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Why Insurance Matters for Sole Traders

Nov 22, 2022
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Running your own business as a Sole Trader can be an exciting journey. Some people want to pursue a venture on their own while others want a partnership or larger corporation, choosing to work within an employer-employee relationship. Nevertheless, if you prefer some flexibility in your schedule and the freedom to pursue your creative pursuits, becoming a sole trader might be right for you. That's especially true if you're living in Australia where 61% of businesses are operated by sole traders, based on a study conducted by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO).

These advantages of being a sole trader may sound promising, and they can be, but did you know that operating as a sole trader also come with risks? Let’s dig deeper into what is is like to be a sole trader below.

What is a Sole Trader?

A sole trader refers to a structure of business where an individual operates and owns the whole business. While a sole trader gets to keep all the profits, he is also the sole responsible for the possible losses that the business may encounter. But take note that just because a business is registered as a sole trader, you can still contract out to other parties for a piece of work that could help him or her operate the business. However, it won't mean that there is an employer-employee relationship that allows an employee to receive additional benefits aside from his payment for the work rendered.

Being a sole trader you can operate from anywhere you like

I’m a sole trader, but why do I still need insurance?

Being the only one who manages his or her business, a sole trader juggles many hats - from accounting, marketing, and operations, among others, it may be a wise choice to at least protect yourself with insurance from possible injuries that come with handling a business. These types of insurance may differ depending on the type of business you’re doing but we’re sharing the common reasons for the importance of insurance for sole tradies below.

Management Liability Insurance

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.

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Business Insurance

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.

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Business Package

Purchase up to six products under one Business Insurance Package.

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1. Sole Trader Insurance may shield you from possible claims.

Practicing a profession or generating income from a hobby both come with risks, even for those who are already considered experts in their field. This is where negligence and malpractice can happen and when that time comes having insurance can help to shield you from potential claims from the injured third party who received your service.

2. Sole Trader Insurance may secure your tools from potential losses.

If you’re working with a piece of equipment or machinery that help you execute your services, you may want to provide insurance for those tools in case of depletion and damages that come with using them regularly.

3. Sole Trader Insurance may cover your building from possible destruction.

Sole traders may purchase a workspace (e.g. a building) to conduct their day-to-day operations, so it might be better if such a place is also covered with insurance to shield itself from losses on possible calamities and unforeseen events.

How can Advisr help you?

Pursuing something on your own may be less intimidating when you know your business is covered from potential risks that may occur with good insurance coverage for your operations. Whether you opt to secure your tools, your health, or your service per see, Visit Advisr now and connect with the right insurance broker who may help you choose the best sets of insurance for your business as a sole trader.

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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.

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