Thousands of Australians take the leap into small business ownership every year. In 2021-22 alone, just over 90,000 sole traders (also called sole proprietors) joined these ranks.1 If you’re one of these small biz entrepreneurs, you might be considering sole trader insurance options for your business.
In part two of our insurance for sole traders series, we’re exploring more coverage options that small business owners can consider to protect their finances and professional reputation.
What insurance does a sole trader need?
In part one of this series, we talked about Public Liability insurance for sole traders. This is a basic type of coverage for many small businesses that protects against third-party bodily injury and property damage claims.
But Public Liability is only one type of insurance that sole traders may consider. You might want to consider other types of sole trader insurance to provide a larger “blanket” of protection.
Many sole traders provide their customers with a specialist service or advice. This type of work presents unique risks. A small mistake in your work could create big problems for a client—and your business. If the client alleges that your error caused them to lose money, you could have an expensive lawsuit on your hands.
For many sole traders, Professional Indemnity is an essential part of their sole trader insurance plan. A policy typically provides financial assistance for claims caused by professional wrongdoing, such as:
- Mistakes, errors, and miscalculations
- Incorrect advice, diagnoses, or treatments
- Omissions or breaches of duty
- Document loss
- Missed deadlines and undelivered services
- Not meeting a client’s expectations
Professional Indemnity protects you against losses claimed by a third party due to alleged or actual negligence in your professional services or advice. Subject to applicable limits, your Professional Indemnity insurance will meet the associated compensation payable to a third party together with your defence costs (which can include legal costs, investigator costs and expert fees).
Professional Indemnity snapshot
A Professional Indemnity policy provides sole traders with important business coverage.
|What’s typically covered||What is not typically covered|
|Your reasonable legal costs for defending or responding to a claimClaim investigation costsCompensation payments as a result of a claim, including but not limited to court-awarded damagesAn award of legal costs against youDisciplinary proceeding costsPublic relations expenses to help protect your professional reputation||Known claims and circumstances that may have occurred prior to the period of insuranceIntentional damage or wrongdoingActs of fraud and dishonestyContractual liabilitiesProfessional fees refundsAccidental injury and property damage (these claims are typically covered by Public Liability insurance)|
Every Professional Indemnity policy is different. Your policy documents will outline exactly when you are covered and when you are not.
What types of sole traders consider Professional Indemnity?
Sole traders who might buy a Professional Indemnity policy include:
- Bookkeepers and BAS agents
- IT professionals
- Migration agents
- Personal trainers
- Real estate agents
- Tax agents
Why do sole traders consider Professional Indemnity?
Sole traders who provide professional services often consider a Professional Indemnity insurance policy. Here are a few reasons why:
- It’s required – A Professional Indemnity policy may be required by law to receive a professional license or to work in certain fields.
- Their clients expect it – Professional Indemnity insurance can be an important signal of professionalism. Clients may prefer sole traders who are insured (some may even write an insurance requirement into their business contracts).
- They want to protect their business – Claims and lawsuits caused by professional wrongdoing are often expensive. Professional Indemnity insurance helps shield your bank accounts from unplanned bills that could devastate your business.
Public Liability and Professional Indemnity insurance can provide sole traders cover for your legal liabilities . But you might be looking for even more protection for things like your business assets. A Business Insurance policy might be just the ticket!
Business Insurance is an insurance package designed to provide cover for your business contents, stock, tools and commercial premises when an insured event occurs (such as fire, storm, theft or even accidental damage). A Business Insurance package can also cover your portable equipment, glass and for loss of revenue due to business interruption in specified circumstances. In addition, cover is available for public liability, tax audit, employment practices and statutory liability risks.
Your Business Insurance package can be customised to include coverages that fit your unique needs as a sole trader. No matter your occupation or where you work, Business Insurance could help you prepare for fires, storms, theft, equipment breakdown, and other events that might threaten a sole trader.
Get insurance for sole traders today!
Being a sole trader is exciting, but that enthusiasm could be crushed by unexpected bills, compensation claims, and lawsuits. Thankfully, sole trader insurance options can help take the worry out of running your own business.
Compare insurance for sole traders today and start protecting your small business. Public Liability Australia can help you sort your Public Liability, Professional Indemnity, and Business Insurance policies in minutes—start now!
1. ABS, Counts of Australian Businesses, including Entries and Exits, accessed 16 Feb 2023.
This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording.
© 2023 BizCover Pty Limited, Public Liability Australia is a business name of BizCover Pty Ltd (ABN 68 127 707 975; AFSL 501769)