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Understanding sole trader business insurance

Business insurance can be a tricky area to get your head around, especially if you’re a sole trader. The rules around insurance policies can vary depending on your business type and whether you have employees. 

As your business evolves and grows – or at the very least on an annual basis, it’s important to review your policies to make sure you have the right cover for protection. 

As a sole trader you have the advantage of making all the business decisions and have control of your assets. But ultimately this also means you’re the one legally responsible for any losses. Let’s breakdown insurance cover to help you understand what to look for when researching covers and policies

Back to basics

Being a sole trader, you’re self-employed, running a business as an individual – not a company. You are therefore not considered to be a worker. What this boils down to is you cannot take out workers compensation as a sole trader to cover yourself in the event of an injury.

As a sole trader you can employ staff on a part-time, casual or full-time basis. And if you do hire staff it’s mandatory to provide workers compensation for them. But where does this leave you should you suffer a workplace accident which causes an injury to you? 


Imagine you’re going about your business and accidentally trip and break your arm. Suddenly, you’re in a position whereby you can’t drive, unable to operate machinery or use a laptop. Quite simply your business will come to a grind.

Personal accident insurance may help. It is designed to provide insurance protection if you were to suffer an injury or disability (permanent or non-permanent) to help reduce any loss of income since the accident and future income loss. It may also provide compensation to your nominated beneficiary in the event of your death. 

What happens after years of being on the tools if you develop a chronic illness – one which prevents you from working and operating your business? That’s where having an income protection policy can assist. It may help cover you should you suffer from a serious illness or injury following an accident – whether in the workplace or outside of work. While this is similar to personal accident insurance, income protection goes a step further and covers you for illness. 

If you’re in business to give advice or provide a service, consider professional indemnity insurance. Why? If you or an employee happen to do something – or fail to do something as part of your service, which results in a customer being impacted physically or financially, it may give you peace of mind if legal action is taken.

In short, the cover can help protect your professional reputation and clear your name. As a sole trader, consider professional indemnity irrespective of whether you have employees. 

Do you operate a bricks and mortar business whereby employees, customers or the general public visit? Perhaps you deliver products or hold offsite events? Everyday you’re at risk of public liability and that’s because accidents can happen at any time.

This type of insurance may help cover legal and court cost should a member of the public have an accident, suffer illness or there’s damage to a property in carrying out your work. 

Fire / property damage insurance may protect your building and contents from a range of natural disasters and money insurance may help provide compensation should a robbery take place. 

When looking at insurance policies it’s important you cover all areas that can impact you and your employees if you have staff. Remember, accidents can happen at any time – without notice, so having the right level of protection can make all the difference as to how you come out at the other end and the longevity of your business.

Need to protect your business?

Having the right insurance is a critical part of your business plan. An insurance broker can offer a range of insurance solutions for your business or help you compare insurance cover to ensure
you’re on the right deal.

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Disclaimer: The guidance provided is general in nature. The guidance is factual information only and is not intended to be financial product advice, legal advice or tax advice and should not be relied upon as such. The guidance has been prepared without taking into account your personal objectives, financial situation or specific needs. Before acting on any guidance you should consider the appropriateness of the guidance having regard to your objectives, financial situation and needs. Before making any decisions, it is important for you to consider these matters and to seek appropriate financial, legal, tax, accounting and other professional advice. 

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