Protections You Need To Have As A Sole Trader
As a sole trader, you have a lot of responsibility. With that, you need to have the right kind of insurance to protect yourself and your assets. Many new business owners make the mistake of thinking their insurance is all they need, but now that you have a company, you have a lot more to think about. Here are the protections you need as a sole trader.
Insurance Requirements
Carrying insurance is not a legal requirement; however, given sole traders have unlimited liability, not having appropriate and adequate cover would be reckless. The protections a sole trader needs are serious.
Not everyone will need the same kinds of insurance, though. The risks may vary depending on the nature of your business. So, what insurance do you need?
Are my existing protections adequate?
Your home insurance is unlikely to provide the coverage you need for your business activities. It may cover the equipment or assets you use to carry out your business, but the coverage limit may not be enough. Besides, it won’t provide any other types of protection you and your company may require.
If you work from home and use your vehicle for business, your insurer needs to know that. While you may be able to change the cover and cover limits on your policy, this will impact on the nature of the policy and the cost.
Public Liability
Every business should have public liability coverage regardless of the size or nature of the enterprise. As the sole proprietor of your company, it protects you, your business, and your assets against liability for injury, death, loss, or damage to, property that is due to negligence on your part. It also covers members of the public when they visit your premises.
If you don’t have insurance and a successful legal claim is made against you, you have to pay the settlement, legal expenses, and possibly the legal costs incurred by the other party. This can be substantial and could destroy everything you have overnight. So it’s incredibly important to have public liability insurance.
Professional Indemnity
This coverage is similar to public liability in that it offers protection against legal costs and damages claims. However, it will not apply to you as a sole trader unless you carry out advice-based activities. It applies, for example, to those who provide verbal or written reports or even suggestions on which work will be based.
General Liability
General liability is also like public liability insurance. However, it is a more extensive type of coverage, as it also includes injuries to members of the public and injuries or damage caused by defective products.
Protection against loss of income
Several items fall broadly into this category of needed protections for a sole trader.
Income Protection
If you become ill or injured, you may be unable to work at either full capacity or at all. Income protection provides financial support during this period, which can make all the difference. Various types of coverage pay part of your average monthly salary or your business’s income.
Accidental Injury
If you are injured in an accident, and you can’t work for some time, you will receive a lump sum payout that can be used to keep you going or pay medical expenses.
Total & Permanent Disability (TPD) Insurance
This insurance pays out a lump sum if you are the victim of a life-changing injury or illness that prevents you from working again.
Other types of insurance
- Vehicle: You don’t have to use a particular insurer for cover for the car you use to conduct business. However, you must ensure that:
- You are covered for business use, not private
- The extras on your vehicle, such as signage, are unlikely to be covered on a standard vehicle policy
- Assets: Covers the costs of the loss of or damage to goods, tools, equipment, and property caused by fire or theft.
- Money: This covers money lost in a fire, burglary, or in transit.
- Audit: Protects accounting fees that you incur due to an audit.
It’s not ever a smart move to be uninsured or underinsured. It’s incredibly risky—if not downright irresponsible—to expose yourself and your business to risk that could potentially cost you everything. And getting the right coverage doesn’t have to cost an arm and a leg, either. There are options out there are companies that can advise you and help to put together the ideal insurance package for you.
