3 Insurances Australian Sole Traders Must Have

There are many of reasons for wanting to be a sole trader – it is the simplest and cheapest business structure.

Perhaps you are a Management Consultant or Recruitment Consultant working from home. Maybe you have got a job on the side as a Interior Designer. Or you could be a Landscaper with a successful local business.

Did you know that sole traders are the most common of all businesses? According to Australian Small Business and Family Enterprise Ombudsman (ASBFEO) 61% of all Australian businesses are sole traders.

A sole trader is an individual operating a business in their own name and not via a company or trust. It is the simplest and cheapest business structure. If you decide to operate your business as a sole trader, it is critical to ensure you have the right insurance in place, particularly given that you are legally responsible for all aspects of the business.

What insurances do sole traders need?

The type of insurance cover required will depend on the nature of the business the sole trader is conducting. For example, if the business owns a commercial property, it should have building insurance. Alternatively, if the business leases a building then it will require contents insurance but not building insurance. If the business owns a car then it may also need motor vehicle insurance.

Even if you are operating as a sole trader, every business with staff is required to have workers’ compensation insurance. Whilst it may not be compulsory every sole trader should have Public Liability insurance and depending upon nature of services required may also need a Professional Indemnity insurance.

1. Workers’ Compensation Insurance

Workers’ Compensation insurance provides cover when staff are injured or unwell as a result of their work.

Workers’ compensation insurance is run by the regulatory authority in each Australian State or Territory and each state and territory. To find out more about this insurance please check your state or territory’s authority’s website.

2. Public Liability Insurance

Public Liability Insurance (also called Public & Products Liability) will protect businesses when their activities have been negligent resulting in personal injury or property damage to a third party.

For example, if the business is sued as a result of its activities, it can have the ability to respond to the legal action including the legal defence costs and damages required to be paid as compensation.

It is recommended to purchase public liability insurance even if your business has low revenue, or if you are working from home.

3. Professional protection

Professional indemnity insurance (also know as PI Insurance) provides cover for a business that offers professional services. The PI cover includes the legal defence costs and claims for damages from an act, omission or breach of duty that is caused as a result of the businesses services. To learn more read our article explaining in detail who requires professional indemnity insurance.

Insurance Options for Sole Traders

For sole traders, it’s important to consider purchasing either income protection insurance or personal
accident insurance. These insurance policies can protect you if you get sick or have an accident and you are not able to work.

As a sole trader there is a range of other insurances to consider. For example, it you are a tradie, you may want to take out specialist insurance that is tailored to your industry. You will also require insurance to cover theft of tools.

It’s an idea to talk to your Steadfast insurance broker to that

No matter how you structure your business, speak to an FD Beck Insurance Broker to get the right cover to protect you from risks you face.