As a subcontractor or self-employed tradesman there are a number of different business insurance options available, but how do you know what you need?
We originally wrote this guide way back in 2010. Now in 2019 the guide is just as relevant, but we’ve given it a refresh to make it far more comprehensive.
There are loads of different trade insurance types available. Most tradies will know about public liability and income protection, but what about contractual liability and business interruption?
You might know everything about your trade, but it’s tough to know everything about business insurance.
In this guide we’ll look at what you need as a newly self-employed tradie, or a seasoned trade business owners.
Use the links below to jump straight to a section:
- Newly Self-Employed Tradies
- Established Businesses
- Public Liability Insurance
- Tool Insurance
- Contract Works
- Income Protection
- Life / TPD / Trauma
Newly Self-Employed
When it comes to the trades, typically what we think of as a newly self-employed person is a tradie who is going out on their own for the first time as a subcontractor or business owner.
You might be subcontracting to a builder under an ABN, or you might be starting your own business doing electrical or plumbing work. Either way, you’re going to need some insurance.
Some newly self-employed tradies choose to invest money into insuring themselves comprehensively, but in reality, most are looking to get the basics without spending too much money.
So what are the basics that you really need as a start-up trade business?
At a minimum, public liability insurance should be your first pick. We’ll go over this cover in more detail later in this guide, but this is the insurance that will cover you in the event that you cause property damage or personal injury to a third party.
Click here to jump forward to the public liability section.
Even as a new business you’re likely to have a large collection of tools. Most tradies will start building their collection during their apprenticeship, and it will only grow once you’re qualified.
As an employee you might not have bothered with tool insurance, but as a business owner you should certainly consider covering them, as without your tools you can’t work, and if you can’t work you won’t be earning any money.
Click here to jump forward to the tool insurance section.
The last of the ‘big three’ insurance types considered to be essential for self-employed tradies is income protection.
Now that you’re self-employed you can say goodbye to sick leave, and in most cases workers compensation. So if you’re off work, you’re on your own.
Income protection will save your bacon by covering a large portion of your income whilst you’re unable to work due to injury or illness.
Click here to jump forward to the income protection section.
Established Businesses
If you’re running an established trade business, there’s a good chance you’ll already have public liability, tools and income protection already in place.
If you don’t, you need to get in touch with us ASAP!
You might have setup your original business insurance years ago when starting up, but things change in business, and now you might have a host of new risks to consider.
For example you might now be keeping a range of stock for your business. Tool insurance can sometimes cover stock (depending on the insurer) but often it won’t be covered.
So if you lose a trailer with $10k worth of tools and $5k worth of stock, your tool insurance is only going to cover the $10k in tools, leaving you $5k out of pocket.
Some trade businesses grow to the point where they have their own small workshop or warehouse. Even if you’re renting, you’ll still need to insure anything you keep on site.
You might now be undertaking larger contracts, which makes cover such as contract works and contractual liability more important.
These are all types of cover that you wouldn’t quote online, and would instead speak with one of our expert insurance brokers about.
Types of Cover
We’ll now dig deeper into the individual types of business insurance for self-employed tradies and trade business owners.
We won’t be looking at every type of cover available, but we will include the most common forms of cover. We recommend that you speak with one of our experts to see which types of cover are right for you.
Public Liability Insurance
Whether your trade business is brand new or was established fifty years ago, public liability insurance should be seen as absolutely vital.
Public liability will respond in the event that you cause property damage or personal injury to a third party.
Cover is typically available at $5 million, $10 million and $20 million. Many small start-ups will opt for $5m cover, whilst larger businesses working on larger projects will generally take $20m.
Claims can range from a few hundred dollars (depending on the excess) through to multi-millions.
A smaller claim might involve property damage. For example you might be an electrical contractor working in a roof, and you accidentally put your foot through the ceiling.
The policy would cover the costs of repairing and repainting their ceiling.
At the top end you have claims involving personal injury or death. If your work was to result in serious injury or death to a third party, you can imagine the potential costs involved if you were to be sued.
Again, there is where your public liability policy would step in. Your policy would not only cover the final settlement against you, but also your legal expenses throughout.
How much of the claim is covered, and what level of legal expenses will be covered, will depend on the policy you have. This is why it’s important to have the cover that is right for you and your business.
