Becoming a sole trader is exciting. You can be your own boss. But being your own boss also means doing all of the boring bits and one of those boring bits is arranging insurance to protect your business.
Thankfully, there are people who can help you sort out the best insurance to protect your business at the best price. But in order to get insurance for your business you need to:
- Know what insurance you need
- Gather the information that your insurance provider will need
- Speak to your insurance provider
What insurance do you need?
There are a number of different types of insurance and which types you need will depend on what type of business you are operating.
Generally, public liability insurance is the most important type of insurance for a sole trader. This covers compensation claims made against you by members of the public. It also covers any associated costs and expenses, including any legal fees that have been incurred.
Injury Insurance cover is also important. This covers you if you are unable to earn money because you have been injured or fallen ill. This means that you won’t need to worry about whether you can cover your monthly outgoings and can concentrate on your recovery instead. It pays a weekly benefit while you are unable to work or a lump sum if you will be unable to work permanently.
You should also consider legal expenses insurance. Among other things, this protects you if you find yourself involved in legal action because you’ve had a dispute with a client or a neighbour, have had criminal charges brought against you or become subject to a tax/VAT investigation. Your legal expenses insurer will also help you handle any legal action.
Property insurance is also worth considering. This covers you if your business property is accidentally damaged or stolen. Depending on the nature of your business it might not be worth spending money to insure your business property, but most sole traders are surprised when they add up the value of the equipment that they use in their business, particularly when things like computer equipment are included.
The information you will need
Your insurance provider will obviously want to know your name and address, but they will also want to know a little bit more about you. They’ll want to know whether you’ve had to make any previous insurance claims, and if you have, they’ll want details of those claims. They’ll also want to know what experience you have in your industry and whether you have any qualifications.
For public liability insurance, your insurance provider will want to know what your business involves and what its annual turnover is expected to be. They’ll also want to know what indemnity limit you require. The indemnity limit is the maximum an insurer will pay in the event of a claim. The standard limit is £1,000,000 but some of your contracts may require you to have a higher limit, or a higher limit may be required as a condition of your membership of a professional association or trade body.
The nature of your business will also be relevant if you require personal accident and sickness insurance. You’ll also need to think about what level of cover you require. Clearly, if you require a higher weekly benefit, the premium will be higher.
From a property insurance point of view, your insurance provider will want to know what property you have, how much it’s worth and where it’s kept. They may also want to know what security you have to prevent it being stolen.
Speaking to your insurance provider
Your insurance provider is there to help you, so don’t be afraid to ask questions if you need any information or you don’t understand anything. It’s better to make sure everything’s right before you have to make a claim than it is to try to fix a problem once an incident has occurred.