What is sole trader insurance?
Sole trader insurance isn’t a single policy. It’s a combination of different types of insurance designed to protect you against the risks that come with running your own business.
Unlike a limited company, sole traders have unlimited liability. This means you’re personally responsible for any debts, legal claims, or compensation costs your business incurs.
If a client makes a claim against you, or someone is injured as a result of your work, you may have to cover the costs yourself. That could include legal fees, compensation payouts, or repairs.
Likewise, if your tools are stolen, your equipment is damaged, or a cyber attack disrupts your business, you’d need to replace or recover everything at your own expense.
Because there’s no legal separation between you and your business, these costs don’t just affect your business finances, they can also impact your personal assets, such as your savings or even your home. Insurance helps protect both.
Do you need insurance as a sole trader?
There’s no blanket rule that applies to all sole traders, but there are certain situations where insurance is either mandatory or strongly recommended.
When insurance is legally required
In the UK, you’re legally required to have specific types of insurance if:
You employ staff. In this case, you must have Employers’ Liability insurance with at least £5 million of cover.
You use a vehicle for business purposes. Here you’ll need at least third-party commercial motor insurance.
Your profession is regulated. Some professions (such as accountants, solicitors, or financial advisers) require professional indemnity insurance as part of their regulatory obligations.
Failing to meet these requirements can result in fines or legal penalties.
When insurance is strongly recommended
Even when it’s not legally required, there are many instances where insurance is essential in practice.
You’ll need appropriate cover if:
Clients require proof of insurance before signing a contract. Many clients, especially larger companies and public sector bodies, will ask for proof of insurance before they agree to work with you.
You work on-site or in public spaces. If you rent an office, for example, or work on-site at a client’s property, landlords and site managers often require you to have public liability cover.
You handle valuable equipment or client data. If your work relies on expensive tools, tech, or sensitive information, the financial risk can be significant. For example, a photographer whose camera is stolen or a freelancer who experiences a data breach could face costly disruption without the right cover.
Your work could cause financial loss or physical harm. If a mistake in your work leads to a client losing money, or if someone is injured because of your business activities, you could be held liable. For example, a consultant giving incorrect advice or a tradesperson causing accidental damage could face compensation claims.
We’ll take a closer look at the different types of insurance for sole traders next.
The different types of insurance for sole traders
Most sole traders need a combination of policies. It all depends on the nature of your work, the type of clients you work with, and the risks associated with your profession.
Here’s a quick overview of some of the most important types of insurance for sole traders, followed by a more detailed explanation of each.
Insurance type | What it covers | Who needs it |
|---|
| Injury to third parties or damage to their property | Anyone working with clients, in public, or on-site |
| Claims for financial loss due to advice or services | Consultants, freelancers, and service-based professionals |
| Employee injury or illness caused by their work | Sole traders who employ staff |
| Business use of cars, vans, or other vehicles | Drivers, tradespeople, delivery or mobile workers |
| Data breaches, cyber attacks, and digital disruption | Anyone handling client data or operating online |
| Loss, theft, or damage to business tools and equipment | Tradespeople, photographers, mobile professionals |
| Equipment, furniture, and stock at your premises | Home-based or premises-based businesses |
Public liability insurance
Public liability insurance covers claims if a member of the public is injured or their property is damaged as a result of your business activities. It’s one of the most common types of cover for sole traders who interact with clients, work on-site, or operate in shared or public spaces.
For example, if you’re a cleaner and a client trips over your equipment and gets injured, this policy would help cover legal fees and compensation costs.
With Tide, you can take out public liability insurance from £7 per month. Once you’ve opened your free account, you can get a quote directly within the app.
Professional indemnity insurance
Professional indemnity insurance protects you if a client claims your work, advice, or services caused them financial loss. This could include mistakes, omissions, or negligence.
For example, if you’re a marketing consultant and a campaign you advised on leads to a client losing revenue, they may seek compensation. Professional indemnity insurance can cover both legal defence costs and any payout.
And getting covered doesn’t have to break the bank. Tide offers professional indemnity insurance starting at £8 per month. Get a quote in minutes via the app, pay monthly, and cancel your annual policy anytime if you no longer need it.
Employers’ liability insurance
Employers’ liability insurance is a legal requirement if you employ anyone, including part-time or temporary staff. It covers claims if an employee becomes ill or is injured because of their work.
For example, if an employee develops a health issue due to unsafe working conditions or is injured while carrying out tasks for your business, this policy would cover compensation and legal costs.
For affordable cover, get an Employers’ Liability insurance quote with Tide. From just £7 per month, you can ensure a financial safety net for any employee-related compensation claims, medical expenses, and legal fees.
Vehicle insurance
If you use a vehicle for work, you’ll need insurance that covers business use. Standard personal car insurance often doesn’t include this.
For example, if you’re a sole trader who drives to client meetings, transports equipment, or makes deliveries, you’ll need the appropriate level of cover. Without it, you may not be insured if something goes wrong while using your vehicle for business purposes.
Cyber insurance
Cyber insurance protects your business against digital risks such as data breaches, cyber attacks, and system disruptions. This type of cover is becoming increasingly important for sole traders who rely on online tools or handle sensitive client data.
If your systems are hacked and client data is compromised, cyber insurance can help cover recovery costs, legal claims, and potential regulatory fines.
