Identifying the characteristics of a sole proprietorship
The first thing we need to do is clarify what it means to be a sole proprietorship. In the United Kingdom, there are two categories of sole traders: persons who are self-employed and work for themselves (often freelancers and contractors), and firms that are set up as sole traders within the legal structure of the sole trader.
The sole proprietorship business structure necessitates the assumption of sole responsibility for all earnings and losses. This does place the sole trader in some danger because if things don’t work out with your business, you could be liable for big losses that will have a negative impact on your personal financial situation.
When solo proprietors require insurance
There are typically three reasons for solo proprietors to obtain insurance. The first reason is that the single trader is required to obtain certain insurance policies in order to be in compliance with the law. The second reason is that certain clients and contracts necessitate the usage of insurance. And the third reason is simply for the sake of peace of mind.
If you are self-employed, do you require employers’ liability insurance?
Employers’ liability insurance is not required if you do not have any employees. That’s all there is to it.
However, as soon as you engage even one employee in the United Kingdom, it is mandatory to obtain an employers’ liability insurance policy from an authorized insurer with a minimum coverage of £5 million. If you manage a firm that exclusively employs members of your own family or if you hire someone who is based in another country, you may not require it.
As a result, if you are a freelance writer or an independent plumber who works on your own, you would not be required to purchase this type of insurance policy.
Employers’ liability insurance, on the other hand, would be required if you were an electrician with a salaried apprentice or a food truck owner with a team of cooks.
Product liability insurance for sole proprietors
It’s possible that you’ll need product liability insurance for single traders if you run a bakery business at weekend food markets or make money by selling your products on online marketplaces such as Etsy.
If an item or product you sell causes harm or property damage, even an honest mistake can result in a claim against your organization. It doesn’t matter whether you were the manufacturer of the thing or not; it even includes items that you give out for free.
If you are a sole trader who sells items, product liability insurance can come to your rescue in a number of different circumstances.
