Insurance for a one-person business is bought against outcomes

Start from what could go wrong, not from the products

The usual approach to insurance is to look at what is sold and decide which items seem relevant, which is how people end up with cover they do not need and gaps where it matters. The better direction is the other way round.

List the things that could realistically go wrong in your particular work. Damage to somebody’s property. Injury to a person. Advice or work that causes a client a loss. The loss of equipment you can’t operate without. Being unable to work for a period. Then ask what each would cost and whether the business could absorb it.

That produces a shortlist specific to your trade, and it is a far better starting point for a conversation with a broker than a list of product names.

The distinction that matters most

Insurance is for outcomes that are unlikely and unaffordable. Anything likely and affordable is better treated as a cost of doing business, because covering it means paying the insurer to handle something you could handle yourself, with their administration added.

The failure mode people fall into is insuring the small, visible risks — the equipment, the phone — while leaving the large ones uncovered, because the large ones are harder to imagine. A claim from a client for a loss your work contributed to is unlikely and it’s the kind of event that can end a business, which is exactly the profile insurance exists for.

Cover that is required rather than chosen

In many trades and many countries, particular cover is a legal requirement, and in others it’s required by clients as a condition of engagement. Anybody who employs people is usually subject to specific obligations of their own.

What is compulsory differs so much between countries and trades that the only reliable answer is a local one — a professional body for your trade, a broker, or your accountant. This is worth establishing before starting work rather than discovering afterwards, since operating without required cover can carry consequences well beyond the uninsured loss itself.

Client-imposed requirements are worth reading carefully too, since they often specify not just that you hold cover but the amount and sometimes the type. Meeting a requirement approximately is not meeting it.

Read what the cover actually responds to

Policies differ in ways that matter and are not visible from the headline description. Whether a policy responds to when the incident happened or to when the claim was made changes what happens if you stop trading. Whether it covers work done in other countries matters if any of your clients are abroad.

Then there are the exclusions, which are where most unpleasant surprises live: types of work outside the description, subcontractors, equipment away from the usual premises, claims arising from advice as distinct from physical work. The description of your business given at the outset also matters, because cover generally responds to the activity described, and a business that has quietly changed what it does may be less covered than it believes.

Reviewing that description annually, when the business has changed, is one of the few genuinely important pieces of admin that nobody schedules.

Protecting your ability to work

For a business of one, the largest uninsured exposure is usually the person. Illness or injury stops the income entirely, and no amount of business cover addresses that.

What is available varies enormously by country — some places have state provision that covers part of it, some don’t, and the products that exist have very different waiting periods and definitions. This is one to ask about specifically rather than assume, and the terms deserve reading, because the definition of being unable to work does a lot of work in these policies.

The alternative or complement is a larger cash reserve, which covers a short absence and not a long one. Most people end up with some combination, and the right mix depends on obligations you have that would continue regardless.

Review it when the business changes

Cover arranged in the first year describes a business that no longer exists once the work has evolved, the equipment has grown, or the client base has changed. It rarely gets revisited because nothing prompts it.

A short annual review — what has changed, what the current worst realistic outcome would cost, whether the description is still accurate — is enough. Insurance is one of the few areas where being approximately right for several years is materially different from being right, and the difference only shows up at the moment it matters.