What insurance does a sole trader need?

What insurance is compulsory for sole traders?

It depends on what you do, where you operate and whether you hire staff.

Workers’ compensation insurance (if you employ people)

If you have employees, workers’ compensation is generally required and is regulated at state and territory level. 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.

Some contracting arrangements can also trigger obligations if a contractor is treated as a “deemed worker” under the relevant state scheme.

Other “must haves” may come from contracts, not laws

Even if a policy is not legally mandated, it can be effectively compulsory because:

• your client contract requires it
• a council, venue, shopping centre, or body corporate requires certificates of currency
• a platform or industry body requires minimum limits to participate

Do sole traders need public liability insurance?

In many cases, yes, public liability for sole traders is strongly recommended, even if it is not always legally compulsory. If you interact with the public, work on client sites, run workshops, do physical work or have customers visiting you, public liability is often the first policy to sort out.

The reason is simple: as a sole trader, you can be personally responsible if your business activities cause injury to a third party or damage to someone else’s property. A single incident can quickly become an expensive claim, particularly once legal costs are involved.

Even when it is not legally compulsory, public liability is often effectively required because clients, venues, principal contractors, body corporates and councils may ask for proof of insurance before they will engage you.

Public liability is especially important if you:

• work on client sites or in public spaces (tradies, cleaners, gardeners, mobile operators)
• have customers visit you (including home studios and offices)
• run classes, workshops, events, pop-ups, markets or stalls
• use tools, equipment, chemicals or anything that could create a hazard
• subcontract or work under contracts that specify minimum insurance limits

What public liability does and does not cover

Public liability insurance is designed to respond to claims where your business is alleged to have caused:

• third party injury, or
• third party property damage and you are legally liable.

It generally does not cover:

• claims that your professional advice caused a financial loss (this is where professional indemnity insurance is relevant)
• damage to your own tools, stock, or equipment
  injuries to you as the business owner (consider personal accident or income protection style cover)

What Other Insurance Should Sole Traders Consider?

Professional indemnity insurance 

If you give advice, design, certify, consult or provide professional services where a client could claim financial loss, professional indemnity is the big one.

This is relevant for: consultants, bookkeepers, marketing providers, designers, IT contractors, engineers, trainers, allied health professionals and plenty more.

What it generally covers:

• claims that your advice or services caused a client financial loss
• alleged negligence, errors, omissions or breach of professional duty
• legal costs and settlements (subject to policy terms)

Quick gut-check: If your work ends up in a document, strategy, plan, recommendation, calculation, report or design, professional indemnity insurance for a sole trader is worth serious consideration.

Product liability insurance 

If your business sells, supplies, imports or makes products, product liability helps protect you if a product causes injury or property damage.

Examples

• A product you supplied causes an allergic reaction
• A faulty item damages a customer’s property
• A handmade product causes injury due to a defect

Often, product liability is combined with public liability in one policy, depending on the insurer and industry.

Personal accident or income protection (protecting you, not just the business)

Here’s the uncomfortable truth: if you cannot work, income can stop fast.

Many sole traders choose personal accident or income protection style cover to help replace income if injury or illness takes them out of action.

When this matters most:

• your business relies on you personally delivering the work
• you do physical work (tradies, gardeners, cleaners, removalists)
• you do client billable work (consultants, creatives, contractors)
• you have little sick leave safety net (most sole traders do)

Tools, equipment and portable contents insurance

If your tools, laptop, camera kit, or specialised gear is stolen or damaged, it can stop your work overnight.

This cover can be structured in different ways depending on your setup (portable equipment, contents, specified items, tools of trade). For tradies and mobile operators, it is often essential.

Cyber insurance (yes, even for small operators)

If you invoice clients, store customer details, use cloud systems, take online payments or rely on email to operate, cyber risk is very real.

Cyber cover can help with costs tied to events like:

• ransomware or hacking
• business email compromise and invoice fraud
• data breaches and notification costs
• system restoration and incident response

Even sole traders can be targets because smaller businesses often have less security in place.

Business interruption insurance (if downtime would hurt)

Business interruption cover is designed to help when an insured event disrupts your ability to trade (for example, fire or storm damage at premises, depending on policy structure).

This can be more relevant if you have:

• a workshop, studio, clinic, or retail space
• key equipment you cannot operate without
• fixed costs that keep running even when revenue pauses

Commercial motor (if you use a vehicle for business)

If your car, ute, van or truck is used for business, you may need a commercial motor policy rather than standard personal cover, depending on usage and insurer rules.

How to choose the right cover (without overpaying)

Step 1: Map your risk profile in 10 minutes

Ask yourself:

• Do I have clients or members of the public near me while I work?
• Do I work on other people’s property?
• Could my advice or work cause a financial loss, not just physical damage?
• Do I sell or supply products?
• What gear would stop my business if it was stolen tomorrow?
• Could I survive 4–8 weeks without income if I was ill or injured?
• Do I store customer data or take payments online?

Step 2: Think in scenarios, not policies

A good approach is to list your top 5 “oh no” moments, then insure to reduce the financial impact:

• injury claim at a client site
• allegation your advice caused loss
• laptop stolen with client files on it
• phishing scam drains funds
• you cannot work for 6 weeks

Step 3: Get the limits right

The “right” limit depends on:

• contract requirements (often the simplest benchmark)
• how public-facing your work is
• the value of the sites you work on (homes vs commercial sites vs events)
• worst-case injury scenarios
• the size of projects and potential downstream financial loss (for professional indemnity)
  
  

Common sole trader insurance packages (what brokers often bundle)

Many sole trader business insurance solutions are built as a simple package, then tailored with add-ons. A typical structure might include:

• public liability (and product liability if relevant)
• professional indemnity (if advice/services risk exists)
• tools/equipment and portable contents
• cyber (where data and payments are involved)
• personal accident/income protection style cover for you

A broker can help avoid gaps, overlaps and “I thought that was covered” moments by aligning policies to what you actually do day-to-day.

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.”