A sole traders guide to understanding Public Liability Insurance

Sole traders are people who own and run a business as individuals. Australian sole traders enjoy many benefits that come with being self-employed, from setting their hours and rates to choosing the clients and customers they work with.

But this freedom also comes with the responsibility to protect your business against unexpected risk. Public Liability insurance can help sole traders in various industries—tradies, consultants, personal trainers, creatives, and more—manage some of the most common risks to their businesses.

What is Public Liability insurance for sole traders?

Public Liability insurance covers legal fees and compensation costs if a customer, member of the public, or a supplier claims against you for injury or damage to their property as a result of your alleged negligent business activity.

Public Liability insurance is one of the most common types of cover for sole traders, and helps businesses manage the cost of:

• Personal injury claims – For example, a client breaking their arm after tripping over loose carpet in your office.
• Property damage claims – For example, accidentally spilling coffee on a client’s laptop during a meeting
• Legal defence costs – Court costs and legal representation if a claim is made against your business
• Compensation payouts – Settlements or court-awarded damages

Why is insurance important for sole traders?

As a sole trader, you are personally liable for claims of loss or damage made against your business. Unlike other business structures, if something goes wrong, it is entirely up to you to set things right. In some cases, you could be forced to use your personal savings to settle a claim.

A Public Liability policy can help ensure that legal fees, compensation payouts, and medical costs don’t drain your business and personal bank accounts.

When do sole traders need Public Liability cover?

There is no blanket legal requirement for sole traders to have Public Liability cover in Australia. However, a policy is mandatory for some industries, such as electricians in most states and territories and NDIS providers.

Many clients require proof of Public Liability insurance before they will engage your services. Venues and councils may also require cover if you want to use their spaces for your business activities. A common example of this is a personal trainer conducting sessions in a public park.

Commercial landlords may also require sole traders to have a Public Liability policy to lease their premises.

Do subcontractors need Public Liability insurance?

Subcontractors are typically responsible for their own insurance needs. In fact, the contractors and businesses you work with may require proof of insurance before you can begin work for them.

Do ABN holders need insurance?

Not all ABN holders are required to have Public Liability insurance. However, having an ABN means you’re operating a business, and are therefore open to some level of risk.

Public Liability insurance helps sole traders manage unexpected bills and liabilities related to third-party injuries and property damage. It also demonstrates your professionalism and helps build trust with clients, customers, vendors, suppliers, and other business stakeholders.

How much Public Liability insurance do sole traders need?

The amount of Public Liability insurance a sole trader needs depends on the unique requirements of their business. With BizCover, you can choose from flexible Public Liability limits of $5 million, $10 million, and $20 million (cover levels may vary by occupation).

For example, a sole trader working from a home office who rarely meets clients in person may need a lower Public Liability limit than a retailer who sees customers, delivery people, and others come through their shop every day.

Do sole traders need workers’ compensation insurance?

Sole traders with employees will likely need workers’ compensation insurance to protect their business and staff. Workers’ compensation insurance is mandatory for most businesses throughout Australia. (Please note, BizCover does not currently offer workers’ compensation policies.)

How can sole traders protect themselves?

A Sole trader cannot cover themselves with workers’ compensation insurance. Sole traders are not classed as employees and are therefore ineligible for this type of insurance. You may instead consider a Personal Accident & Illness policy to help protect yourself if you are unable to work due to injury or serious illness.

Personal Accident & Illness insurance provides a weekly income benefit following an accidental injury or illness for a set amount of time once signed off from work by a medical practitioner. You can also choose cover that provides a lump sum benefit for permanent disability or accidental death.

Other types of cover that sole traders may need

While Public Liability is one of the most common types of cover that sole traders choose, it may not be the only insurance your business needs. Depending on your business type and activities, you may also consider cover such as:

• Professional Indemnity insurance – Sole traders may need it to get or maintain a professional or trades license or meet legal requirements for their occupation.
• Business Insurance Package – Yours can be customised to include cover for your tools and equipment, building and contents, unplanned business interruptions, and more.
• Cyber Liability insurance – Can help you manage the costs of data breaches, business interruptions caused by a cyber breach, crisis management, and more.