Public Liability Insurance and Professional Indemnity Insurance

What's the difference between public liability and professional indemnity insurance?

The main difference between public liability and professional indemnity insurance cover is this:

Public Liability Insurance

Protects you if someone (a third-party) is injured or their property is damaged in connection to your business. This type of insurance covers you for damages related to physical surroundings and physical property. For example, if a client falls over and suffers an injury while visiting your business's premises, a public liability insurance policy provides cover for any legal costs or compensation you may be required to pay.

Professional indemnity insurance

Protects you against claims made by clients if your professional advice or services cause them loss or injury. This can include providing unprofessional advice, failing to exercise required skill or breach of professional duty. None of this is covered by public liability insurance.

Physical vs Professional Loss

At its core, the difference between these two covers lies in the nature of the loss suffered by the third party. Public liability insurance is primarily concerned with physical risks, such as bodily injury or tangible property damage. In contrast, professional indemnity insurance is designed to address financial or economic loss that stems from a professional's errors, omissions or breach of duty. While a public liability claim might arise from a physical accident on your premises, a professional indemnity claim typically arises from the work produced or the advice given on paper.

Public liability vs professional indemnity: what do I need?

• Public liability insurance: If your business has a physical premise or operates in public.
• Professional indemnity insurance: If your job involves you providing a service or advice.

Professional indemnity cover is designed for professionals who offer advice or a service. If you offer professional advice, design, analysis or consultancy, you should consider taking out this type of cover. Architects, designers, real estate agents and PR consultants are some of the professionals who commonly need professional indemnity insurance. However, as the examples above show, many of us can benefit from having both professional indemnity insurance and public liability insurance.

Public liability cover is important for anyone who has customers or members of the public visit their place of business regularly, or if you visit with clients on site and there is a risk of you damaging their property.

To help you decide which type of insurance you need, let's look at two different scenarios involving Jason, who owns his own medical practice.

Public liability and indemnity insurance: what do they cover?

Occurrence-based vs Claims-made

Understanding how a policy is triggered is vital for long-term protection. Public liability is typically an 'occurrence-based' policy, meaning it covers incidents that happen during the period of insurance, regardless of when the claim is eventually filed.

Professional indemnity is usually a 'claims-made' policy. This means the policy must be active at the time the claim is actually made against you, not necessarily when the original mistake occurred. This distinction makes 'run-off' cover particularly important for professionals who are retiring or closing a business.

How much public liability insurance does a business require?

Determining an adequate level of Public Liability Insurance to take out will depend on a number of factors including:

• The nature of your work. Insurance companies will review claims data that has accumulated over the years to assess the likelihood of a claim against your occupation/business occurring.
• How large your business is. A company with a greater number of staff or higher annual revenue is generally more likely to have a claim made against it. Insurance companies may vary in how they assess the size of the business.
• Where your business is located. Businesses that carry out their service in areas that are potentially higher risk i.e. airports or mine sites may find that their cost for cover is considerably higher.

If your business is such that you never have to visit a client's premises and very few clients actually come to your location, then you can opt for a more basic level of cover.

An insurance broker can help you secure a competitive policy that provides the right level of cover by helping you determine how much cover you actually need and finding an insurer offering suitable cover.

What information do I need?

In order to enable you to get the best quote possible you must be able to give the insurer the most accurate information you can, especially regarding the following:

• Whether the business could be classified as being high risk or low risk
• The number of people employed by the business
• The size of the business with regards to annual turnover
• What type of business it is
• If your business is an importer or exporter, what countries does it deal with?

For example, if you run a suburban news agency with only two or three employees your public liability premium will be much lower than a blacksmith with a contract of shoeing horses for a number of leading race horse stables.

Industry-Specific Scenarios and Segmentation

Insurance needs are rarely one-size-fits-all, and different sectors face unique exposures:

IT Consultants: A consultant might need PL if they visit client sites to install hardware (physical risk), but they definitely need PI to cover software bugs or system failures that cause a client to lose revenue (professional risk).

Architects: While PL covers someone tripping in their office, PI is the critical safeguard against structural design errors that lead to expensive rectification works years later.

Accountants: PI is often a regulatory requirement for accountants to protect against tax filing errors or incorrect audit results that lead to ATO penalties for a client.

Trades: Plumbers and electricians rely heavily on PL for site accidents, but those who provide specialised designs or consulting services may also require PI to cover advice-related errors.

Talk to a broker about public liability and professional indemnity insurance

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Frequently asked questions

• Are combined professional indemnity and public liability premiums tax deductible in Australia?

  Yes, insurance premiums for Professional Indemnity and Public Liability are generally 100% tax deductible for Australian businesses as they are considered a necessary business expense. You should retain your tax invoices and consult with a registered tax agent to ensure you claim correctly for your specific business structure.

• Is it cheaper to bundle professional indemnity and public liability insurance?

  Yes, many Australian insurers offer a multi-policy discount or reduced administration fees when you bundle Professional Indemnity and Public Liability into a single business package. This is often more cost-effective than purchasing two separate standalone policies and provides the convenience of a single renewal date.

• Does a combined policy cover my sub-contractors or only my employees?

  No, most standard policies only provide cover for the policyholder and their direct employees. If you hire sub-contractors, you must usually ensure they have their own insurance or explicitly ask your insurer to add them to your policy as an 'additional insured', which may incur an extra premium.

• Do I need these insurances if I am a sole trader working from a home office?

  Yes, because standard home and contents insurance policies in Australia generally exclude any liability related to business activities or professional advice. Public Liability protects you if a courier or client is injured while visiting your home office, while Professional Indemnity protects your professional work regardless of your location.

• Does combined insurance cover work performed for overseas clients?

  It depends on whether your policy includes a 'Worldwide Cover' extension, as most standard Australian policies are limited to work performed within Australia and New Zealand. Even with worldwide cover, many Australian insurers specifically exclude claims brought in the courts of the United States of America or Canada unless otherwise agreed.

• What is the minimum level of public liability cover required for small businesses in Australia?

  Most Australian small businesses require a minimum of $10 million in Public Liability cover to satisfy standard commercial lease agreements and government contract requirements. While $5 million limits are available, $10 million is the most common industry benchmark for professional services and trade contracts.

Written by

Gary Ross Hunter

Journalist

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Gary Ross Hunter has over 6 years of expertise writing about insurance, including life, health, home, and car insurance. Having reviewed hundreds of product disclosure statements and published over 800 articles, he loves simplifying complex insurance topics for everyday readers. Gary has contributed to major outlets like Yahoo Finance, The Sydney Morning Herald, and news.com.au, and holds a Bachelor of Arts (Honours) in English Literature from the University of Glasgow, along with a Tier 2 General Advice certification, ensuring his work adheres to ASIC’s RG146 standards. See full bio

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Gary Ross has written 520 Finder guides across topics including:

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