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Do sole traders need business insurance?

No law requires every sole trader to hold business insurance. Some insurance is compulsory in certain situations: CTP with vehicle registration, workers’ compensation once you employ someone, and any cover a licence, professional body or contract requires. As a sole trader, you’re personally liable for your business’s debts and claims.

Written by COVRA · Updated · Sources

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What the law requires.

No general law makes a sole trader hold business insurance. These are the situations where some cover is compulsory.

  • Registering a vehicle Compulsory third party (CTP) insurance comes with registration in every state and territory. It covers people injured in an accident, not your vehicle1, 2.
  • Employing someone Most employers must hold workers’ compensation. It covers your workers, not you: icare’s example is a sole-trader tiler who hires an apprentice and has to cover the apprentice3.
  • Some licences Some states require public liability for certain occupations1, and some professions require professional indemnity (see below).
  • Contracts and platforms Clients, landlords, councils and platforms can make insurance a condition of the work. One shopping centre leasing agent asks casual tenants for $20 million of public and products liability4.

Your personal assets can be at risk.

In law, a sole trader and their business are the same.

  • Unlimited liability A sole trader business “has unlimited liability and all your personal assets are at risk if things go wrong”5. The business is “not a separate legal entity from its owner”6.
  • Claims against you Public liability generally covers claims that you injured someone or damaged their property. Professional indemnity covers claims that your advice or work cost a client money1. See public liability vs professional indemnity.
  • Platform cover Airtasker’s $10 million liability cover, from Chubb, applies to tasks paid through Airtasker and covers injury or damage you cause to others. It doesn’t cover you if you’re injured7.

In a survey QBE commissioned of 1,010 micro-businesses and sole traders, 24% said they couldn’t afford any financial setback, and another 29% could withstand only up to $10,0008.

If you’re injured or sick.

Workers’ compensation covers employees. A sole trader who can’t work needs other cover for their income.

  • Workers’ compensation Doesn’t cover you. icare, NSW’s insurer, says: “If you’re a sole trader … you can’t cover yourself with Workers Compensation insurance.” In Victoria, a sole trader with no workers doesn’t need to register3, 9.
  • Queensland WorkCover Queensland sells Workplace Personal Injury Insurance to the self-employed, from $1,650 a year. It isn’t income protection or 24-hour cover10.
  • Income protection Usually replaces a percentage of your pre-tax income, such as 75%, after a waiting period11. Personal accident and illness cover is similar, with shorter benefit periods, such as 12 months or two years12.
  • Tax Premiums for cover that replaces your income are generally deductible, but not premiums for lump-sum injury, life or trauma cover13. Payments you receive are taxable14.
  • What the claims show In AFCA decisions, sole traders’ benefits were based on income after business expenses: one was worked out on $494 a month, and another paid nothing because the business made a loss15, 16. A claim also failed because the sole trader kept doing the business’s admin17.
Costs

What it costs.

Published figures for the covers sole traders most often look at. A guide, not a quote.

Public liability, low-risk services $426–$568

Typical premium a year for sole traders. upcover, August 2026.18

Public liability, trades About $598

Typical premium a year. upcover, August 2026.18

Public liability, beauty, fitness and health About $1,008

Typical premium a year for client-facing work. upcover, August 2026.18

Personal accident and illness $115 a month

BizCover customers’ average, July 2023 to June 2024.12

upcover’s figures are typical yearly premiums for sole traders by type of work, from more than 2,000 public liability policies it arranged in 2022–2026, including GST and fees18.

When a licence requires it.

Some jobs need insurance to be licensed, whether you’re a sole trader or a company. A few examples.

  • Electrical contractorsPublic liability of at least $5 million in Queensland, Victoria, Tasmania and the NT19–22.
  • PlumbersPublic liability of at least $5 million in Victoria and Tasmania23, 24.
  • Tax and BAS agentsProfessional indemnity of at least $250,000 to $1 million, depending on turnover25.
  • Migration agentsProfessional indemnity of at least $250,00026.
  • Real estate agents, NSWProfessional indemnity of at least $1 million per claim27.
  • Health practitionersProfessional indemnity for all aspects of their practice, to be registered28.
  • Family day care educatorsPublic liability of at least $10 million29.

