Do You Need Business Insurance as a Sole Trader?

Operating as a sole trader gives you flexibility and control but it also means you're personally responsible for any risks your business takes on.

In this article, we’ll walk through:

• Are sole traders legally required to have insurance?
• Types of insurance sole traders should consider
• Industries where insurance is essential
• How much does business insurance cost?
• How to set up your business properly

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1. Are sole traders legally required to have insurance?

In most industries, business insurance is not legally required for sole traders.

However:

• Some platforms (like Uber or DoorDash) may require insurance as part of their terms
• Certain contracts or clients may also request proof of insurance
• Some insurances are required by law to run your business
• You’re personally liable for your business activities, so insurance can protect your home, car, and other personal assets if something goes wrong

Even if it's optional, insurance is a smart way to reduce personal risk. Insurance premiums are also considered an operating expense and are tax-deductible.

2. Types of insurance sole traders should consider

Here are the most common insurance types for sole traders:

Public Liability Insurance

Covers you if someone dies, gets injured or has their property damaged because of your negligence. This is essential for any business with physical customer interaction or site visits.

Professional Indemnity Insurance

Important for sole traders who offer advice or services (e.g. consultants, designers, therapists). It covers claims of mistakes, neglect or breaches of contract that result in a loss for your client negligence or errors in your work.

Income Protection Insurance

Covers a part of your income if you’re unable to work due to illness or accident. Since sole traders don’t get sick leave, this can help cover essential expenses.

Business Interruption Insurance

Helps pay your ongoing business cost if an insured event disrupts your business like fire, theft, or natural disasters.

Portable equipment insurance

Protects assets like tools and electrical equipment you take on a job with you, in the event of accidental loss, damage or theft.

3. Industries where insurance is essential

If you're working in any of the following industries, business insurance may be mandatory or highly recommended:

• Trades and construction
• Delivery and rideshare
• Health and wellness (e.g. fitness professionals, therapists)
• Professional services (e.g. marketing, consulting, design)

Some clients may not work with you unless you have the right insurance in place.

4. How much does business insurance cost?

Business insurance varies depending on:

• The type of cover you need
• Your annual turnover
• Your business activities and risk exposure

For example:

• Basic public liability insurance can start from as little as $30 - $50 per month
• Costs go up for higher-risk industries or higher levels of cover

To compare policies across leading providers, you can use platforms like BizCover for business insurance, which helps sole traders quickly find and customise cover based on their industry.

5. How to set up your business properly

To operate professionally and protect yourself:

• Register for your ABN 
• Keep personal and business finances separate
• Set up invoicing and record keeping
• Choose appropriate insurance to reduce your personal exposure

Even if you’re just starting out, having these foundations in place builds long-term confidence and compliance.

Business insurance in a nutshell

While business insurance isn’t legally required for most sole traders, it’s highly recommended - especially if your work involves clients, physical spaces, or professional advice.

The right cover can protect your income, your business reputation, and your personal assets. Explore business insurance obligation-free with BizCover.

Need to register your ABN before applying for insurance? Use Register My ABN for a fast and easy ABN registration for only $45 incl. GST.