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, sole traders are the most common of all businesses, with research by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) showing 61 per cent of all Aussie businesses are sole traders.
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.
“Sole traders are people who carry on business under their own name and not through a company or trust”
Which insurances are compulsory?
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 insure the building. If they don’t own the building and they’re tenants, they need to ensure their contents. If they own a building, they need public liability insurance. Tradespeople going out to work on building sites need public liability insurance. If they own a motor vehicle, they need motor vehicle insurance.”
Even if you are a sole trader, every business with staff 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.
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 resources to respond to any 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 ensure the cover you hold remains appropriate to your needs.
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.
Sole trader insurance options
As a sole trader, it’s also important to consider taking out either income protection insurance or personal accident insurance. These insurances can help protect you if you fall ill or have an accident and you are unable to work for a period. It’s also a really good idea to have health insurance.
There is a range of other insurances to consider as a sole trader. If you are a tradesperson, you may wish to take out specialist insurance that covers tradies. You will also need to have the right insurance to cover theft of your tools.
It’s an idea to talk to your Steadfast insurance broker to that no matter how you structure your business, you have the right cover to protect you from the common risks you face.
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Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Please consider whether the information is appropriate to your circumstance before acting on it and, where appropriate, seek professional advice.