What is a sole trader?
There are two types of sole trader:
- Self-employed people who work alone with no employees
- Sole trader businesses with employees which are set up with a sole trader legal structure, where an individual takes sole responsibility for the losses and receives all the profit
Many freelancers who work alone set up limited companies rather than use a sole trading business structure.
Why should you consider buying sole trader insurance?
For many freelancers and professionals, the terms of their contracts stipulate that they must be insured – normally for professional indemnity and public liability.
As a sole trader, you need to find out what type of insurance your clients require, plus the limit of coverage. Ask any professional bodies and institutions that you belong to what insurance is expected in your line of work.
Sole trader insurance is not only purchased for contractual demands – there are many risks involved with working as a sole trader and taking out specialist sole trader insurance will give you the confidence that you need to further your business, increase your profits and sustain them.
Having sole trader insurance in place will set you ahead of your competitors when you pitch to clients, plus you will be able to run your business with the peace of mind that you and your business are protected if the worst was to happen.
What should I look out for when choosing sole trader insurance?
There are many types of insurance to choose from within a sole trader package, which can be tailored to suit your own individual business needs.
- Don’t assume your home insurance covers your operation as a sole trader- read the small print
- Be pessimistic! Add up the highest cost of what you might need to cover
- Think who your clients are – do they have a team of lawyers behind them to protect them if anything goes wrong?
- Your potential liability is the value of your largest contract, so make sure you protect yourself accordingly