In Australia, more than 62% of businesses are run by sole traders1 – and if you’re one of them, you’ll know that the juggle is real. One minute you’re on the tools or fulfilling an order, the next you’re manning the phones to answer customer enquiries, before switching gears at the end of the day to chase up unpaid invoices and start preparing your Business Activity Statement (BAS).
The fact is, as a sole trader, you not only wear a lot of hats, but every aspect of your venture rests on your shoulders.2 And so do all the liabilities,2 which means arranging any necessary business insurance is typically a good first step.3
But when you’re flying solo, you might be wondering what qualifies as “necessary”. What insurance does a sole trader need? Are some types of sole trader business insurance mandatory? If you’re running your business from your house, is your stock covered by your home’s contents insurance? And are you eligible for workers compensation insurance if you get injured or sick because of your job?
To help you get your head around the types of sole trader insurance you might need, we’ve put together this handy guide to answer these questions – and more.
Why does having business insurance matter for sole traders?
For starters, because you don’t have paid sick leave as a sole trader, if you get injured or fall ill and need to take some time off work, you might run into financial difficulties without the right insurance in place.1
And, as a small business – which is what sole traders are officially classified as4 – you could face significant costs if the equipment you rely on gets damaged or stolen, or a customer is injured and claims for compensation. If you don’t have the adequate level of insurance to cover events like these, the costs you might incur could even result in your business having to close.5
Plus, it pays to bear in mind that as a sole trader, your personal assets could also be at risk if something goes wrong for your business and you’re uninsured.2
Is sole trader insurance compulsory in Australia?
It can be. For example, if you have a business vehicle, Compulsory Third Party (CTP) insurance is mandatory.6 CTP insurance covers injuries to people caused by car accidents and is a legal requirement before you can register any vehicle in Australia.7
Public liability insurance is also a legal requirement for certain occupations in some states and territories, while professional indemnity insurance is compulsory for some professions regardless of where you live or the fact that you’re a sole trader.6,8
And, if you’re a sole trader and you employ people to help run your business – which is legal under the sole trader business structure – you’ll need to organise workers compensation insurance.2
What insurance do I need as a sole trader?
It can depend on the type of business you’re running. A good place to start can be working out whether any types of business insurance are legally required, before considering the optional types of insurance that are available and deciding whether they may be suitable for your business.6
To help you determine what types of cover you might – or might not – need above and beyond CTP insurance if your business owns a vehicle, we’ve answered some questions sole traders often ask about business insurance.
Do I need public liability insurance as a sole trader?
You might. Public liability insurance can be useful for any business, including sole traders, that interacts with people face to face, including if customers – or members of the public – visit your business premises or you visit theirs.8 This includes if you operate your sole trader business from home and customers visit you there.8
It’s also a mandatory part of licensing requirements for certain trades in some states and territories.9 For example, in Queensland, electricians need public liability insurance to obtain or renew a licence,10 and it’s the same story for plumbers – and some other trades – in Victoria.11-13
For a sole trader, public liability insurance provides cover if a customer or member of the public suffers an injury or property damage, and you or your business is found to be negligent.8
Do I need professional indemnity insurance as a sole trader?
Maybe. While public liability insurance covers third party injuries and property damage,6 this type of business insurance helps cover professionals against civil liability claims made in relation to their advice or services.6,8
Professional indemnity insurance is mandatory for a wide range of professions that can operate as sole traders in Australia, including but not limited to:
- Certified practising accountants14
- Tax agents15
- Real estate agents16
- Lawyers17
- Architects.18
Do I need workers compensation insurance as a sole trader?
If you employ staff, then yes, you do.2 If a staff member gets injured or becomes sick due to their work, workers compensation insurance can cover their medical expenses as well as their wages while they’re unable to work.19
However, workers compensation insurance won’t cover you as a sole trader, regardless of whether or not you employ staff.6
Instead, income protection insurance could help cover your bills if you can’t work.1 If you have a superannuation fund, it might be worth checking whether income protection insurance is included as part of the package.1
What about products liability insurance – do sole traders need that?
If you’re a sole trader who makes, sells or supplies goods – or simply repairs or services products8 – then yes, you might like to consider getting product liability insurance.6
This can cover your business against claims for injury, loss or damage caused by any of your products.6
What is business interruption insurance?