Our industry guides have more, including for tradies, cleaners, consultants and couriers.

FAQ

Common questions.

Do sole traders need public liability insurance?

Not under a general law. Some licences require it, such as at least $5 million for electrical contractors in Queensland, Victoria, Tasmania and the NT, and many clients, landlords and councils ask for it.

Do sole traders need workers comp?

Not for themselves. Workers’ compensation covers employees, and sole traders generally can’t cover themselves with it. Once you employ someone, most employers must hold it for their workers.

Do I need workers comp if I hire a subcontractor?

Possibly. In some states a subcontractor can count as your worker, depending on how they work for you. Our tradie insurance guide explains each state’s test.

Do sole traders need professional indemnity insurance?

Only where a regulator, professional body or contract requires it, such as for tax and BAS agents, migration agents, NSW real estate agents and registered health practitioners.

Do I need business car insurance as a sole trader?

CTP comes with registration. For damage to vehicles, a private car policy may not cover some business use, such as deliveries, unless that use is declared, so how you use the car matters.

Is income protection tax-deductible for sole traders?

The ATO says premiums for cover that replaces your income are generally deductible, and the payments you receive are taxable. Premiums for lump-sum injury, life or trauma cover aren’t deductible.

How much does sole trader insurance cost?

upcover’s typical public liability premiums for sole traders range from about $426 to $1,008 a year, depending on the work. BizCover’s personal accident and illness customers paid an average of $115 a month.

Does Airtasker insurance cover me?

Airtasker’s liability cover, from Chubb, covers injury or damage you cause to others on tasks paid through Airtasker. It doesn’t cover you if you’re injured.

Still have a question? A broker can talk it through with you.

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Covers in this guide.

Our guides to what each cover generally does, what it costs and the rules that apply.

Public Liability Insurance Professional Indemnity Insurance Business Motor Insurance

Sources.

  1. Types of business insurance, business.gov.au, 8 November 2024
  2. What is CTP insurance?, Motor Accident Insurance Commission (Qld), 13 July 2026
  3. Who needs a policy, icare, 2026
  4. Insurance, Mall Managers
  5. Sole trader, business.gov.au, 14 October 2024
  6. Sole trader (glossary), ASIC, 19 June 2025
  7. Third party liability insurance: a guide for Taskers, Airtasker
  8. Sole trader and small business survey, QBE, 4 February 2025
  9. Do I need to register for WorkCover insurance?, WorkSafe Victoria, 19 May 2026
  10. Workplace personal injury insurance, WorkCover Queensland, 1 June 2026
  11. Income protection insurance, Moneysmart (ASIC), 17 September 2026
  12. Personal accident and illness insurance, BizCover, 25 September 2026
  13. Income protection insurance, ATO, 8 June 2026
  14. myTax 2025: other deductions, ATO, 1 June 2025
  15. Determination 12-24-128460, AFCA, 30 April 2025
  16. Determination 12-25-249097, AFCA, 25 June 2026
  17. Determination 12-00-1058608, AFCA, 31 October 2024
  18. How much does public liability insurance cost in Australia?, upcover, 20 August 2026
  19. Electrical Safety Regulation 2026 (Qld), section 165, Queensland legislation, 2026
  20. Registered electrical contractors, Energy Safe Victoria
  21. Electrical contractor licence, CBOS Tasmania, 20 July 2026
  22. Electrical contractor licence, NT WorkSafe, 13 May 2025
  23. Plumber insurance requirements, Building and Plumbing Commission (Vic), 29 July 2026
  24. Plumbing contractor licence, CBOS Tasmania, 12 February 2025
  25. Professional indemnity insurance, Tax Practitioners Board, 30 April 2026
  26. Practice management duties, Office of the Migration Agents Registration Authority
  27. Professional indemnity insurance information sheet, NSW Fair Trading, June 2025
  28. Professional indemnity insurance arrangements, Ahpra, 9 May 2025
  29. Education and Care Services National Regulations, regulation 30, AustLII