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Five Types of Insurance a Sole Trader Needs
Doing the things that you are passionate about is a privilege that not everyone has. Others choose to be employees, and some people join with business partners who share a common passion. If you are fortunate enough to have the opportunity to work on your own while earning at the same time, it might be wise to seek security for your operations via insurance.
Is a Sole Trader different from a self-employed one?
A sole trader and a self-employed may appear to be similar and yet they still have distinguishing aspects. In particular, a sole trader refers to a business structure where a person operates under their own Australian Business Number (ABN) that is connected with and tied to the individual person, the sole trader. Being self-employed involves an individual owning and operating a Pty Ltd company and being employed by that company. Being self-employed provides a few additional protections due to the company corporate structure that you are utilising to shield your personal assets and can limit your liability for any potential exposure.
Below are the five types of insurance that you might want to consider if you’re a sole trader.
Below are the five types of insurance that you might want to consider if you’re a sole trader.
What are the five types of insurance that a sole trader needs?
1. Workers’ compensation insurance
As a sole trader, you are not operating as an employee, and as such, you can't ensure you have coverage for yourself as an "employee" through workers' compensation insurance. As such you may need to consider Total and Permanent Disability insurance (TPD) and other life insurance considerations to give you coverage if you are to experience any work-related or work-limiting injuries.
2. Public liability insurance
When you engage with the public as part of your operations, you should consider what level of public liability insurance is appropriate for you. Do you sometimes worry about spilling a drink on your client’s laptop during a meeting which could lead to equipment damages? When you do business whether on your own or with partners, it may be inevitable that someone from the public may be injured by your products or have their property damaged through engagement with you. With public liability insurance, you can get coverage for possible damages that may occur and give you coverage for your expenses
Management Liability insurance is designed to provide protection to both the business and its directors or officers for claims of wrongful acts in the management of the business.
A business insurance pack can provide cover for your business premises and contents, against loss, damage, theft or financial loss from an insured interruption to the business.
When you engage with the public as part of your operations, you should consider what level of public liability insurance is appropriate for you. Do you sometimes worry about spilling a drink on your client’s laptop during a meeting which could lead to equipment damages? When you do business whether on your own or with partners, it may be inevitable that someone from the public may be injured by your products or have their property damaged through engagement with you. With public liability insurance, you can get coverage for possible damages that may occur and give you coverage for your expenses
Public liability insurance may also cover the cost of your legal defence, compensation payments, medical costs, and loss of income as a result of the claim.
3. Professional indemnity insurance
When you give a service or offer advice, you may be liable for any loss or damage that may result from the advice you have given. Even if you provide your services for free, you may still be held responsible for any losses incurred by your client. With professional indemnity insurance, you may practice your profession and provide advice, knowing that, depending on your actions, you are protected from any claims that require you to pay compensation to anyone who was harmed by your professional advice.
4. Tools and equipment insurance
If your work requires you to use certain tools and equipment to render a service, they could be subject to wear and tear or damages due to unforeseen events like fire, flood or theft. Insurance for your tools and equipment may cover any potential loss and provide for any replacement that you might need.
5. Personal accident insurance
Bad things happen unexpectedly that is what accidents are. But just because it is unavoidable doesn’t mean that you shouldn’t prepare for potential accidents that you might face or experience. This is where you might need personal accident insurance which could help you cover your expenses during any recovery you may require. Potential expenses could be your transport and meal expenses, among others.
How can Advisr help you?
The type of insurance that a sole trader needs may differ depending on the nature and type of your business. If you are a sole trader or planning to be one, connect with an insurance broker on Advisr to find an insurance specialist that understands your business and can provide the coverage you need as a sole trader.
General Advice Warning: This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is appropriate for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.
All information above has been provided by the author.
All information above has been provided by the author.
ADVISR, ABN 17 613 588 266
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