The insurance question
As an independent sales agent, you do not have the safety net of an employer's insurance policies. If something goes wrong, such as a customer suing you for bad advice, an injury at a client's premises, or an illness that stops you from working, you are personally responsible.
Insurance does not prevent bad things from happening, but it protects you financially when they do.
Professional indemnity insurance
What it covers
Professional indemnity (PI) insurance covers claims made against you for professional negligence, errors, or misleading advice. If a customer claims they suffered financial loss because of something you said or did during the sales process, PI insurance covers the legal costs and any damages.
Do you need it?
If you are providing advice or recommendations as part of your sales process (which most agents do), PI insurance is strongly recommended. Some principals require it before they will work with you.
Typical costs
For independent sales agents, PI insurance typically costs $300 to $800 per year depending on your revenue and the products you sell.
Public liability insurance
What it covers
Public liability insurance covers claims for injury or property damage that occur during your business activities. If you visit a client's premises and accidentally cause damage, or if a client visits your office and is injured, public liability covers the claim.
Do you need it?
If you ever meet clients in person, attend events, or visit business premises, public liability insurance is recommended. Some venues and clients require proof of coverage before they will let you on site.
Typical costs
Public liability insurance for a sole trader agent typically costs $200 to $500 per year for $10 million to $20 million in coverage.
Income protection insurance
What it covers
Income protection insurance replaces a portion of your income (usually 75%) if you are unable to work due to illness or injury. Policies typically pay out after a waiting period (30 to 90 days) and continue for a defined period (2 years or until retirement age).
Do you need it?
If commission sales is your primary income source, income protection is arguably the most important insurance you can have. Without it, an illness or injury that stops you from selling means zero income.
Tax deductibility
Premiums for income protection insurance are generally tax deductible, which reduces the effective cost.
Workers compensation
As a sole trader, you are not covered by workers compensation unless you opt in. In most states, sole traders can purchase optional personal injury insurance.
The bottom line
Insurance is a cost that many new agents try to avoid. But the financial consequences of being uninsured when something goes wrong can be devastating. At a minimum, consider professional indemnity and income protection. The peace of mind alone is worth the investment.