Types of self-employed insurance
Even if you are a sole trader working entirely on your own, there are numerous types of business insurance that you should consider in order to protect yourself from a series of worst-case scenarios.
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Professional indemnity insurance
To a certain extent, you may not have a choice when it comes to professional indemnity insurance.
Although it is not a legal necessity, many institutions, associations and regulatory bodies you may wish to join as a sole trader require professional indemnity insurance as a condition of your membership. Sometimes it may even be your client who is insisting that you have this type of cover before they hire you.
Professional indemnity insurance covers a wide range of sectors, from those providing advice – such as accountants, consultants and solicitors – to jobs involving specifications, such as architects, interior designers and web developers or designers.
It would typically be applied in situations where, as a result of your actions or recommendations, you have caused a financial loss for a client, or if your services have been deemed inadequate.
For example, if in the process of designing a website you accidentally use images that are not your intellectual property, professional indemnity insurance would cover your costs if you are sued.
Similarly, if you make an error as a freelance accountant, this kind of policy would take care of your legal fees and compensation costs.
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Public liability insurance
Public liability insurance for self-employed workers covers the legal costs and compensation claims for personal injury or death, and property loss or damage, caused by your business activities. With this kind of insurance, the claims would typically be made by a client, visitor to your workplace, or a member of the general public.
For example, if you are a plumber, and a pipe you installed bursts due to it not being fitted properly, public liability insurance would cover you if you were sued for negligence.
It can even be helpful if you are a live performer, such as a DJ. Say the venue is damaged during your performance, or someone is injured in an accident. A public liability insurance policy would prevent you from having to pay any compensation costs out of your own pocket.
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Product liability insurance
If you operate a bakery business at weekend food markets, or make money from selling your creations on online marketplaces such as Etsy, you might want to look into product liability insurance for sole traders.
An honest mistake can still lead to claims against your business if an item or product you sell causes injury or property damage. And it doesn’t matter whether you were the manufacturer of the item or not as this cover even includes items you give away for free.
There are a variety of situations in which product liability insurance can come to the rescue of a sole trader dealing in goods.
This could be someone getting food poisoning from a batch of cookies, an allergic reaction caused by a mislabelled product, or a cut hand from a jagged piece of packaging, for example.
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Employers’ liability insurance
If you do not have any employees, you do not need employers’ liability insurance. It’s as simple as that.
However, the moment you hire just one employee, it is a legal requirement in the UK to take out an employers’ liability insurance policy with coverage of at least £5 million from an authorised insurer. You will also need this cover if you are a limited company with any shareholder owning less than a 50% stake in the business. So for example, if you are two sole traders owning a 60:40 share of a business.
Employers’ liability insurance is designed to cover compensation costs and legal fees if an employee becomes ill or injured while carrying the work they do for you.
You may not need it if you run a business that only employs members of your own family or are employing someone who is based abroad.
So, for example, if you are a freelance writer, or an independent plumber working on your own, you would not need to take out this kind of policy.
On the other hand, if you are an electrician with a paid apprentice, or a food truck owner with a team of cooks, you would need employers’ liability insurance.
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Other types of insurance to consider if you are self-employed
Business car insurance
While you must have car insurance as standard to drive in the UK, you will need to take out a specific business car insurance policy if your job involves you doing more than just commuting to and from your workplace.
For example, this could be a builder driving to multiple sites, a salesperson going from client to client, or even running work errands during the day.
Of course, there are also jobs where a vehicle is a primary part of your work, for example if you drive a van or a taxi. These would need their own commercial car or vehicle insurance policies.
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As a self-employed courier delivering food or goods for a living, there are two main forms of insurance to consider.
The first is hire and reward insurance, which is a legal necessity if you are carrying other people’s goods, or paying passengers of any kind.
The second is goods in transit insurance. This will cover the cost of replacing the goods you are delivering if they are lost, stolen or damaged.
» MORE: Do you need business insurance to deliver food?
There are many professions where tools are vital to their trade, such as carpenters, builders and plumbers.
But tool insurance doesn’t only provide cover for the accidental loss, theft or damage of ‘traditional’ tools, such as wrenches, saws and screwdrivers. It also includes modern devices, such as mobile phones and laptops, although such items may sometimes fall under business equipment insurance.
So if your work requires an item that you simply cannot do without, you should look into tool insurance.
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Business contents insurance
In order to financially cover the damage to, theft or loss of your stock, equipment, and even documents, you may want to look into business contents insurance. It can also include cover for fixtures and fittings, and employees’ personal belongings.
This kind of insurance is applicable to a range of different professions, from beauty therapists running their own salons to accountants working from home.
Business equipment insurance
While there is overlap between business contents insurance and business equipment insurance, the latter is sometimes more suitable for items such as laptops, mobile phones, and machinery, whether that’s own-plant or hired-in plant.
A good policy should cover you if your equipment is lost, damaged or stolen.
Commercial property insurance
If you want to protect the bricks and mortar of your business premises, then you may want to consider commercial property insurance. This can include cover for repairing damage caused by fires, flooding, riots, storms and burst pipes.
In order to protect your business from digital threats, you may want to look into cyber insurance.
Cyber insurance can help cover costs related to the loss of or damage to digital assets, cyber exhortation, and data breaches and the subsequent impact on the reputation of you, your business, or a client.
Business interruption insurance
If an event, such as a flood, fire or breakdown of essential equipment, prevents you from carrying out business as usual, then business interruption insurance may help cover the loss of your pre-tax profits, or increased costs related to the running of your business.
Personal accident insurance
It isn’t only clients or members of the public who can get injured during your working day.
Dedicated personal accident insurance – separate to a life insurance policy or private healthcare insurance – can help if you were to be injured either at work or elsewhere to the extent that you could no longer earn an income.