If you work for yourself, you ought to be running for cover

As a self-employed family man who is the main breadwinner, I have to allow for a large outlay on insurance. My kids will not eat and will miss drama club and karate if my freelance journalism business dries up.

I have a wide range of insurance and personal investment-type policies, including pension, Isa, private medical insurance, family legal cover, an endowment policy dating back to the 1980s - which will not come anywhere near to paying off my mortgage - life insurance and two income protection plans.

This is by no means comprehensive, but still knocks a nasty chunk out of my income. I consider my policies are the bare minimum for someone in my position. There are others I would like to have, such as mortgage protection, libel insurance and critical illness cover, but can only afford so much.

A Norwich Union study, Homeworking Reality, found that one in three people working from home did not have adequate insurance, and nearly two-thirds were without separate business contents insurance because they mistakenly believed they did not need it or that they were covered by their home contents policy. More than 40 per cent of those who should have had public liability insurance did not.

Simon Cooter, director of small business and e-business at Royal & Sun Alliance, says: 'When people set up a business, insurance is not top of their list, but is vital.'

A plumber, for example, whose van is off the road and so cannot take him to customers will not earn unless he has business interruption cover or a vehicle insurance policy that gives him a temporary replacement.

'For most self-employed people insurance costs are not insignificant, but are by no means some of the major costs of running the business,' Cooter says. He advises:

· Talk to a reputable local insurance broker who deals with several insurers, who understands your requirements and offers advice

· Minimising health and safety risks could lower your premiums, so seek help

· Ask other people in your trade what policies they have and how much they pay

· Speak to your trade association or union. They might have arranged a policy package for your specific sector, with optional extras.

Litigation is an ever- greater risk, warns Kate Walker, Norwich Union product manager. 'If you are a cake maker and the product you make poisons people at a wedding, the implications are enormous.'

Emma Grange of the Association of British Insurers says what insurances you take out will depend on the business you are in, your particular attitudes towards risk and whether you have savings to cover a crisis.

'It is a bit of a Pandora's box,' she adds. 'There are so many things people need to consider. A self-employed managing director of a scaffolding company will need a lot more cover than a one- man band plumber or an IT consultant who has no property. There is no rule of thumb.'

Walker points out that for some sectors public liability is a must, particularly if you do work for local authorities; these might require £5 million cover as a condition of contracting you.

The ABI's website lists for consideration:

· Public liability. Covers you legally if you injure the public or their property

· Product liability. Protects you from damage or injury arising from products you make, repair or sell

· Motor vehicle liability. Covers you for any injury to others or property damage caused by your vehicle

· Personal accident and sickness. Pays if you cannot work because of sickness or accident for a maximum period, usually 52 or 104 weeks.

· Income protection. Compensates for loss of earnings if you are unable to work and available in case of long-term sickness

· Property. Buildings and contents to protect premises and equipment. Domestic policies may not cover you

· Engineering. For cover against electrical or mechanical breakdown

· Money. Personal assault cover is sometimes included in this, which will compensate you if you are injured during a theft

· Goods in transit. Protects goods against loss or damage while in your vehicle

· Business interruption. Will compensate for the shortfall in gross profit and any increased working costs and extra accountants' fees incurred as a result of damage to your property

· Health, life and pension. You need to think about what would happen to your family if you died, or became ill and about accruing a nest egg for retirement

· Private medical. Covers treatment for curable, short-term illnesses.

What a photographer focused on

Stephanie Mackrill, who has been self-employed
as a photographer since last July, specialising in
portraiture of children and fashion and
commercial work, invested ?5,000-?10,000 in
equipment and says that insurance was one of the
first things she thought of.

'I made sure that I was covered for the
equipment, for liability - if I drop a camera on
someone's posh car - and in case all the pictures I
take on a full-day shoot get lost.'

Mackrill took out a specialist photography
package through Essex broker Morgan &
Richardson for ?400 a year. This covers, among
other things, all her tools of the trade, whether at
home or outside, including overseas, public and
product liability, money, assault, employee
liability, computer breakdown, personal accident,
professional indemnity and refrigerated stock.

Some aspects of the policy are not relevant to
her, such as employee liability, but when Mackrill
looked into separate policies and adding on to
her home contents insurance, for example, she
says the price would have been extortionate.

'It all came as a package and was the most
comprehensive I could get,' she says.

'I'm covered for every eventuality, including my
fridge.'

She has just started a pension but decided
against critical illness cover: the insurers wanted
to load her premium because of mild asthma and
exclude spinal and neurological problems
because of an old whiplash injury.

She also has life insurance costing about ?38 a
month and a mortgage protection policy to cover
payments of more than ?500 a month.

What three people need to make their policy

Builder

Minimum cover: Public and products liability (?2m),
commercial legal protection (?100,000), money
(?1,000) and assault.

Annual premium: ?178.50

Belt & braces: Public and products liability,
commercial legal protection, money and assault,
contractors tools (?2,500), contract works, business
interruption increased cost of working, personal
accident, business travel. Annual premium: ?765.45

Accountant

Minimum cover: Public and products liability,
commercial legal protection, money and assault.

Annual premium: ?131.25

Belt & braces: Public and products liability,
commercial legal protection, money & assault, business equipment
(?10,000), loss of income due to business interruption
(?100,000), personal accident, business travel.

Annual premium: ?408.45

Dog groomer

Minimum cover: Public and product liability,
commercial legal protection, money and assault.

Annual premium: ?131.25

Belt & braces: public and products liability,
commercial legal protection, money and assault,
treatment risk, business equipment, stock (?1,000),
business interruption (loss of income), personal
accident.

Annual premium: ?490.35

· Source: Norwich Union - for sole trader status in a standard post code, with no employees.