Public Liability Insurance for Small Business: What It Covers and How Much You Need
Public liability is the cover most Australian small businesses are asked for first. Here is what it protects, what it excludes and how to choose a limit.
Key takeaways
- Public liability covers injury to third parties and damage to their property caused by your business activities.
- It does not cover your employees, your own property or the cost of redoing faulty work.
- Common limits are $5 million, $10 million and $20 million. Contracts and sites often specify the minimum.
- Product liability is a separate but related cover for businesses that sell or supply products.
If you run a business that interacts with customers, suppliers, visitors or the public, public liability insurance is usually the first cover anyone asks about. Landlords want it before they sign a lease, councils want it before they issue a permit, and head contractors want it before you step on site.
What public liability insurance covers
Public liability responds when a third party claims your business caused them injury or damaged their property. A typical policy provides:
- Compensation for personal injury to third parties
- Compensation for damage to third-party property caused by your business activities
- Legal defence and court costs for insured claims
- Cover for property in your care, custody or control, subject to limits
Real-world examples include a customer slipping on a wet floor in your cafe, a tradesperson's ladder damaging a client's car, or a cleaner's equipment damaging office flooring.
What it does not cover
Public liability is often misunderstood as covering everything. It does not. Common exclusions include:
- Injuries to your own employees, which fall under workers compensation
- Damage to your own business property or stock
- The cost of fixing faulty workmanship or recalling products
- Claims arising from professional advice, which need Professional Indemnity
- Liabilities you accept under a contract that go beyond the common law
- Asbestos, gradual pollution, aircraft products and punitive damages
Choosing a limit
Public liability limits in Australia are commonly $5 million, $10 million or $20 million per occurrence. The right figure depends on your industry, the severity of a worst-case claim, and what your contracts specify. Construction sites and government contracts frequently mandate $10 million or $20 million. The premium difference between limits is often smaller than people expect, so under-insuring to save a little rarely makes sense.
Product liability: the related cover
If you manufacture, import, sell or supply products, product liability cover responds to claims that a product caused injury or damage. Claims can arise from manufacturing defects, design defects or inadequate warnings. Product liability is usually written alongside public liability in a single policy.
Getting the right cover
Kasana Insurance Brokers arranges public and product liability cover for trades, hospitality, retail, professional services and more. We check your contract requirements, compare insurers and make sure the certificate of currency says exactly what your client needs it to say.
Frequently asked questions
Is public liability insurance mandatory for small businesses in Australia?
It is not required by law for most businesses, but landlords, councils, principal contractors and many clients require a certificate of currency before you can trade or start work.
Does public liability cover injuries to my staff?
No. Injuries to employees are covered by workers compensation, which is a separate statutory scheme in each state and territory.
What limit of public liability do tradies usually need?
Many builders and site principals require contractors to hold at least $10 million, and some require $20 million. Check your contract or site induction requirements before you choose a limit.
This article provides general information only and does not take into account your objectives, financial situation or needs. Consider the relevant Product Disclosure Statement and speak with a broker before acquiring any insurance product.
