How to make sure you haven’t left yourself vulnerable as a sole trader

How to make sure you haven’t left yourself vulnerable as a sole trader

One of the simplest ways to set up a business in Australia is as a sole trader. Your ABN is free, it costs around $30 to register a business name each year and there are no legal or other annual fees required. You have the freedom to make all the decisions, take all the profits and manage your business as you see fit.

The flip side is that as a sole trader you leave yourself completely vulnerable to your losses, particularly if you’re underinsured. That’s because as a sole trader you’re responsible for everything, including your debts and your business’ legal liabilities. 

So if you’re a sole trader, the easiest way to minimise your risks is to get the right insurance. The risks of underinsurance or the lack of any insurance at all can result in the devastation of your business, reputation and the loss of all your assets.

Here are 10 insurance policies that help reduce risks to sole traders in Australia.

  1. Professional Indemnity: If you provide professional advice or services then this insurance policy pays your legal costs if a customer alleges negligence or financial loss when they followed your advice. It will also pay any damages if the claims are proven.
  2. Public Liability: If you deal with public, owned or leased property then this insurance policy covers claims of injury or property damage arising from your legal liability.
  3. Product Liability: If you manufacture, sell or repair products then this policy covers you against claims of personal injury or property damage suffered by a customer as a result of these products.
  4. Business Interruption: If your business is prevented from trading due to a covered peril, this insurance covers your fixed overheads, profits and other re-establishment costs to get your business back up and running. 
  5. Property Damage: Covers your business’ buildings, contents, stock, plant and equipment and other property against perils such as fires, storms, lightning, impact and accidental loss or damage. It can possibly be extended to cover flood risk.
  6. Theft: Provides insurance against burglaries or theft of goods or stock on your business’ premises, as well as any damage caused by such activities.
  7. General Property: Covers portable business property against accidental loss or damage for anywhere in Australia and potentially overseas. 
  8. Equipment: Covers damage or loss to plant, equipment and machinery, as well as computers and other electronic equipment onsite.
  9. Vehicles & Mobile Plant: Provides insurance for registered and unregistered vehicles, mobile plant and equipment, and so on, as well as downtime, loss of income and hiring costs for replacements.
  10. Cyber Insurance: This insurance covers varied risks related to your activities involving IT networks as well as services and activities provided on the web or other electronic methods. It covers losses arising from hacking and social engineering episodes as well as legal liabilities through data loss.  

Given the number of insurance policies suitable for sole traders, it’s clear that there are significant risks to sole traders that need to be addressed. So whilst the benefits of being a sole trader are seductive, the inherent vulnerabilities with this business structure are also substantial. 

To avoid underinsurance jeopardising your business and personal assets, maybe it’s time to explore your insurance options. Find your local adviser today.

Important Information 

This communication including any weblinks or attachments is for information purposes only. It is not a recommendation or opinion, your personal or individual objectives, financial situation or needs have not been taken into account. This communication is not intended to constitute personal advice. This type of insurance product is designed for small and large businesses, that want to be covered against financial loss relating to accidents or personal injury involving contractors or sub-contractors.

We strongly recommend that you consider the suitability of this information, in respect of your objectives, financial situation and needs before acting on it. This document is also not a Product Disclosure Statement (PDS) or a policy wording, nor is it a summary of a particular product’s features or terms of any insurance product. If you are interested in discussing this information or acquiring an insurance product, you should contact your insurance adviser to obtain and carefully consider any relevant PDS or policy wording before deciding whether to purchase any insurance product.

Business Interruption Insurance

Business Interruption Insurance

From your family and employees to customers and suppliers, there are a lot of people who depend on your business opening its doors each day.

Professional Indemnity Insurance

Professional Indemnity Insurance

Professional Indemnity (PI) Insurance isn’t just limited to typical ‘professions’ such as accountants, engineers, lawyers, doctors and architects. Essentially, anybody providing advice or consultancy services for a fee has an exposure that needs to be considered.

Find your local Insurance Adviser

Talk to your local Adviser to get advice about your insurance needs and to get a quote