Do I Need Insurance as a Sole Trader?
Sole traders make up a large proportion of businesses in Australia. And whilst the business structure might seem a bit less complex than companies and trusts, it doesn’t necessarily mean that insurance is any less important. In fact, as a sole trader, your assets are at risk if things go wrong in your business, so you must have the right protection in place.
The insurance that you might need as a sole trader will depend on a range of factors such as:
What your business activity is and how you operate
Where you are located
Whether you have any employees, apprentices etc. working with you
What your business assets are; and
Your individual circumstances
Remember – a sole trader status depends on how your business is structured, not just whether you’re a solo worker. You can be a solo worker within a company (pty ltd) structure which means you’re not a sole trader and will have different insurance needs. You can also be a sole trader with employees (which sounds contradictory!).
Of course, there may be types of insurance that could be beneficial for you depending on your circumstances, that we haven’t listed here. The best option is to have an obligation-free chat with us about your work and circumstances so we can provide you with tailored information. Or you can visit our business insurance page for more info!
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Public Liability Insurance is highly recommended for most businesses. Regardless of how safe you and your business are, accidents can still happen and being sued can be extremely expensive.
Public liability can help protect you when there is injury (including emotional or death) or damage to the property of clients, customers or the public, by providing cover for:
Investigation costs
Legal fees (including to defend yourself if you’re not at fault)
Damages if you’re sued and found negligent
Fines and penalties
Medical expenses for the injured person
If you work from home or have limited/no revenue, you may still benefit from having Public Liability insurance, as you can still be sued as a result of actions off-site and regardless of your revenue.
However, as your risks are likely to be lower it’s important to talk this through with your insurer or broker to ensure you’re not paying for cover you don’t need.
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Damage or loss of your physical assets can have a huge impact on your ability to continue working, your financial security or even the viability of your business.
Depending on your circumstances, you may be best placed with a business pack to cover multiple assets or separate policies.
We can assist with insurance for:
Motor vehicles (personal, commercial and fleet) including trucks, tractors, trailers etc.
Building (owners)
Contents and stock
Portable equipment including phones, laptops and tools
Glass – this is often a requirement for businesses who lease a property
Plant and equipment that are kept on-site, including electrical and machinery
Money – loss, theft or damage to money belonging to your business at your site, in transit or at home
Employee fraud – property or money that’s lost as a direct result of employee fraud
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Professional Indemnity insurance is important for sole traders who provide professional advice and/or services and can protect you against accusations of negligence. Some examples of sole traders who might benefit from Professional Indemnity insurance include (but are not limited to) accountants, allied health professionals, architects, engineers, marketing consultants and veterinarians. If you’re unsure, please contact us to have a chat about your business. We can also recommend an industry-specific association that may be able to provide you with a lower-cost policy.
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The rate of hacking and data breaches is increasing in frequency and severity for businesses. A business with an online footprint – website, emails, online payment systems, ordering supplies online, cloud storage systems etc. can be at risk.
Cyber insurance can include:
Business Interruption losses: financial loss you may suffer as a result of a cyber attack if you are unable to operate or need to limit operations
Cyber extortion: if hackers are holding your systems or data ‘hostage’ including hiring negotiation experts, covering extortion demands and preventing future threats
Electronic data replacement: the cost of recovering or replacing your records and other business data
Legal expenses, damages (if you’re sued), fines and penalties (even when breaches are unintentional, government regulators can fine for breaches of privacy and confidentiality legislation)
Notification and monitoring expenses: Cover the costs of notifying customers of a security breach and monitoring their credit card details to prevent further attacks
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If you are a sole trader with employees, you are legally required to hold a workers compensation policy for your employees, unless you qualify for an exemption. This may also apply to subcontractors depending on the circumstances of their engagement with your business. Each State and Territory has different Workers' Compensation so the legislation and requirements vary.
Workers compensation insurance provides financial cover for employees who are injured at work or become sick because of their work. This might include their wages and/or costs of medical treatment and rehabilitation.
At Strive Insurance Services we can assist with ACT and WA workers compensation or provide information about who you can contact in your relevant State or Territory for further information about your obligations.
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Personal Accident & Illness Insurance can be an important policy for sole traders, essentially being the equivalent of workers' compensation, but more tailored to individual circumstances and not mandatory.
There are varying levels of cover that can provide income for you if you are injured or become ill and are unable to work. You can choose to be covered by injury or illness that occurs at work, outside of work or both. Policies can also provide cover for hospital and medical expenses and medical evacuations if you travel. It’s important to understand the exclusions of these policies including the wait times before payments are received so you can manage your finances with this knowledge in mind, to protect your family and/or personal assets.
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Income protection, Total Permanent Disability (TPD) and Life Insurance are complex and personalised types of insurance. Some people have standard policies within their super funds, whilst others take out more tailored policies. These policies can be expensive but can also be very important if you have financial obligations (mortgage, dependents/spouse etc.) that would be impacted if you pass away or are unable to work for some time, or permanently. These insurances can be especially important for sole traders who don’t have access to workers' compensation insurance.
As this is a specialised field, Strive Insurance isn’t licensed to assist with income protection or life insurance, however, we have had great experiences with the advisor who does our own – Mark Burgess from MB Advice
Ph: 0478 171 656 or mark@mbadvice.com.au
We can also work with Mark to ensure across Personal Accident & Illness, Income Protection, TPD and Life Insurance you have the cover you need for your personal circumstances without duplicating or paying for what you don’t need.