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Professional Indemnity Insurance: What it Costs and Why You Need it as a Sole Trader

Professional Indemnity Insurance

When running your business as a sole trader, it is important to insure yourself against anything that could bring financial harm to you and your business. Because you are legally the same entity, any business liability is your liability.

For most sole traders who provide services for clients, you could find yourself in the tough spot of having a client sue you for your service not delivering in the way they expected it to. This is where professional indemnity insurance would cover you.

Do I Need Professional Indemnity Insurance?

The chances are high that if you don’t think you need professional indemnity insurance, you most probably do. Don’t just think of how someone could make a claim against your business; think about the time, effort, and resources that drain your business when battling a claim like this. The loss that comes from having to pay the legal fees for the claim and the loss of business are enough to not just damage your business finances but your personal funds as well.

The professions that have a legal requirement in Australia for adequate professional indemnity insurance are:

Accountants
Architects and draftsmen
Bookkeepers, BAS, and tax agents
Electricians
Financial Planners Fand mortgage brokers
Plumbers
Registered migration agents
Real estate agents

While not a legal requirement for some, it is still an important insurance policy to consider for almost every business that provides advisement or services, including but definitely not limited to:

Tradesmen (plumbers, electricians, builders, etc.)
Personal trainers
Massage therapists
Tutors
IT professionals
Engineers

All of these sole traderships can benefit from having an indemnity insurance policy, especially if a client insists on lodging claims of negligence or malpractice. Insuring yourself with this policy means you are protecting you and your business from financial risks by covering costs for legal fees; it also covers any compensation paid to the client if a claim is successful.

How Much Does Professional Indemnity Insurance Cost for Sole Traders?

Just like a sole trader’s business, no two insurance policies are the same. The cost of your policy can be influenced by a range of factors:

Number of staff: If you are operating a sole tradership with employees, the number of people you employ can mean higher premiums.
Staff turnover: Sole traders with a lower annual turnover means there is less risk for your business, meaning lower premiums. High turnovers mean more risk of claims made against you, so insurers charge higher premiums.
Client type: The type of clients you deal with can also have an impact on your insurance premiums. The larger-scale the client, the higher the premiums compared to lower-end clientele.
Industry: Some industries may have higher premiums than others because they carry a higher risk profile. For instance, an accountant would face much higher premiums than an artist.
Additional benefits: As mentioned above, no two policies are the same. If you choose to include additional protections into your policy this will cost you more.
Excess: An excess is what you pay if you ever have to lodge a claim. The higher your excess is, the lower your premiums will be.
Previous claims: It is also a legal obligation in Australia to inform future insurers about past claims you may have made against any insurance policies.

Professional Indemnity Insurance

Agile's Professional Indemnity insurance protects against claims arising from an act, error or omission in the performance of professional services.

Details Get Quote

Professional Indemnity Insurance

Professional Indemnity insurance is designed for professionals who provide a specialist service or advice, providing protection for financial loss and legal costs of a claim.

Details Get Quote

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.

Details Get Quote

Number of staff: If you are operating a sole tradership with employees, the number of people you employ can mean higher premiums.
Staff turnover: Sole traders with a lower annual turnover means there is less risk for your business, meaning lower premiums. High turnovers mean more risk of claims made against you, so insurers charge higher premiums.
Client type: The type of clients you deal with can also have an impact on your insurance premiums. The larger-scale the client, the higher the premiums compared to lower-end clientele.
Industry: Some industries may have higher premiums than others because they carry a higher risk profile. For instance, an accountant would face much higher premiums than an artist.
Additional benefits: As mentioned above, no two policies are the same. If you choose to include additional protections into your policy this will cost you more.
Excess: An excess is what you pay if you ever have to lodge a claim. The higher your excess is, the lower your premiums will be.
Previous claims: It is also a legal obligation in Australia to inform future insurers about past claims you may have made against any insurance policies.

Depending on all of the factors above, a thorough business evaluation is also done to evaluate any further risk factors relevant to the insurer. As a benchmark, professional indemnity insurance can range anywhere from $50 to over $200 AUD per month.

Why Choose Morgan Insurance Brokers?

When you choose to insure yourself with Morgan Insurance Brokers, you can rest assured knowing our specialist brokers compare policies from over 100 insurers, tailor making a comprehensive insurance plan specifically for your business.

Don’t wait until it’s too late, contact us today for a free quote and protect your business.

professional indemnity insurance

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.

Morgan Insurance Brokers, ABN 28 628 815 074, AFSL 327131

This article originally appeared on Professional Indemnity Insurance: What it Costs and Why You Need it as a Sole Trader and has been published here with permission.