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.
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As a sole trader, you have the freedom to be your own boss and pursue your true passions. It also means you bear the brunt of a range of responsibilities, including workplace safety and insurances.
Sole trader insurance is worth considering when:
- You get sick or have an accident. Income protection can provide a steady stream of replacement income if you're unable to work for extended periods of time. Personal accident insurance can help if you have a serious accident.
- You deal with the public. Whenever people are involved, the chance that you could be held responsible for accidents or damage they have increases. Public liability insurance is crucial.
- You have employees. If you employ workers, you're legally required to get workers compensation.
What insurance does a sole trader need?
- 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.
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.
- Capital benefits are often paid in the event of permanent disability or death.
- 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.
- Public liability and professional indemnity insurance is compulsory for certain professions. Without it, you might not be able to operate with a full licence.
Compare your sole trader insurance options
Click each to explore the policies you can apply for as a sole trader:
Compare income protection brands
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
Personal accident insurance
What types of business insurance does a sole trader need?
There are a few types of business insurance you should strongly consider if you're a sole trader:
- Professional indemnity insurance. Professional indemnity insurance provides protection for anyone who dispenses professional advice, such as an architect designing building plans or a lawyer. If you're a sole trader who gives advice to clients, seriously consider professional indemnity insurance in case that advice causes problems or damage.
- 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.
- 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.
If you have any staff working for you, you need to take out workers compensation on their behalf. You should also look for other forms of financial protection for yourself and your business, such as income protection insurance.
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.
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. It will not cover you if you get sick, only injured.
The other more robust 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.
Things to keep in mind when applying for sole trader insurance
When considering sole trader insurance there are a few important factors to look at:
- 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.
- 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.
- Flexibility. Another important factor that you might want to check is how flexible your policy is. Make sure it increases with CPI to avoid being underinsured.
How much sole trader insurance do I need?
This is perhaps one of the most common questions people have. While the answer to this question varies from person to person, you can calculate your needs by asking 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 and mean that you don't require as much cover as someone who is without savings.
- Do you have plans to expand your business? If you're planning on expanding your business at any time in the future, you need to ensure that your company can continue to grow without you at the helm.
- Do you have loans or debts? While sole trader insurance is for protection of your business's fixed costs, it can also lessen the financial strain for you in times of need. It will allow you to continue to pay your ongoing business expenses.
Sole trader insurance gives you the assurance of being able to continue your business even if you fall into hard times. Why risk losing it all when you can have something to protect your lifelong investment with sole trader insurance?
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