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Sole trader insurance

You have 3 insurance options when it comes to sole trader insurance, to protect you and your business: Income protection, personal accident insurance or business insurance.

Some 60% of Australian business owners are sole traders. As a sole trader, you have the freedom to be your own boss and pursue your true passions. But it also means you bear the brunt of a range of responsibilities, including workplace safety and insurance.

What you need to know

  • Sole trader insurance is necessary for many self-employed people who run their business as an individual. This includes tradies, estate agents, hairdressers, market stallholders and home-based workers.
  • Income protection is one cover to think about. It can offer a steady stream of replacement income if you are unable to work for extended periods of time.
  • Public liability insurance and professional indemnity insurance can protect you from a range of costs if you deal with the public. Without insurance in place, these expenses could be very damaging.

What insurance does a sole trader need?

Income protection

Income protection

  • Provides up to 70% of your income if you become temporarily ill or injured and are unable to work.
  • It's often especially helpful for sole traders who may not be protected by workers' compensation.
  • Some policies include total and permanent disability (TPD) cover as well if you need to permanently stop work and premiums are usually tax-deductible.
User

Business insurance

  • A business insurance policy can include professional indemnity insurance, which provides protection for anyone who dispenses professional advice. It's often compulsory.
  • Liability insurance protects you for legal fees and compensation if you're accused of negligence and you need to defend yourself. Costs may arise from property damage after an accident, or medical fees if you cause injury or illness to others.
  • Public liability and professional indemnity insurance is compulsory for certain professions. Without it, you might not be able to operate with a full licence.
Fracture

Personal accident insurance

  • Personal accident insurance is a cheaper alternative to income protection that only covers accidental injury – not illnesses.
  • Unlike income protection insurance, there are no medical questions or tests involved at application.
  • A lump sum is often paid in the event of permanent disability or death.

Compare your sole trader insurance options

Click each to explore the policies you can apply for as a sole trader:

Income protection Personal accident insurance Business insurance

Finder survey: What prompts Australians to take out income protection insurance?

Response65-74 yrs55-64 yrs45-54 yrs35-44 yrs25-34 yrs18-24 yrs
None of the above1.14%2.33%5.7%5.08%3.67%2.06%
Getting older (but not retiring)0.57%1.16%3.11%2.03%0.92%
Retirement0.57%0.58%1.55%1.52%0.92%1.03%
Starting a new job0.57%1.74%2.59%4.06%3.21%2.06%
Starting my own business0.57%0.58%0.52%1.02%1.38%1.03%
Buying a home1.74%3.63%5.08%3.21%1.03%
Moving home0.58%1.04%0.51%0.92%1.03%
Having a baby2.59%4.57%5.05%2.06%
Getting married1.04%1.52%2.75%1.03%
Buying a car1.38%
Your children moving out of home0.46%
Starting university education1.03%
Source: Finder survey by Pure Profile of 1110 Australians, December 2023

Compare income protection brands

Name Product Maximum Monthly Benefit Maximum % of Income Covered Maximum Benefit Period Average Claims Acceptance Rate Average Claim Time Sum Insured Apply
TAL Accelerated Protection Income Protection
$30,000
Up to 70%
Up to
Age 65
Data not available
1.3 months
$1,305 million
Get up to 70% of your income covered with flexible short and long term benefit periods.
AAMI Income Protection
$10,000
Up to 75%
Up to
5 years
Data not available
2.8 months
$222 million
Take out a new AAMI Income Protection policy and get $100 eGift card after your first 4 months of cover. T&Cs apply. Ends June 30, 2024.
ahm Income Protection
$10,000
Up to 70%
Up to
5 years
Data not available
Data not available
Data not available
Get 10% off your first year of ahm Income Protection when you apply by 1 July 2024. T&Cs apply.
NobleOak Income Protection
$30,000
Up to 70%
Up to
Age 65
97%
Data not available
$65 million
With NobleOak, you can lock in a policy with a benefit period covering you up to the age of 65. Cover limits may go as high as $30,000.
Medibank Income Protection
$12,500
Up to 70%
Up to
5 years
Data not available
Data not available
Data not available
Save 10% on your first year of Medibank Life Insurance when you apply by 1 July 2024. T&Cs apply.
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Personal accident insurance


Business insurance

How much does professional indemnity insurance cost?