Business interruption insurance can cover costs if your business is reduced or forced out of action due to certain events or risks,5 such as a fire damaging your property,6 or a burglary.8
It can help pay for things such as your business’s loss in gross profit or increased costs of working.5,8
Do I need stock, products and asset insurance?
Insurance that covers your assets, stock or products is optional for small businesses, including sole traders.6
To help decide whether or not you need this type of cover, it might help to consider what you’d do if:6
- Your stock or business property was lost or damaged due to a break-in or theft
- An event such as a fire or storm damaged your stock or equipment
- Items you buy, sell or use in your business were lost or damaged during transport.6
Without the appropriate type of insurance in place, as a sole trader, could you afford to cover these costs and stay in business?5
Does Youi Small Business Insurance cover sole traders?
Yes. “At Youi, our Small Business Insurance can provide cover for a wide variety of small businesses – including if you’re a sole trader,” says Mervyn Hartley, Youi’s Head of Product – Home and Small Business.
“Youi’s Small Business Insurance includes public liability and products liability cover as standard.”
From there, sole traders can choose from a number of optional covers – some of which we’ve already outlined above – to add to a Small Business Insurance policy at Youi, for an additional cost. Some of these include:
- Professional indemnity – With this optional cover, you’re covered for civil liability claims that arise from the professional advice or specialist services you provide to clients.20
- Business interruption – If an unexpected event temporarily disrupts your operations, this helps cover your lost profit and extra operating costs.20
- Business property damage – Under this optional cover, contents at your business premises are covered for loss or damage caused by an accident, for example by fire, storm, flood or theft. Stock in trade can also be covered at the premises and while it’s in transit to or from your business within Australia, while refrigerated food or stock is covered for deterioration.21,22
- Business items – This covers loss or damage to your portable business items, including electronic devices, tools of trade and even some mobile machinery.23
- Money – Your business cash is covered for loss or damage with this add-on, whether it’s cash kept at the premises that you operate your sole trader business from, in transit, or stored in a safe or at an authorised person’s home.24
How much is sole trader insurance?
It depends. “The cost of a Small Business Insurance policy with Youi will be determined by a range of factors, including the amount of business liability cover you choose – and we offer multiple liability limits to suit different business needs,” says Hartley.
“You can select from three levels of cover – $5million, $10million and $20million.”
Thinking specifically about public liability insurance, a sole trader with a relatively low risk profile when it comes to things such as foot-traffic volume and business activities might decide a $5million policy is sufficient.25
However, a $10million or $20million policy could be required if your business has a higher risk profile or if you want to:
- Sign a commercial lease25
- Apply for a local council tender25
- Obtain a council permit, for example an outdoor dining permit.26
In those situations, you’ll often be asked to provide a certificate of currency – which you can get from your insurer – to prove that you have the required insurance cover.5
“At Youi, other factors we take into consideration to calculate the cost of insurance include whether you’ve chosen to add any of our optional covers to your policy, where your business is located and the type of business you’re running,” explains Hartley.
“These kinds of details all play a role in helping us gauge the risk of covering your business.
“To get an accurate idea of how much Small Business Insurance might cost, you might like to consider starting a quote with us.”
Common sole trader insurance mistakes
Running a small business on your own as a sole trader can be a steep learning curve. So, to help ensure your business have the most suitable cover in place, here are a few insurance mistakes to watch out for.
Relying on your home insurance to cover your business
If you’re running your business from home and you have home insurance, you might assume your business equipment – and any stock you have stored in a garage or spare room – is already covered for loss or damage.
But, home insurance policies don’t usually cover these items automatically – and starting or operating a business from home without informing your insurer may even run the risk of voiding some policies.27
“If you have a home insurance policy with Youi, it’s important to let us know if you plan to start operating a business from home so we can discuss the options available and any changes that may apply,” says Hartley.
“For example, there’s an option to add cover for your business items if you have a contents policy with us, for an additional cost.28
“Importantly though, the legal liability cover our home building and contents policies provide won’t cover third party injury or property damage related to your business activities at the home or for your business items.”
