Business vs Personal Protection for Sole Traders

If you’ve ever sat down with a sole trader to talk protection, you’ll know it’s rarely a black-and-white conversation. They’re not running a limited company. They don’t have shareholders and often they don’t see themselves as ‘business owners’ in the traditional sense. So when the topic of business protection comes up, the instinctive response is: ‘Isn’t personal cover enough?’

It’s a fair question. But it’s also a moment where your advice can make all the difference.

Let’s take a moment to consider the scale of sole traders in the UK. There are 4.2 million solo self-employed individuals, contributing a staggering £366 billion to the economy in 2024 alone. That’s more than half of the UK’s private sector business population¹.

And yet, despite their economic impact, the protection gap is alarming. Only 6% of sole traders and self-employed workers have income protection insurance². Even more concerning, 44% of SMEs and sole traders operate without any commercial insurance at all. That’s over 2 million businesses exposed to risk without a safety net³. 

Let’s start with the business side. Sole traders are their business. If they’re unable to work, the income stops. If they pass away, there’s no legal separation between personal and business assets. That means debts, contracts, and obligations fall directly to their estate.

Business protection can offer a lifeline here - income protection tailored to self-employed earnings, loan cover for studio or equipment finance, even critical illness cover that helps keep operations ticking over. It’s not just about money; it’s about continuity, reputation, and resilience.

But here’s the rub: many sole traders don’t see the need. They’re not familiar with the concept. They worry about cost. And they’re often so focused on day-to-day survival that long-term planning feels like a luxury.

That’s where you come in - not to sell, but to reframe. To help them see business protection not as a corporate tool, but as a way to safeguard everything they’ve built. 

On the flip side, personal protection is familiar territory. Life cover, critical illness, income protection - it’s what most sole traders already have, or at least understand. It’s designed to protect their family, their mortgage, their lifestyle. And for many, that feels like enough.

But here’s the challenge: personal protection doesn’t keep the business running. It doesn’t pay the studio rent, or hire a freelancer to finish client work, or cover the cost of a missed deadline. It’s reactive, not proactive.

That doesn’t mean it’s wrong - it just means it’s incomplete. And again, that’s where your advice matters. You’re not asking them to choose one over the other. You’re helping them see how both can work together to create a safety net that’s truly fit for purpose.
 

Some sole traders will benefit most from a robust personal protection plan. Others will need business-specific cover to protect their income and reputation. Many will need a blend of both. What matters is that the solution fits them - their business model, their financial setup, their goals.

And that’s not something they can figure out alone.

This is where your value as an adviser really shines. You’re not just offering policies - you’re offering perspective. You’re helping sole traders ask the right questions:

What happens to my income if I can’t work? Who’s responsible for my business debts? How do I protect my clients, my brand, my reputation? What does my family need if the worst happens? 

These aren’t easy questions. But they’re the ones that lead to meaningful, tailored protection plans. And they’re the ones that sole traders often don’t know they should be asking - until you help them see the bigger picture.

The financial vulnerability is real. 27% of self-employed people⁴ don’t have enough savings to cope with a financial emergency, and a third say they couldn’t survive more than three months without income⁵. Government support like Employment and Support Allowance offers just £72.90 - £92.05 per week⁶  - barely enough to cover basic living costs.

And what happens when a sole trader dies? The business ceases trading immediately. Accounts are frozen until probate is granted, which can halt payments to suppliers, clients, and even employees. Those employees may be entitled to redundancy from the deceased’s estate, adding further financial pressure.⁷

Sole traders are resilient, resourceful, and often juggling more than most. But when it comes to protection, they need more than resilience - they need clarity. And that’s what you offer. 

Whether the solution leans toward personal cover, business protection, or a combination of both, your advice helps them move from uncertainty to confidence. From vulnerability to strength. From reactive to proactive.

And that’s not just valuable - it’s vital.
 

Sources:

¹IPSE – The Self-Employed Landscape 2024

²Reassured – Sole Trader Income Protection Guide 2025

³PolicyBee – UK Business Insurance Statistics 2025

^{4 5}Scottish Widows & YouGov research 2025 

⁶Gov.UK, 2025

⁷LegalVision UK – Sole Trader Business When You Pass Away