Not only do you need to shine in your sector, but you need to acquire the other skills necessary for running a business such as accounting and business development. With all of your time taken up with running your business and preparing it for the future, some critical aspects can be neglected, such as insurance.
When you are a sole trader, you may believe that insurance is an unnecessary expense. After all, you are often the only one in your business, and many think that they will be the only ones affected in the case of a financial loss or unexpected disaster. However, insurance can prove to be invaluable.
Having insurance can provide peace of mind that you, your clients and your business will be protected in emergency situations. With so many different insurance providers and policy types out there, what is specialist insurance for sole traders and do you need it?
Sole trader insurance can have broad coverage of a number of different policies.
Depending on what your business does will impact the type and amount of coverage you need for different areas. Some of the aspects that you can expect to find in insurance for sole traders includes;
If you are a sole trader who provides services such as giving advice or professional knowledge, then you will need professional indemnity insurance to protect your clients and the success of your business. If a customer takes legal action against your organisation based on the work provided, then you may need financial assistance to cover the claim worth as well as the legal costs you may face.
While you may not intend to do so, it is common for businesses to breach their professional duty or provide advice which proves to be negligent. You may not think it will happen to you, but clients are unpredictable, and you need to be sure that you have the financial support to cover any issues that impact your business and its professional capacity.
People often avoid taking out professional indemnity insurance; this is because it used to be very expensive as a policy. Now, with the increase in freelance workers, sole traders and small businesses, there is a broader range of plans and providers available. Therefore, the costs for professional indemnity insurance are much more competitive.
Typical professional indemnity insurance will cover you for at least £100,000. Depending on the nature of your sole trader business, it is worth reviewing the reasonable coverage amount that you need, based on the risk and nature of your work.
Public liability is considered a must-have insurance policy for all sole traders. It is this insurance that will protect you and your valued customers. Public liability insurance for sole traders means that you have financial support for legal liability matters that affect the public. This insurance will help to protect you should anyone suffer from personal injury or have property damage as a result of your business.
In a claim culture, having public liability insurance is essential to protect you financially in the event of a claim. When legal costs can run into thousands before the case even makes it to court, insurance can lessen the impact on your personal finances. If you do not have insurance to cover the cost of a claim or legal advice, then the financial loss can devastate your business as well as your personal life.
As public liability insurance is so universal, it is relatively cost-effective. In the grand scheme of your business, it is a worthwhile cost. As with all insurance costs, the higher the risk of a claim occurring, the more expensive the policy will be.
Typically, public liability insurance is included as standard into a specialist sole trader policy. Usually, the level of coverage will begin at £1 million. If your business is high risk, then you can increase the cover limits to suit your needs. In some cases, local authorities and contracts with suppliers and customers will dictate the level of public liability insurance needed, so make sure to check carefully before choosing your policy.
When it comes to protecting physical assets, one that is important for sole traders is the property that you operate your business from. When it comes to sole trader insurance, you can often select the most relevant property insurance for your needs; this may include office or shop insurance. It may also include business combined insurance which covers a multitude of trades and professions.
Remember, some business insurance policies will only cover liability, not necessarily physical assets and property, so make sure to specify exactly what you need to cover. When it comes to protecting your property, some policies will include the buildings as well as the contents. So, make sure to have an accurate estimate of the cost of the building and contents.
Property insurance for sole traders will protect your assets from accidental damage, such as floods, leaks, storms and fire. It can also protect you against theft. When choosing property insurance, it may be a balance of what you can afford to replace without insurance and what you will need financial assistance for. If you cannot afford to replace an item, then make sure to insure it.
As well as covering accidental damage, property and business insurance can help to protect your business from loss of income too. This means that if you have to close your business for repair works, your insurer may offer financial help to cover the cost of a loss of income. Some policies will even help with extra trading expenses too.
Many sole traders believe they do not need employers’ liability insurance and fall foul of the law. There is a legal requirement to have employers’ liability insurance if you employ a member of staff. For sole traders, however, this can prove complicated. If you are a sole trader and never have assistance or take on employees, then you do not need employers’ liability.
Sole traders and partnerships do not need employers’ liability insurance if only close family members work at the business. There are restrictions on what the Health and Safety Executive (HSE) defines as close family members, and you need to check whether your relationship is valid and abides by the law.
If your business takes on occasional or temporary staff, then you will need employers’ liability insurance. However, you are able to add on an employers’ liability policy to your sole trader policy for a specific period of time (to cover the length of the employment). Sometimes, selecting the specific timeframe may lower the cost of your policy. However, you will always need to make sure it is in place if you employ someone regardless of their length of the contract. In some cases, it may be better always to have employers’ liability insurance in place so you do not have to worry and is a weight off your mind.
The required limit for employers’ liability insurance is a minimum of £5 million. However, most insurers will provide cover for £10 million as standard. As employers’ liability often comes as part of a package for businesses and sole traders, the cost of the insurance is usually competitive.
The law takes employers’ liability insurance very seriously as it protects you and your employees from claims as a result of death, disease or injury as a result of the workplace. Should anything happen to your workforce, regardless of how long they have worked with you, you will be covered for any claim. As personal injury claims can be extremely costly, it is no surprise that the law ensures that all businesses with employees have employers’ liability insurance in place.
When it comes to finding the right coverage, every sole trader business is different.
It is essential to find the right policy that best suits your business, your needs and your financial situation. It can often be cheaper to have a single policy encompassing every aspect of your shop or sole trader business. It is worthwhile asking to include coverage for all aspects of your business from contents to property to employer’s liability to make sure you and your business are covered for every eventuality.
Income Protection may also be a good idea for a sole trader, especially if the sole trader is the main earner.
Some policies may include personal accident insurance as well as legal representation and even cyber and data risks insurance. Remember to be honest when discussing your insurance needs with a broker or supplier, that way they will be able to find the most appropriate insurance package to suit your needs and make sure that your business has financial security should any emergency, or unforeseen event take place.