What Insurance Does a Sole Trader Need?

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Suitable insurance is important for businesses of all types and sizes. And there is no relaxation in penalties or claims just because you are a sole trader.

What Insurance does a Sole Trader Need

This guide will help you understand important sole trader insurances that you should consider.

Public Liability Insurance:

If you work as an electrician, plumber or other trade contractor, make sure you have public liability insurance in place.

This insurance may protect you from having to pay costs for injuries and property damages caused by your sole trader business operations.

For example, if someone is injured at your auto repair shop after slipping on the greasy floor. Or what if you accidentally damage a glass pool fence while doing landscaping work at your client’s home?

Although these mistakes are not deliberate, not all clients are forgiving. They can ask you to pay for their costs or take you to court.

Public liability insurance can cover the cost of damages, injuries or legal fees. Therefore, you may not need to pay out of pocket.

Professional Indemnity Insurance:

Professional indemnity insurance is important for sole traders who provide professional services or consult to clients for a fee. It can cover the damages that might occur from an act, breach of duty or omission from your professional services and advice. If your client sues you for poor advice that led to a financial loss for them professional indemnity may provide cover.

For example, if you are an accountant who guides your clients with their tax planning, but your client claims your advice has led them to incur tax penalties.

You can be slapped with costs on the grounds of negligence or error. Here comes professional indemnity insurance.

Professional indemnity insurance can cover damages and claimant costs imposed on you, legal and court fees, and claim investigation costs.

Commercial Motor Insurance:

If you have a commercial vehicle that you use for your business purposes get it insured for commercial use. In many cases, personal auto insurance may not cover the use of your vehicle for business use. Bodily injury liability caused by accidents can lead to expensive claims. Suitable commercial auto insurance coverage can protect against this risk as well as provide coverage for vehicle damage.

Personal Accident Insurance:

While strictly speaking personal accident is not a business insurance, it can be very important for a sole proprietor.

As a sole trader, you do not have anyone to provide you with paid sick leave. This means that personal accident insurance can be a good way to pay expenses if you cannot work for an extended period due to your injury or illness.

A personal accident policy can cover up to 80%* of your income for some time whilst you are out of business due to illness or injury.

 Tools Insurance:

Trade based sole traders running their own contracting business rely on their equipment and tools. These tools and equipment should be insured as they are prone to damages, breakdown and theft. Tool insurance for sole traders can cover such risks.

How to Choose Suitable Insurance for a Sole Trader

As a sole trader you should be particular when choosing covers as you need your policy/s to respond if you need to make a claim.

Here are some tips on choosing suitable insurance for a sole trader.

Assess Your Risks:

Consider the risk factors present in your profession. The key risks factor for an IT consultant will be significantly different from those for a painter. Hence, while professional indemnity may be the most important cover for an IT consultant public liability cover may the most important for the painter.

Choose an Expert Insurance Broker:

The next step is to try and chose an insurance broker that is familiar with your profession/industry. For example, if you are an engineer, try and find a broker that frequently handles engineers. Industry experienced brokers are aware of the typical risks and requirements of the occupation.

Why do you need an insurance broker?

If your claim is borderline you want a good broker representing your interests on your side.  They can help get your claim paid.

If you place a policy with an insurance company directly or with an agent of the insurance company; they represent the insurance company.

This can make a big difference to you at claims time.

Shop Around for Prices:

Prices and coverage can vary based on insurer. Therefore, you or your broker should compare multiple policies and review rates, benefits and terms.

Re-assess:

As your business scales up, so do your risks. Therefore, re-evaluate your insurance covers when you expand your business, purchase equipment or start hiring staff.

Disclaimer :

 

*Important: Cover may be available subject to meeting insurers underwriting criteria. Some of the covers listed may or may not be available or may have limitations or exclusions. Cover inclusions vary significantly from insurer to insurer. DO NOT rely upon the above. Check your policy schedule carefully for inclusions and exclusions and limitations. Talk to a business insurance broker for more information.

 

Author Bio:

Romit Malhotra is the brand representative of Smart Business Insurance, a leading Australian insurance broker. A big foodie, he loves to travel the world. Also, a diligent businessman, Romit likes to pen down his thoughts on related topics whenever he finds some free time.

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