This means that having a dedicated sole trader public liability insurance policy – among other types of business insurance – is worth considering if you’re running a home-based business.5
Being underinsured
A growing number of small businesses are underinsured29 – that’s where you don’t have enough business insurance to cover the replacement value of the items you’re insuring for events such as damage or theft, or for liability claims.30,31
As well as potentially putting you in breach of contractual or legal obligations,31 underinsurance could leave you without the necessary funds to recover if something goes wrong.29
Strategies that may help you avoid being underinsured as a sole trader include:31
- Understanding if any types of insurance are compulsory for your sole trader business
- Knowing what your business insurance covers and excludes, and what limits apply
- Reviewing your level of cover regularly
- Keeping and up to date valuation of what it would cost to replace your business equipment.31
Adopting a ‘set and forget’ approach to your insurance
As we’ve alluded to above, this business insurance mistake can potentially put you at risk of being underinsured.31
Instead, it can be a good idea to make a habit of reviewing your insurance cover at key moments, such as:31
- When your sole trader insurance policy is due for renewal
- If you’ve purchased new equipment
- If you’ve expanded your business operations.31
This can help you make sure your insurance still reflects the size and nature of your business, including the current value of any existing or new assets, as well as the risks your business currently faces.31
Whether you’re just starting out as a sole trader or you’ve been running your business for a while, this guide has hopefully helped you understand more about the type of sole trader insurance you might like – or need – to consider getting.
And, if you’d like to learn more about the cover provided by Youi’s Small Business Insurance, or to investigate whether your current set-up is still right for you, why not consider giving our team a call on 1300 010 648 or starting a quote online?
1Source: Moneysmart – Self-employment, n.d.
2Source: Australian Government – Sole trader, n.d.
3Source: Government of WA Small Business Development Corporation – Starting a Sole Trader Business Guide, n.d.
4Source: Australian Competition & Consumer Commission – Small business, n.d.
5Source: Qld Government Business Queensland – Business insurance, September 2024
6Source: Australian Government – Types of business insurance, n.d.
7Source: Moneysmart – Choosing car insurance, n.d.
8Source: Business Victoria – Find the right insurance, October 2022
9Source: Insurance Council of Australia – Public Liability Submission ICA, March 2026
10Source: Qld Government WorkSafe – Licensed electrical contractors, March 2025
11Source: Building and Plumbing Commission – Insurance requirements for licensed plumbers, November 2020
12Source: Energy Safe Victoria – Registered Electrical Contractors (REC), n.d.
13Source: Building and Plumbing Commission – Insurance: Building insurance requirements, n.d.
14Source: CPA Australia – Professional indemnity insurance, n.d.
15Source: Australian Government Tax Practitioners Board – Professional indemnity insurance, April 2026
16Source: Australian College of Professionals – Professional indemnity insurance, n.d.
17Source: LawyersWeekly – Top-up time: Don’t get caught short with your professional indemnity insurance, May 2025
18Source: Australian Institute of Architects – Professional indemnity insurance basics, October 2025
19Source: Australian Government Fair Work Ombudsman – Workers compensation, n.d.
20An additional cost applies for optional covers. Conditions, limits and exclusions apply. For full details, see the PDS & Policy Wording.
21Business Property Damage cover is optional and an additional cost applies. Conditions, limits and exclusions apply. For full details, see the PDS & Policy Wording.
22Loss or damage caused by flood, storm or bushfire within the first 72 hours of your policy commencing is only covered in limited circumstances. For full details, see the PDS & Policy Wording.
23Business Items cover is optional and an additional cost applies. Conditions, limits and exclusions apply. The most we will pay for each item is $2,500, up to a total of the Business Items amount noted on your policy schedule per claim, unless a High Value Business Items amount is noted on your policy schedule, in which case the most we will pay for all items with a replacement value of more than $2,500 is the High Value Business Items amount shown on your policy schedule.
24Money cover is optional and an additional cost applies. Conditions, limits and exclusions apply. The most we will pay for each claim is the insured value for your business’s money. For full details, see the PDS & Policy Wording.
25Source: Sprintlaw – Public Liability Insurance Explained: Why Your Business Needs It, February 2025
26Source: Brisbane City Council – Footpath and outdoor dining permits, n.d.
27Source: WA Government Small Business Development Corporation – Home insurance and your business, August 2022
28Additional costs, limits and exclusions apply. For more details, see the Home Insurance PDS.
29Source: Australian Chamber of Commerce and Industry – Addressing the Small Business Insurance Challenge, October 2025
30Source: Insurance Council of Australia – ABC’s of General Insurance, n.d.
31Source: WA Government Small Business Development Corporation – The hidden risks of being an underinsured business, December 2025
