Business Insurance for Sole Traders & Self Employed
INSURANCE FOR SOLE TRADERS AND SELF-EMPLOYED PROFESSIONALS.
Sole traders have more control over their business decisions, but that also comes with more responsibility. That’s where insurance comes in.
Whether you’re a Tradie, Hairdresser or Bookkeeper, if you’ve chosen to operate as a sole trader, you have a unique amount of freedom over your business decisions. But this freedom also means you’re personally and financially liable should things not go to plan. That means making sure you’re covered with the appropriate level of insurance.
If you’re just getting started as a sole trader, it may be easy to overlook certain forms of insurance as an unacceptable cost. But this may be setting you up for bigger problems in the future.
What about access to WorkCover? As a sole trader, you’re not classed as a worker and are therefore ineligible to claim workers compensation in the case of an injury. Instead, you’ll need to make sure you’re prepared for the worst. From compensation claims against you to personal injury or illness, this BLOG covers six key areas of insurance:
INCOME PROTECTION INSURANCE
How would you pay your mortgage and ongoing expenses if you were to fall ill or injure yourself and be unable to work? This is a real consideration for sole traders and freelancers, and it’s the reason Income Protection Insurance is often advisable.
While savings or a partner’s income might see you through, they might not. Some sole traders may be the sole breadwinner. Or others understandably won’t want to see their nest egg disappear.
Income Protection policies provide financial assistance when you’re unable to earn. Usually via monthly payments of up to 75 percent of your income.
Premiums are usually tax deductible and vary depending on factors including age, benefit amount, and the benefit and waiting periods selected.
Similar to Income Protection Insurance is Personal Accident and Sickness Insurance. This type of insurance can cover up to 85 percent of weekly earnings, but it is generally more limited than Income Protection. Also with a shorter benefit period.
PUBLIC LIABILITY INSURANCE
Imagine you’re a beauty therapist and a customer slips on some product and breaks their leg in your salon. Or perhaps you run a carpentry business and an employee damages a client’s priceless family heirloom…
As a sole trader, you could be paying the price for years to come. Unless of course, you have adequate insurance.
A worthwhile investment for many sole traders, Public Liability insurance covers compensation costs and your legal fees if a third party sues you for injury or property damage resulting from your alleged negligent business activity.
While it might not be worthwhile if you’re a graphic designer who works from home. If you interact with suppliers, clients or the public, and could feasibly cause property damage or personal injury to a third party while doing business, Public Liability Insurance is a must.
TOOL INSURANCE
A worker is only as good as her tools, and – unfortunately – tools are frequently stolen from utes and construction sites.
This is a double whammy for tradies because, not only can replacing tools cost thousands of dollars, it can take time. During which time a tool-less tradie may be out of work and out of pocket.
Tool Insurance provides protection against theft and damage, for example from a fire or vehicle collision. But, coverage does vary widely between policies, so it’s important to read the fine print.
You should also make sure your ute or work vehicle is adequately covered for business use. Commercial Motor Insurance may therefore be worth investigating.
PROFESSIONAL INDEMNITY INSURANCE
Actions may speak louder, but words still matter. And they can land you in hot water if you’re in the business of providing advice for a fee.
Professional Indemnity Insurance protects sole traders from third party claims arising as a result of the specialist service or expert advice they have provided.
It can cover any damages and compensation costs, as well as legal fees, should you be found to have breached your professional duty. For example by providing incorrect advice or leaking confidential information.
Sole traders who typically require this type of insurance include accountants, financial advisors, lawyers, engineers, veterinarians, architects, marketing consultants and allied health professionals, but it may also be relevant to many more.
TPD INSURANCE
Nobody wants to expect the worst, but it’s smart to be prepared for it. Particularly if you have high living expenses and dependents. TPD stands for Total and Permanent Disability. This insurance involves the payment of one large lump sum should you become permanently disabled and unable to work, due to injury or illness.
Premiums depend on factors such as age, sex, health and the benefit amount required. Those in ‘riskier’ professions, such as builders and other trades, will typically pay higher premiums than office workers.
WORKER’S COMPENSATION
Nobody wants to expect the worst, but it’s smart to be prepared for it. Particularly if you have high living expenses and dependents. TPD stands for Total and Permanent Disability, and this insurance involves the payment of one large lump sum should you become permanently disabled and unable to work, due to injury or illness.
Premiums depend on factors such as age, sex, health and the benefit amount required. Those in ‘riskier’ professions, such as builders and other trades, will typically pay higher premiums than office workers.
If you’d like help with your business, or even personal insurances, please give us a call or contact us here. We have a wealth of knowledge in the insurance space and would be more than happy to assist you to find the right insurance for your needs.
– 9 December 2020 –
General Advice Warning
In preparing this article, Praescius Financial Consultants NSW Pty Ltd, Praescius Financial Consultants NT Pty Ltd, Praescius Financial Consultants HB Pty Ltd and Praescius Financial Brisbane Pty Ltd have not considered your personal circumstances, goals or objectives; as such the information, commentary and assertions made within this article may not be suitable to you. Please seek personal financial advice prior to acting on this information, or making a decision regarding the choice of a financial product or strategy. Further information and disclosures can be found in our Financial Services Guide or by contacting us on the phone numbers provided.
Praescius Financial Consultants NSW Pty Ltd, Praescius Financial Consultants NT Pty Ltd, Praescius Financial Consultants HB Pty Ltd and Praescius Financial Brisbane Pty Ltd are authorised representatives of Praescius Financial Holdings Pty Ltd ABN 14 610 960 980 AFSL 486455, 2a/57-59 Oxford Street, Bulimba Qld 4171.
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