Personal Injury Insurance for Sole Traders and Self-Employed Workers: Is it Worth It?

Whether you’re a self-employed tradie, sole-trader small business, or work from home as a freelancer, being self-employed comes with a lot of perks. You set your own hours, you don’t have a fixed income ceiling, and you’re your own boss.

But this freedom also comes with more responsibility and higher risk exposure. If anything goes wrong in your work or business, you’re personally and financially liable. Furthermore, the survival and growth of your business rests entirely on your shoulders. If anything happens to you and you can’t work, you could lose your income.

So, how do you protect yourself and your business? Insurance is the best safety net. There are several types of insurance plans available to sole traders and self-employed workers, including income protection, trauma insurance, and personal injury or personal accident insurance. In this guide, we explore personal injury insurance for sole traders, what it covers, and how it can help you.

What is Personal Injury Insurance and What Does it Cover?

Sole trader personal injury insurance compensates you in the event you’re unable to work because of an accidental injury. Some insurers also cover sickness.

Compensation typically includes weekly benefits to replace lost income (usually up to 85% of average weekly income), and a lump sum payment whose amount depends on the severity of the injury.

Some policies also have an optional business expense cover that will pay you weekly benefits to cater for fixed business expenses like rent, car lease payments, and utilities.

The exact language of a personal injury insurance plan varies from one policy to another, so it’s crucial that you read the product disclosure statement to understand what you’re covered for (and what’s not covered).

Talking of what’s not covered, personal accident insurers don’t pay claims for injuries caused by self-harm, those that occur when under the influence of drugs or alcohol, and injuries from high-risk activities like sky-diving.

Do I Need Personal Accident Insurance?

As a sole trader or a self-employed worker, you’re not eligible for workers’ compensation since you’re not an employee. Without this safety net, there’s nothing to protect you if you get injured or fall sick.

Personal accident insurance is essentially workers’ compensation, but for sole traders, tradespeople, freelancers, and anyone who’s self-employed.

Paying premiums can feel like a wasteful business expense, but having self-employed injury insurance can make the difference between your business surviving or collapsing when an accident happens to you.

It allows you to:

• Keep providing for yourself and your family, even if income drops or goes away.
• Keep paying business expenses like rent.
• Focus on recovering instead of worrying about money or rushing to go back to work before you fully recover.

Personal Injury vs. Income Protection Insurance

These two types of insurance both compensate for part of your lost income should you become unable to work. But that’s where the similarity ends.

Income protection insurance offers long-term coverage, usually up to 65 years of age. In contrast, personal injury insurance provides weekly benefits for up to 1-2 years, hence premiums are generally lower.

Do you need both? As a financial advisor, we can help you make the best decision based on your situation and needs. But in many cases, it’s a smart decision to have both income protection and personal accident insurance.

You can use your self-employed injury cover in case of injuries or sickness that keep you away from your work or business for a limited period, and rely on income protection insurance for broader, longer-term protection.

Personal Injury vs. Trauma Insurance

Trauma insurance is another type of cover that provides financial security if you’re unable to work or run your business. The main difference is that trauma insurance only covers critical illnesses like cancer, heart attack, stroke, and dementia. Also, trauma insurance pays out a lump sum rather than in installments.

Whether you need both is something a financial planner is best placed to help you decide. Since both cover different things, it might be beneficial to get both types of cover.

• A personal accident cover may not cover critical illnesses or any illnesses at all (some only cover injuries like burns, broken bones, etc.). A trauma insurance cover can fill this gap.
• On the other hand, trauma insurance doesn’t cover injuries and non-critical illnesses. You’ll need personal injury insurance for these.

How to Choose the Best Self-Employed Personal Injury Insurance Cover

At Lifestyle Led Wealth, we understand the ins and outs of personal protection insurance, and can help you find the best personal injury insurance plan for you.

Whether you’re a plumber, a freelance graphic designer, or you run a small business, we’ll walk you through your options and explain what kind of coverage you get with each.

Contact us at 1300 068 453 to talk to Justin, our financial planner, about choosing a personal injury insurance that’s tailored to your life plan.

Disclaimer: The information contained in this document is of a general nature only and has been prepared without taking into account your objectives, financial situation or needs.