance is an appropriate choice for sole traders, especially when unexpected accidents or legal costs occur due to unforeseen circumstances.
What is the difference between public liability and professional indemnity insurance?
Public liability covers injury or damage to third parties, while professional indemnity covers claims related to professional advice or services. Read our comprehensive guides to learn more about who needs professional liability, compare professional liability or find answers to commonly asked questions on this topic.
What should I do if I need to make a claim?
Contact your broker or insurer, provide all necessary documentation, and follow their instructions.
^Based on reviews sourced from Google, Facebook, and ProductReview.com.au
