Business insurance for the self-employed: which policies to buy first

Reviewed by Apex Insurance Brokers · Last reviewed 2026-08-05

When you go self-employed, the insurance market throws a dozen covers at you at once and none of them explain which matters most for your situation. The honest answer is that most freelancers and startups do not need everything on day one. You need the right two or three policies, arranged in the right order, and the discipline to add the rest as your business grows.

This guide gives you a buying sequence rather than a shopping list. It ranks the four covers self-employed people ask about most — professional indemnity (PI), public liability (PL), employers' liability (EL) and cyber — by legal obligation and by real financial exposure. Each section links to a fuller explainer if you want the detail.

The one rule that overrides everything: employers' liability

If you employ anyone — even one part-time assistant, an apprentice, or a family member on the books — employers' liability insurance is not optional. Under the Employers' Liability (Compulsory Insurance) Act 1969, most businesses with employees must hold at least £5m of cover from an authorised insurer. Trading without it, when you are required to have it, can expose you to a fine for every day you are uninsured.

So EL sits above the whole sequence. It is the only cover on this page the law forces on you, and the threshold is simply "do you have employees". If you are a genuine sole trader with no staff, you can usually skip it. The moment you take someone on, it becomes your first purchase, not your last.

One common trap: labour-only subcontractors and casual helpers can count as "employees" for insurance purposes even if you think of them as self-employed. If people work under your control and direction, assume you need EL and check the position rather than guessing.

Priority one for solo workers: professional indemnity

For the majority of freelancers, consultants, designers, coaches, bookkeepers and other advice- or knowledge-based businesses, professional indemnity is the cover that protects the thing you actually sell: your judgement and your work.

PI responds when a client alleges that your advice, service or deliverable was negligent, wrong, late or caused them a financial loss — and comes after you for damages, plus the legal cost of defending the claim. For someone whose "product" is intangible, this is usually the single largest uninsured risk they carry.

Two reasons PI often ranks first for solo workers:

• Some clients contractually demand it. Public sector bodies, larger corporates and many agencies will not sign you up without evidence of PI at a stated limit — commonly £1m or £2m. No PI can mean no contract.
• Certain regulators or professional bodies require it. Depending on your profession, holding PI at a minimum level may be a condition of membership or of being allowed to practise.

If either applies to you, PI stops being a "nice to have" and becomes the cover you arrange before your first invoice. Our fuller guide walks through how PI limits and run-off cover work if you want to size it correctly.

Priority two: public liability, if you meet the public

Public liability covers injury to a third party or damage to their property arising from your business activities. If a client trips over your equipment, if you damage a customer's premises while working there, or if a member of the public is hurt in connection with what you do, PL responds to the compensation claim and defence costs.

The test for how urgently you need PL is simple: does your work bring you into physical contact with clients, their property or the public?

• A tradesperson working in customers' homes, a mobile hairdresser, a personal trainer or a market trader should treat PL as essential and near the top of the list.
• A writer or developer who never meets a client in person and works only from their own desk carries far less public-liability exposure, so PL can sit lower down.

PL is not legally compulsory in the UK, but many venues, landlords, marketplaces and commercial clients insist on it — typically at £1m, £2m or £5m — before they let you work or trade with them. That contractual pressure often decides where PL lands in your sequence.

Priority three: cyber, once you hold data or take payments

Cyber insurance used to feel like a big-company concern. For today's self-employed it increasingly is not, because so much of a small business now runs through cloud tools, client databases and online payments. Cyber cover typically helps with the costs of a data breach, ransomware, business interruption from an attack, and the response work — notification, IT forensics and getting you trading again.

Where cyber fits in your buying order depends on what you hold and handle:

• Add it sooner if you store client personal data, take card or online payments, or would be seriously disrupted by losing access to your systems for a week.
• Add it later if you hold minimal data, take payment offline, and could keep working from paper if your laptop died.

Two points people miss. First, holding personal data brings obligations under UK data protection law regardless of whether you insure the risk — cyber cover helps you respond to a breach, it does not replace good practice. Second, PI and cyber can overlap at the edges, so it is worth checking how the two wordings interact rather than assuming one covers the other.

Putting the sequence together

Here is how the four covers usually rank for a self-employed person, and what tips each one up or down your list.

Read top to bottom, the logic is: legal duty first, then your income, then physical risk, then digital risk. EL jumps the queue only if you have employees. For a solo freelancer with no staff, the practical order is usually PI, then PL, then cyber — adjusted by whatever your contracts insist on.

Three worked examples

Freelance marketing consultant, works from home, no staff. Buys PI first — her advice is what clients pay for and her agency contracts demand a £1m limit. Adds cyber next because she holds client contact lists and campaign data. PL is low priority; she rarely meets clients in person. No EL needed.

Self-employed electrician, works in customers' homes, uses one labourer. Needs EL first because the labourer likely counts as an employee. PL is essential and next — the risk of damaging a property or injuring someone is real and constant. PI matters if he also designs or specifies systems. Cyber is a lower priority.

Online course creator selling digital products. Cyber and PI rise up the list together: she holds customer data and takes online payments, and a claim that her course caused a financial loss is a professional-indemnity question. PL is minimal — there is no physical premises or public contact. No EL unless she hires.

The pattern across all three: the same four covers, ordered completely differently by the nature of the work. That is why a sequence beats a checklist.

A few things not to get wrong

• Do not over-insure on day one. Buying every cover at maximum limits before you have revenue wastes money you could put into the business. Match cover to the risks you actually run now, and review as you grow.
• Do not under-read your contracts. The fastest way to know which cover you need first is to read what your clients require. Many disputes start with a broker discovering a client's minimum PI limit only after the contract is signed.
• Do not treat "self-employed" as one thing. A consultant and a mobile tradesperson have almost inverted risk profiles. The sequence in this guide is a starting frame, not a substitute for looking at your specific work.
• Do bundle sensibly. Many self-employed people end up with a combined package that pairs, say, PI and PL, which can be simpler to manage than separate policies. Whether that suits you depends on how the individual limits are set.

If you would rather not work out the order alone, that is exactly what a broker is for. Tell us what you do and we will map the sequence to your situation.

Common questions

Do I legally need any insurance as a sole trader with no employees?
Not automatically. Employers' liability is the main legally compulsory business cover, and it only applies once you have employees. Beyond that, "compulsory" usually means required by your clients, your professional body or your regulator rather than by general law — but those requirements are just as binding on whether you can trade.

Should I buy professional indemnity or public liability first?
It depends on what you sell. If clients pay for your advice, designs or expertise and rarely see you in person, prioritise professional indemnity. If your work brings you into physical contact with clients, their property or the public, public liability comes first. Many self-employed people eventually hold both.

Is cyber insurance really necessary for a one-person business?
It is increasingly relevant rather than automatically necessary. If you store client personal data, take online payments, or would be badly disrupted by losing access to your systems, cyber cover is worth arranging early. If you hold very little data and could keep working offline, it can wait until later in your sequence.

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This guide is general information, not advice on a specific policy or a substitute for your policy wording.