There are lots of reasons to be a sole trader – to simplify your business or if you’re just starting out are some of the common ones.
Maybe you’re an artist or graphic designer working from home. Perhaps you’ve got a side hustle as a florist. Or you could be a gardener with a thriving local business.
In fact, according to the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), nearly 1.7 million Australians operated as sole traders between 2021 and 2022.
Sole traders are people who carry on business under their own name and not through a company or trust.
If you decide this is the right structure for you, it’s important to ensure you also have the right insurance cover for your business.
Which insurances does a sole trader need?
Steadfast Group Broker Technical Manager, Michael White, says the spectrum of insurance cover required will depend on the nature of the business the sole trader is conducting.
“If they own a building, they should generally insure the building. If they don't own the building and they're tenants, they may need to insure their contents. If they occupy a building, they might need public liability insurance. Tradespeople going out to work on building sites can need public liability insurance. If they own a motor vehicle, they may need motor vehicle insurance.”
Even if you are a sole trader, if you have an employee, you must have workers compensation insurance. You may also need to take out public liability and professional indemnity insurance.
- Workers compensation insurance
This type of insurance can provide a safety net when staff are injured or unwell as a result of their work.
Workers’ compensation insurance is managed by the states and territories and each state and territory has a regulatory authority that looks after this area. Check your state or territory’s authority’s website to find out more about this insurance.
It’s important to note that sole traders are not considered employees, and workers compensation generally does not cover you, so you may want to consider income protection or personal accident insurance.
- Income protection and personal accident insurance
As a sole trader, these insurances can help protect you if you fall ill or have an accident and you are unable to work for a period. It can also be a really good idea to have health insurance.
- Public liability insurance
This type of cover can protect businesses when their actions have been negligent and caused injury or death to a third party.
It means if the business is sued as a result of its actions, it can have the financial resources to respond to legal actions and the means to pay any damages.
It may still be appropriate to hold public liability insurance if your business currently has no or limited revenue, or if you are working from home. But your exposures are likely to have changed. So it’s an idea to talk to your insurance broker to help you find out whether the cover you hold remains appropriate to your needs.
- Professional indemnity insurance
Professional indemnity insurance can provide cover for businesses that offer professional services from the legal costs and claims for damages from an act, omission or breach of duty that happens as a result of their actions.
There is a range of other specialist insurances to consider as a sole trader depending on the nature of your business.
If you are a tradesperson for example, you may wish to take out insurance designed for tradies. You may also need to have the right insurance to cover theft of your tools.
Talk to your Steadfast insurance broker, no matter the structure of your business, they’ll be able to help check that you have the cover you need to protect you from the risks you face.
