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As a sole trader, you and the business are the same legal person, so a claim against the business is a claim against you and your personal assets. The covers most sole traders consider are public liability (the one clients and councils most often ask for), professional indemnity if you give advice or professional services, cover for your tools and equipment, and personal accident and illness or income protection for yourself, because workers compensation doesn't cover a sole trader's own injuries in any state.
Very little of it is compulsory while you work alone. That changes the day you take on an employee, including an apprentice or a contractor who counts as a worker, when workers compensation becomes a legal requirement. Some professions also require PI for registration, and some states require public liability for certain occupations.
By Better Rate Mate Editorial Team ยท Last reviewed
The right mix depends on what you do. A mobile hairdresser needs public liability and tools cover more than PI; a freelance bookkeeper is the reverse. Everyone who relies on their own ability to work should look at cover for themselves.
| Cover | What it pays for | Compulsory? | Most relevant to |
|---|---|---|---|
| Public liability | Injury to others or damage to their property caused by your work | Only for certain occupations in some states; often required by clients, councils and landlords | Anyone working with the public or on other people's premises |
| Professional indemnity | Clients' financial loss from your advice or professional work | For some professions (for example, tax agents and registered health practitioners) | Consultants, bookkeepers, designers, IT contractors, health practitioners |
| Personal accident and illness | A weekly benefit if injury or illness stops you working, for a limited period | No | Every sole trader whose income stops when they stop |
| Income protection | Part of your income for longer periods if you can't work | No | Sole traders who want longer-term income cover |
| Tools and portable equipment | Theft of or damage to tools, laptops and equipment away from home | No | Tradies, photographers, mobile workers |
| Product liability | Injury or damage caused by goods you make, import or sell | No | Makers, importers and online sellers |
| Cyber | The costs of a hack, ransomware or data breach | No | Anyone taking payments online or holding client data |
| Workers compensation | Your workers' wages and medical costs after a work injury | Yes, once you employ workers | Sole traders who employ anyone |
Workers compensation insures an employer's workers, and a sole trader isn't their own employee. business.gov.au says it directly: if you're a sole trader, workers compensation doesn't cover you, and you'll need your own death, illness and disability cover. The schemes say the same thing in their own words, with a few options worth knowing about, summarised in the table below.
Each scheme's rules for owners, directors and contractors are set out in our state guides: NSW, Victoria, Queensland, WA, South Australia, Tasmania, the ACT and the NT.
| State | Covers the sole trader? | Options for owners |
|---|---|---|
| NSW | No. icare says sole traders, proprietors and partners can't cover themselves | icare points to personal accident and illness cover or income protection |
| VIC | No. Sole traders and partners without employees don't register | If your own company employs you, you are its worker and it must register |
| QLD | No. Sole traders, partners, directors and trustees aren't covered by WorkCover's accident insurance | Optional Workplace Personal Injury Insurance from WorkCover Queensland |
| WA | No. Individuals generally can't cover themselves, even with an ABN | A company can choose to cover its working directors |
| SA | No. The scheme covers workers under a contract of service | Working directors employed under a contract of service are workers |
| TAS | No. The scheme insures employers for their workers | Private accident and illness cover |
| ACT | No. WorkSafe ACT says sole traders and partners aren't workers | Private accident and illness cover |
| NT | No. The scheme covers workers under the PAYG test | Directors can be covered if paid through PAYG and disclosed to the insurer |
Two kinds of product replace income when you can't work. Personal accident and illness (sometimes called accident and sickness) is general insurance. business.gov.au describes it as paying you for loss of income while you recover. It's often sold alongside business packages, with benefits paid for a limited period and relatively simple underwriting.
Income protection is a life insurance product. It can pay for much longer benefit periods, but the application process is more detailed. For both, compare the waiting period before payments start, how long they last, how the policy defines being unable to work, and how your income is assessed, because sole traders' earnings vary and some policies average them over a period.
In Queensland there's a third option: WorkCover Queensland's Workplace Personal Injury Insurance, an optional policy for contractors, self-employed people, directors, partners and trustees. WorkCover says the minimum premium is $1,650 a year, including GST and stamp duty. It covers work-related injury only, not illness or injury outside work.
Public liability is the cover sole traders are most often asked for. It covers your legal liability if someone is injured or their property is damaged because of your negligence while you're working, and because a sole trader's personal assets aren't separate from the business, a serious uninsured claim can reach your home and savings.
The questions to settle before you buy are the limit (a council permit or subcontract may require $10 million or $20 million), whether products liability is included if you sell or install goods, and whether the occupation on the policy matches everything you do. Most insurers ask for your ABN.
The day you employ someone, including a casual, a part-timer or an apprentice, workers compensation becomes compulsory under your state's scheme, subject to the small-wages exemptions in NSW, Victoria and South Australia (which don't apply to apprentices and trainees in NSW and Victoria). Deadlines can be short: 5 business days in Queensland and 14 days in South Australia.
Using subcontractors can trigger it too. A contractor who mainly supplies their own labour and works under your direction can be your worker in law even if they have an ABN. Check your state's test on the workers compensation page.
Sole trader premiums are driven by the same factors as any business: your occupation, turnover, limits, claims history and excess. Keep those constant across quotes:
Most sole traders consider public liability, cover for their tools and equipment, and personal accident and illness or income protection for themselves. Add professional indemnity if you give advice or professional services, product liability if you sell goods, and workers compensation if you employ anyone.
It isn't compulsory for most sole traders, although some states require it for certain occupations. In practice many clients, councils, landlords and head contractors won't work with you without it.
Not for themselves: workers comp doesn't cover a sole trader's own injuries in any state. You must insure any workers you employ, and some subcontractors count as workers.
Having an ABN doesn't by itself require you to hold any insurance. Requirements come from what you do: employing workers (workers comp), your profession (PI for some), your occupation in some states (public liability), a registered vehicle (CTP), and the contracts, leases and permits you sign.
The same as a sole trader: public liability if you work with the public, PI if you're paid for expertise, tools and equipment cover, and cover for your own income, because workers comp doesn't cover self-employed people.
It depends on your occupation, turnover, the limit you choose, whether products liability is included, your claims history and the excess. Get quotes with identical details from several insurers to see the real difference.
The ATO lists business insurance premiums, including public liability, professional indemnity and accident or disability cover, among the operating expenses a business can generally deduct. Check your own situation with your accountant.
This page explains how insurance for sole traders generally works. It is not advice about your business or any particular policy. Read the Product Disclosure Statement and Target Market Determination before you buy.