ProviderOccupationExcessQuote (monthly)
DUALAccountant$2,500$51.79
DUALAdministrator$0$52.02
QBEAdministrator$0$57.06
QBEAccountant$1,000$71.50
VeroPlumber or carpenter$2,500$95.56
VeroAccountant$2,500$114.81

Quotes are accurate as of March 2023. Based on a small business owner based in NSW who earns $150,000.

Get a personalised liability and professional indemnity insurance quote


Gary Ross Hunter's first-hand experience

Insurance director: What sole traders should keep in mind

There are some insurance covers that are simply 'must haves' like Public liability, General property, Contents & Stock and Workers' compensation. Then there are others that are highly advised, including most business insurances like Business interruption insurance and Cyber insurance.
When it comes to insurance, the biggest mistake a sole trader can make is not having enough 'sum insured' – that is, not having enough insurance coverage to reflect today's replacement costs. Being underinsured is a huge business risk, which is why sole traders should seek advice from a professional insurance adviser.
— Tim Stanford, Director, FIS Insurance Services.

What types of business insurance does a sole trader need?

These are the types of business insurance to consider if you're a sole trader:

  • Public liability insurance. When there's any chance of people having an accident on or because of your business, public liability insurance is a must. This can help with compensation and legal fees if someone trips and falls on your business premises or injures themselves in your restaurant.
  • Professional indemnity insurance. Professional indemnity insurance provides protection for anyone who offers professional advice, such as an architect designing building plans or an accountant. If you're a sole trader who gives advice to clients, seriously consider professional indemnity insurance in case that advice causes problems. This type of cover can include acts of defamation and the mishandling of customer data. It can cover both claims with and without merit.
  • Workers' compensation. If you're a sole trader and you have employees, you need to take out workers' compensation for them. This is a legal requirement in Australia.

Why is sole trader insurance important?

Unlike most employees in Australia, sole traders are not eligible for workers' compensation. Not having access to work cover means that if you're injured on the job, you won't have access to any form of financial compensation.

Why can't sole traders get workers' compensation?

A sole trader doesn't qualify for workers' compensation because, in order to be eligible, you must be employed by another person or company.

When you're their employee, they're required to take out workers' compensation on your behalf.

How do I get covered for injuries when I'm a sole trader?

Without workers' compensation, there are 2 main ways you can get covered for injuries you may sustain.

Fracture

Personal accident insurance

The first, cheaper option is personal accident insurance, which will provide you with a lump sum when you have an accident resulting in an injury and can't work. Personal injury insurance comes in a few forms, including standalone accident cover and total and permanent disability insurance.

Income protection

Income protection

The other stronger form of cover is income protection, which can also help make up for lost income when you are unable to work. The big difference between income protection and personal accident insurance is that income protection will also cover you when you get sick.

3 things to keep in mind with sole trader insurance

When considering sole trader insurance there are a few important factors to look at:

1. Waiting period

Business expenses insurance has waiting periods anywhere from 14 days to 12 months. The waiting period determines how long you will have to wait to receive the benefit after you make a claim. The shorter the waiting period the higher your premium.

2. Features and limitations

No 2 policies are the same. Make sure you understand the features and limitations of your policy. Take note of how things are defined to avoid any misunderstanding and disappointment when making a claim.

3. Flexibility

Another important factor that you might want to check is how flexible your policy is. For example, some premiums increase in-line with inflation, in which case you can avoid being underinsured.

How much sole trader insurance do I need?

To help you answer this question, ask yourself:

  • Do you have funds you can readily access? Having some savings only apportioned to your business can provide you with a much-needed safety net. It means you might not require as much cover.
  • Do you have plans to expand your business? If you're planning on expanding your business in the future, you need to ensure that your company can continue to grow without you.
  • Do you have loans or debts? While sole trader insurance is for protection of your business's fixed costs, it can also ease the financial strain for you in times of need. It allows you to continue to pay your ongoing business expenses.

Why you can trust Finder's income protection insurance experts

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Frequently asked questions

Written by

James Martin

James Martin was the insurance editor at Finder. He has written on a range of insurance and finance topics for over 7 years. James often shares his insurance expertise as a media spokesperson and has appeared on Prime 7 News, WIN News, Insurance News, 7NEWS and The Guardian. He holds a Tier 1 General Insurance (General Advice) certification and a Tier 1 Generic Knowledge certification, both of which meet the requirements of ASIC Regulatory Guide 146 (RG146). See full profile

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