Tools and equipment insurance
This type of insurance covers the loss, theft, or damage of tools and equipment you rely on for your work. Without it, replacing essential items can be expensive and disruptive.
If a tradesperson’s tools are stolen from their van overnight, tools and equipment insurance would help cover the cost of replacing them so work can continue.
Business contents insurance
Business contents insurance covers items such as furniture, equipment, and stock at your business premises or home office. It’s important because standard home insurance policies often exclude business-related items.
For example, if your laptop, desk setup, or inventory is damaged by a fire or flood, this policy can help cover the cost of repairs or replacements.
How much does sole trader insurance cost?
There’s no fixed or one-size-fits-all price for sole trader insurance. It all depends on your specific business activities and the level of risk involved.
Factors that affect your premium
Several key factors influence the cost of your insurance, including:
Industry and trade type: Higher-risk trades like construction or electrical work will typically pay more for insurance than lower-risk, office-based professions.
Level of cover: The higher the limit of indemnity (that is, the maximum amount your insurer will pay out in case of a claim), the higher your premium will be.
Claims history: If you’ve got a history of previous insurance claims, that may increase the cost of a new insurance policy.
Business turnover: A higher turnover can indicate a greater volume of work and increased exposure to risk, which may lead to higher premiums.
Location: Where your business is based can affect your premium. For example, areas with higher rates of theft, accidents, or claims may result in higher insurance costs.
Number of employees (if applicable): If you employ staff, the size of your team will directly impact the cost of employers’ liability insurance, as more employees generally mean higher risk exposure.
How to keep your insurance costs down
Here are some practical steps you can take to reduce your insurance premiums:
Bundle policies: Many insurers offer combined packages that include multiple types of cover at a lower overall cost than buying them separately.
Choose a higher excess: Opting for a higher voluntary excess (the amount you pay towards a claim) can reduce your premium, as long as it’s still affordable if you need to claim.
Pay annually: Paying upfront in one annual payment is often cheaper than spreading the cost monthly, as it avoids additional fees or interest.
Review your cover regularly: Make sure your policy reflects your current business activities so you’re not paying for cover you no longer need.
Shop around: Don’t settle for the first option. Comparing several providers, including brokers and direct insurers, can help you find better value for the same level of cover.
How to choose the right insurance for your business as a sole trader
Choosing the right insurance starts with understanding your business and the risks that come with it. This includes:
Assessing your business risks
Checking client and contract requirements
Comparing cover, not just price
Understanding policy limits and excess
Start by looking at how your business operates day to day. Do you work directly with clients, either in person or on-site? Do you rely on expensive tools or equipment? Do you handle sensitive data or provide advice that could impact a client financially? If you employ staff, you’ll also need to consider your legal responsibilities. Answering these questions will help you identify which types of insurance are most relevant to your work.
Next, consider any external requirements. Many clients, particularly larger organisations, will expect you to have specific types and levels of insurance in place before signing a contract. For example, it’s common to be asked for a minimum level of public liability or professional indemnity cover. Checking this early helps you avoid delays and ensures you’re able to take on the work.
When comparing policies, focus on the level of cover rather than just the price. Two policies may look similar on the surface, but differ in what they include or exclude. Make sure you’re comparing like-for-like protection and understand exactly what you’re covered for.
Finally, pay close attention to policy limits and excess. The limit is the maximum amount your insurer will pay out, while the excess is what you’ll need to contribute towards a claim. Choosing a higher excess can lower your premium, but it should still be affordable if you ever need to use your insurance.
How to get sole trader business insurance
Once you’ve identified the type and level of cover you need, the next step is to put the right policy (or policies) in place. Here’s how to get insured, step by step.
1. Gather your business information
Before requesting quotes, make sure you have all key details about your business to hand. Insurers will typically ask for a clear description of your activities, your estimated annual turnover, whether you employ anyone, and any previous claims history.
You should also be clear on the type of cover and limits you’re looking for, based on your earlier assessment. This helps ensure the quotes you receive are accurate and relevant to your needs.
2. Request quotes from multiple providers
To get the best value, compare quotes from several insurers. You can use comparison websites, go directly to providers, or work with a broker who can search the market for you.
Looking at multiple options helps you understand typical pricing and avoid overpaying. If your business has more complex risks, a broker can also help you find more tailored cover.
3. Review the policy details carefully
Before committing, take the time to read through the policy documents in detail. Focus on what’s included, what’s excluded, and any conditions attached.
Even if two policies look similar, the level of protection can vary. Checking the fine print ensures you’re fully covered for the risks most relevant to your business.
4. Get proof of cover and keep it accessible
Once you’ve purchased your policy, your insurer will provide a certificate of insurance. This is your official proof of cover and may be required by clients, landlords, or contractors before you start work.
Keep a digital copy easily accessible so you can share it quickly when needed.
Keep your sole trader business protected with Tide
Insurance is a crucial step in protecting both your business and your personal assets. With the right cover in place, you can focus on running things smoothly and building a business that works for you.
Tide has all the tools you need to do exactly that. From banking and invoicing to expense tracking and tools to ensure compliance with Making Tax Digital requirements, everything is designed to keep your finances organised and your admin simple, all in one place.
Open your Tide sole trader bank account for free today and compare business insurance quotes directly within the app.
You’re building your business your way. Tide helps you protect it.
