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Insurance for sole traders

Protecting the way you want to work.

There are multiple advantages to operating as a sole trader, but when it comes to protecting yourself against accidents and illnesses, the fact that sole traders aren’t covered by workers compensation insurance can be a major negative.

When you are a sole trader or proprietor, you are not considered to be a “worker” — which disqualifies you from taking out workers compensation insurance, an insurance that is compulsory for all other employers, and leaves you without coverage for any injuries you sustain in the course of your work or injuries and illnesses that prevent you from continuing to work.

While employees who suffer injuries while on the job can at least take some comfort in knowing that their employer’s workers compensation insurance will provide some financial and medical support while they recover, as a sole trader, you won’t be afforded this peace of mind.

As such, it’s important for you to consider alternative insurance options — even if you decide they’re unnecessary, it’s certainly worth doing some research on the alternatives in order to make a decision that is best suited to you and your particular situation.

Two insurance policies worth considering as a sole trader are personal accident and illness insurance and income protection insurance, both of which are quite similar in nature. Let’s have a look at these two policies and how they’ll be of benefit to you in a little more detail.

Personal accident and illness

The idea of this type of insurance is that it will help protect your income by paying a percentage of your salary if you suffer an injury or event that prevents you from continuing to work and earn money.

It’s not pleasant to think about, but personal accident and illness insurance is designed to cover you for — in most cases — loss of, or loss of use of, a limb, permanent and total disablement, and death. The definition of “disablement” may vary between policies.

Aside from the obvious benefits of this policy, it can also help cover any medical bills and may pay out a lump sum for certain types of accidental injuries — be it to you or, in the event of death, to those who are listed as beneficiaries on your policy.

An alternative to personal accident and illness insurance is accident only cover. With this type of policy, you would be protected if you suffered an accident, but would not be covered in the event you suffered from an illness.

As a bonus, the premium you pay for personal accident and illness insurance is tax deductible.

Income protection

Income protection

insurance typically covers up to 75 per cent of your income for a defined period of time (usually a maximum of two years) if you are prevented from working as a result of an illness or accidental injury.

After serving a nominated waiting period (typically between 30 and 90 days), income protection benefits are usually paid on a monthly basis, but in some cases a lump-sum payment may be an option.

As with personal accident and illness insurance, the premiums paid on an income protection policy are tax deductible.


While we aren’t advocating for or against you taking out either of these policies, we are suggesting that you take into account the specifics of your situation and give some significant thought to your decision on whether or not these insurances a relevant to you.

Some questions that may be pertinent for you to answer include the following:

  • What is your family situation?

  • Do you have a spouse, children or other dependents who rely on your income?

  • Are you the sole provider?

  • What is your overall financial situation?

  • Would you and/or your family be able to withstand any period of time — be it short or long — without the income from your business?

  • What is the longest amount of time you or your family would be able to survive without the income from your business?

  • What kind of ongoing expenses do you have? Are these expenses reliant on the continued income from your business?

  • If you were unable to work, would your business fold?

  • Do you have loans/mortgages that would default if you were unable to work and earn an income?

Having a think about the answers to these questions will go a long way towards helping you make a decision that is best for you and anybody else who may be reliant on the income provided through your business. You may wish to consult with a financial or business adviser if you are still unsure about your options and what might be best for you.

If you do decide that one of the insurances discussed is relevant to you, make sure you get a few quotes from different insurers and assess each policy to be certain that the choice you make is the right one for you and your situation.

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