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Self-Employed Business Insurance: What It Is, How it Works & Do You Need It?

Business insurance is financial protection in the event something doesn’t go as planned when you work for yourself. It is a blanket term used to describe the different types of cover available to protect your business financially, depending on what you do.

When you take out business insurance a bespoke package will be built for you with the cover you need that is relevant to your business.

Types of Business Insurance Available for the Self-Employed

Here are some of the main types of self-employed business insurance available:

Professional Indemnity

Professional indemnity (PI) is usually for sole traders who have service-based businesses. It provides covers for legal costs and expenses incurred if you provide incorrect or inadequate advice which causes your client financial loss.

Public Liability

Public liability is cover for legal fees and compensation in the event that a member of the public is injured or their goods are damaged as a result of coming into contact with your business or member of your team either at your business premises or customer premises.

Product Liability

Insurance for legal fees and compensation in the event that someone is injured or their property is damaged by goods or products you have sold them.

Business Equipment

Cover for the cost of replacing equipment that has been lost, stolen or damaged.

Business Interruption

Financial cover if you are unable to trade and need to be compensated for loss of income or profits as a result of a major event or natural disaster such as a fire, explosion, theft and vandalism. Some policies offer cover for increased trading costs to cover the increase in overheads if you find a way to trade despite the event. Business interruption on covers financial losses but separate insurance is required to cover things like business premises and equipment.

Employers Liability

This is a legal requirement if you are an employer offering cover in the event an employee is injured or killed while working for you. Employer’s liability only covers people who receive a payslip from being on your payroll so if you are a sole trader working alone you probably won’t need this.

It does not cover injury of sub-contractors, consultants or contractors who invoice you for their services.

Business Motor

Business motor insurance is different from personal motor insurance and is frequently overlooked. If you plan to use your car for business, then you should let the insurer know and extend your policy for business cover. Business motor insurance is generally more expensive than personal motor insurance because insurers assume you will use your vehicle more and drive more miles, in particular during rush hour.  

Self-Employed Income Protection

Income protection insurance (also known as life insurance) is financial cover in the event that you fall ill and cannot work, or worse. Income protection pays out sums of money to help you pay your bills while you are not able to work.

Business Insurance If You Work From Home

If you are self-employed and run your business from home then you may need to consider small business insurance, alongside your home policy.

For example, you may have expensive equipment in your home that may not be covered under your home insurance. Or if you have clients visiting your home, then you may need to consider public liability insurance, in case they are injured in your home.