Tool insurance gets talked about a lot — a stolen kit is an obvious, visible loss. What gets missed is the bigger risk: what happens if you can’t work at all, or if your work damages someone else’s property. Neither of those comes with the safety net an employee gets automatically.
The short version (TL;DR)
- Public liability insurance is essentially required for any self-employed tradie or subcontractor — many licences, builders, councils and commercial clients won’t let you on site without it.
- Income protection insurance matters just as much, arguably more — self-employed tradies get no sick leave and no workers’ compensation the way an employee does.
- Tradies and similar physical occupations make up around half of all work-related serious injury claims each year — the risk of needing income protection isn’t hypothetical.
- Income protection typically replaces around 75% of your income for a defined period (commonly up to 104 weeks) if injury or illness stops you working.
- Tool insurance still matters — but it protects your equipment, not your ability to earn or your legal exposure if something goes wrong on a job.
Public liability: not really optional
Public liability insurance covers claims for damage or injury your work causes to someone else’s property or person. In practice, for most tradies it’s not really a choice:
- Electricians and plumbers in most states need public liability insurance to obtain or renew their trade licence.
- Builders, councils, and commercial clients commonly require proof of current public liability cover before they’ll let you start work — no certificate, no job.
- It protects you against genuinely business-ending claims — a mistake that damages a client’s property or injures someone can be financially catastrophic without cover, regardless of how careful you normally are.
Income protection: the one nobody thinks about until they need it
This is the gap that catches self-employed tradies out hardest. As an employee, you get sick leave and access to workers’ compensation if you’re injured at work. As a sole trader or subcontractor, none of that applies automatically — if you can’t physically get on the tools, your income generally stops the moment you do.
The risk isn’t abstract: tradies and workers in similarly physical roles account for roughly half of all serious work-related injury claims made each year. Income protection insurance typically replaces around 75% of your income for a defined period if illness or injury stops you working — turning a potentially business-ending injury into a manageable, temporary income gap instead.
How this connects to your other financial planning
Income protection works alongside, not instead of, the other basics covered in our other guides — a genuine cash flow buffer and appropriate super contributions all sit in the same category: financial protections an employer would otherwise be organising for you, that become entirely your own responsibility the moment you’re on an ABN.
What tool insurance still covers (and doesn’t)
Tool insurance protects the physical kit you rely on to earn — genuinely important given how expensive a full trade toolkit is to replace, but it’s a different risk category entirely from public liability (your legal exposure to others) or income protection (your ability to earn if you’re injured or sick). A complete insurance picture for a self-employed tradie generally covers all three, not just the one that feels most tangible.
Frequently asked questions
Do I legally have to have public liability insurance?
It depends on your trade and state, but for licensed trades like electrical and plumbing, it’s commonly required to obtain or renew your licence — and even where it’s not strictly mandated by law, most builders and commercial clients will require it before letting you on site regardless.
Is income protection worth it if I’m young and healthy?
Given that tradies make up around half of all serious work-related injury claims annually, the risk isn’t about age or general health — it’s about the physical nature of the work itself, which applies regardless of how fit or careful you are.
What does income protection actually pay out?
Typically around 75% of your income, for a defined benefit period (commonly up to 104 weeks depending on the policy) if you’re unable to work due to illness or injury — check the specific terms of any policy before relying on a general figure.
Isn’t tool insurance the main one I need?
Tool insurance matters, but it only covers your equipment — public liability and income protection cover your legal exposure and your ability to earn, which are generally bigger financial risks than the cost of replacing tools.
This guide is general information only — not financial or insurance advice. Insurance needs vary by trade, state, and individual circumstances; get quotes and advice from a licensed insurance broker or provider before making decisions.
Sources:
Trade Risk — Insurance Guide for Self-Employed Tradies and Subbies
Hnry — Insurance guide for self-employed tradies
BizCover — Insurance for Tradies
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