Having the right insurance for a sole trader in place is a key factor in protecting you against financial loss, or even disaster, and making sure you have the cover at the best price is an essential part of running a business.
What insurance does a sole trader need?
This will depend on what business you are engaged in, how your business is set up and the assets you have within your business. The two key areas to be considering are the cost to you of any loss or damage to your own property and the potential cost of any legal action you may face in the business.
For many sole traders it is the latter that can offer the biggest threat to you and your business. We live in a litigious society where people are much more likely than they used to be to seek legal redress and compensation where they feel they have been injured, their property has been damaged or just badly treated and they are not happy. This culture lends itself to actions against businesses or all sizes, some actions are genuine, others somewhat speculative in nature.
Dealing with claims from third parties is the realm of liability insurance and for our purposes it comes in a few different “flavours”, the cover you need will depend upon the type of work you are engaged in.
Public Liability Insurance for Sole Traders
This is the insurance that all sole traders should have in place, irrespective of their trade or occupation and essentially you should “not leave home without it”.
The public liability insurance policy protects the policyholder in respect of it’s legal liability for personal injury or property damage arising during the course of the business. The policy meets the costs of any awards made against you by a court and very importantly pays for the legal defence of any claim whether speculative or otherwise. The cost of defending even the most spurious case against you can run into thousands of pounds and can have a severe impact on you financially if you do not have the insurance in place to respond to such claims.
The public liability policy has limit of indemnity which represents the insurers maximum liability in respect of any one claim or occurrence. You choose this limit and common limits for sole traders are £1M, £2M and £5M, with others available upon request. Increasingly these limits may be dictated to you under the terms of a contract or by a local authority.
How much is public liability insurance for a sole trader?
Public liability insurance is in fact inexpensive for the vast majority of sole traders , with £1m of cover being available for less than a £100 a year for most trades and occupations. Clearly the greater the risk of a claim, then the greater the premium will be, but for most sole traders the cost of the insurance is a relatively small sum especially when you consider the benefits the policy provides.
Professional Indemnity Insurance for Sole Traders
If you are engaged in the provision of professional services in your business, for instance providing advice for a fee, then the public liability policy will not protect you in respect of any claims made against you in respect of your legal liability for breach of professional duty or negligent advice. This is the realm of professional indemnity insurance. This insurance is vital for those engaged in the provision of professional services.
Again the policy has a limit of indemnity, although there are a lot more options available easily in terms of limits which tend to start from £100,000. Once again the choice of limit is your own and will depend of the nature of the professional services you provide and your estimation of what the “downside” of a breach of professional duty might be.
How much is professional indemnity insurance for sole traders?
The cost of professional indemnity insurance has tumbled over the last few years and cover, that was once £1000 is widely available at £100 per year. The cost should no longer be an obstacle in you obtaining a suitable policy that will protect you in the event of a claim being made against you.
Liability claims for sole traders.
It is worth noting that the claims under a public liability and professional indemnity policy are generally handled in a quite different way, public liability tends to be on a claims occurring basis and professional indemnity on a claims made basis. It is important that you understand the difference between the two and more information is available on our claims made vs claims occurring page.
Employers Liability Insurance for Sole Traders
If you employ people within the United Kingdom, you are legally required to hold employers liability insurance, there are a few exceptions to this and this information can be found on our main employers liability page, but for the most part you will require the cover. The required limit if £5M although in practice insurers issue polices with a £10M limit. You will not generally be able to buy employers liability insurance on a stand-alone basis and you will purchase it alongside your public liability insurance or as part of a package insurance such as shop or office.
Employers liability insurance protects the policyholder in respect of claims made against it in for any legal liability for death, injury or disease arising in the course of the employment.
Property Insurance
Having dealt with legal liabilities, we turn our attention to the protection of you financial interests in any property you own or are responsible for. Many sole traders will have limited physical assets, such as tools or stock and these can be added to an appropriate liability insurance policy that provides this option.
For others if you have business premises you will need to make arrangements for the property to be insured under an appropriate package policy. These policies, shop, office, business combined, are available for almost all trades and occupations and provide the additional benefit of also wrapping up your public and employers liability insurance needs alongside your property insurance requirements in one neat package.
How do I buy insurance for a sole trader?
We provide instant access on-line to liability insurance for sole traders with a hundreds of occupations available immediately with buy on-line facilities. If you prefer you can speak to one of our brokers directly who will be delighted to assist you with any questions you may have and provide you with our best terms for sole trader insurance.