For more information about public liability or to obtain a quote, please click here for our dedicated guide.
Tool Insurance
As a tradie on the tools, or as a business owner who supplies tools to their staff, you’ll know how vital these items are to your business.
Without your tools you can’t work, and as a self-employed tradie no work means no money!
There is a misconception amongst some tradies that tool insurance is expensive, or that it’s too difficult to claim on.
We can’t speak for some of the insurers or broker that have caused this, but here at Trade Risk the truth couldn’t be more different.
We look after hundreds of self-employed tradies with their tool insurance and have successfully settled a huge number of tool insurance claims.
The cover is also very affordable, with $5k cover starting from under $400* when combined with a public liability policy.
* Based on a carpenter in Qld with $5k worth of tools, combined with public liability.
There are a couple of things to keep in mind with tool insurance which are going to assist greatly when you need to make a claim.
Firstly, most policies only cover theft of tools following forced or violet entry. So to make a successful claim, there must be evidence of forced entry and there must be a police report.
Secondly, you must be able to provide evidence of ownership for the items you are claiming. When you purchase a policy we don’t ask for evidence, but we do need you to supply it in the event of a claim.
Invoices for the equipment are best, but any other proof such as original manuals or boxes, or even photos, can be helpful where invoices or receipts are not available.
Contract Works Insurance
We won’t go into too much detail on contract works insurance, but if you’re a builder, or a contractor taking on larger projects, this one could be important for you.
Contract works insurance is similar to public liability in some ways, but instead of covering incidents where you have been negligent, it covers incidents that you were responsible for, but not negligent.
Hang on… Why would you be responsible for something if it wasn’t your fault?
A good example here is malicious damage where the contract makes you responsible for the site. You might have done the right thing and secured the site, but someone still comes in and causes damage.
You’re not “at fault” as such, as you did the right thing to secure the site. Because you weren’t at fault, your public liability won’t respond, but your contract works policy will.
Another policy that falls into a similar category is contractual liability insurance.
We recommend that you speak with one of our expert insurance brokers if you’d like more information about either contract works or contractual liability.
Income Protection
Income protection can be mandatory in some cases to enter certain worksites. Not all worksites will have this rule, but some certainly do for subcontractors or other self-employed trades.
As a self-employed tradie you have no access to sick leave, and depending on which state you operate in, you might not have access to workers compensation insurance either.
Income protection will assist by replacing up to 75% of your income for a period of time in the event that you cannot work due to injury or illness.
One of the great benefits with a proper income protection policy is that it covers you away from the worksite as well. So if you suffer an injury on the weekend, you’ll still be looked after.
It’s important not to confuse proper income protection with similar, but inferior, policies such as personal accident, or accident and illness etc.
Often these policies can be referred to as income protection, but they’re not the same. There are host of differences, with one being that some only cover you whilst on site.
For more information about income protection for self-employed tradies, or to obtain a quote, please click here for our dedicated guide.
Life, TPD & Trauma Insurance
Income protection is fantastic when it comes to replacing your income, but it’s not always going to do the complete job of protecting your family.
Life insurance, TPD insurance and trauma insurance can step in to fill the gaps.
In the unfortunate event of your passing, income protection won’t help your family (as it doesn’t pay out on death) but life insurance certainly will.
TPD stands for total and permanent disability. It pays out a lump sum in the event that you suffer an injury or illness serious enough to leave you unable to ever return to work.
In that event income protection will still replace most of the lost income, but you’ll still need extra money to deal with this life-changing event.
Trauma insurance is somewhat similar to TPD, but its lump sum is paid out upon diagnosis of a critical illness.
All three of these covers (life, TPD and trauma) are important for all workers, but can be even more important for a trade business owner to ensure their family is looked after.
Where to Next?
If you’re still reading, your head is probably exploding from all of these different insurance options, and they are only the tip of the iceberg!
Our job as insurance brokers is to guide you through the maze of business insurance and ensure you have the right cover to suit your needs.
We help all self-employed tradies with the insurance, from one-man start-ups needing the basics through to multi-million-dollar businesses with far more comprehensive requirements.
To get started please call our team on 1800 808 800 or complete our online contact form. We deal with most of our clients via phone and email, but if you’re in Brisbane or surrounding areas you can visit our office or we’ll come to you.
We love business, we love the trades and we’d love to help protect what’s important to you.
