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A Guide to Sole Trader Business Insurance

Running your own business as a sole trader means you wear every hat! You’re the boss, the accountant, the marketing team and everything in between. With so much on your plate, having the right sole trader business insurance in place isn’t just a smart move - it’s essential.

At BusinessComparison, we can help you find affordable, reliable insurance designed to protect your work, clients and peace of mind. Whether you're a seasoned contractor or looking for new freelancer insurance, we’ll help you compare quotes and get the cover you need.

What is Sole Trader Business Insurance?

Sole trader insurance is a type of business cover explicitly designed for people who run their business as an individual. That includes freelancers, tradespeople, consultants, creatives and more.

Because there's no legal separation between you and your company, any claim made against your work could affect your personal finances. Having insurance in place helps protect you from things like accidental injury, damage to property, professional errors and more.

You can take out a single policy, like public liability insurance, or combine multiple covers to suit your setup.

Types of Freelancer Insurance

Here are some of the most popular insurance options sole traders choose:

Public Liability Insurance

Covers claims from third parties if someone is injured or their property is damaged because of your work. Essential for anyone who works with the public or visits client sites.

Professional Indemnity Insurance

If your advice or service causes a client financial loss, PI insurance can cover compensation and legal fees - a must-have for many freelancers and self-employed workers.

Employers’ Liability Insurance

Legally required if you hire anyone, even part-time, temporary or subcontractors. Fines can reach up to £2,500 per day without it.

Product Liability Insurance

If you manufacture, supply or sell products, this covers you if one of those products causes harm or damage.

Contents Insurance

If you store products or materials, contents insurance can protect them from loss due to fire, flooding or theft.

Self-Employed Insurance

This protects against the potential risks self-employed workers face and protects the business legally.

How Much Does Sole Trader Insurance Cost?

Sole trader insurance costs vary depending on the type of work you do, the risks involved and the level of cover you need. Because no two businesses are the same, insurers base your quote on factors like your trade, location, business size and whether you employ staff.

Before choosing your policy, deciding what type of cover you need is important, whether public liability, professional indemnity, or freelancer insurance. Some sole traders prefer to take out standalone policies, while others combine multiple.

A good rule of thumb for sole trader business insurance is to think about the worst-case scenario. For example:

1. Could you afford to replace your tools if they were stolen?

2. What if a client were injured while visiting your premises?

3. Would a mistake in your work result in a costly claim?

If you’re working on contracts, especially with public bodies, larger companies or in regulated industries, it’s worth checking if they require a minimum level of cover. Generally, premiums are lower for low-risk, home-based businesses and higher for trades or work with higher exposure to risk.

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Sole Trader Business Insurance FAQs

What insurance do I need as a sole trader?

Public liability is often a good place to start. If you work with clients or the public, it covers you if someone is injured or property is damaged. You might also need professional indemnity for consultancy work and employers’ liability if you hire employees.

Is insurance a legal requirement for sole traders?

Not always. However, if you hire employees, employers’ liability is legally required. Certain industries or contracts (like with regional councils or big firms) might mandate specific cover.

Does home insurance cover my business?

Most home insurance policies don’t cover business activities or equipment. If you work from home, it’s worth checking your policy and topping it up with additional cover if needed.

How does the sole trader insurance claims process work?

If something goes wrong, you’ll have access to a dedicated claims team. Your insurer will support you throughout the process - whether it’s fixing damage, replacing tools or defending a legal claim.

Can I get freelancer insurance with the same policy?

Yes. Whether you consider yourself a freelancer or a sole trader, insurance policies are usually flexible and designed to suit the way you work. You can combine covers like public liability, PII and self-employed insurance in one tailored policy.

How much excess will I pay on a sole trader insurance claim?

An excess is the amount you contribute to a claim. For example, if your excess is £250 and the total claim is £1,000, your insurer would pay the remaining £750. You’ll see exact excess amounts listed clearly before you buy a sole trader insurance policy.

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