Business liability insurance guide

What types of business liability insurance covers are there?

There are a range of different types of liability insurance, including employers liability insurance (workers compensation) and directors and officers liability insurance (for companies). The three main types of liability insurance are:

• Public liability
• Professional indemnity
• Product liability insurance

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What is the difference between the three types of cover?

The three of these are easy to get confused because they all protect you from lawsuits where people are suing you for harming them and/or their property. The difference lies in how you allegedly harmed them. Here's how they differ:

• Public liability. This protects you when the damage is unrelated to your professional service or when you provided a service that caused damage that you couldn't have expected (ie, you weren't reckless). Example: You own a massage parlour and a client slips and falls in your building.
• Product liability. This is a subset of public liability insurance, and it comes into play when you sell someone a product that ultimately does the damage. Example: As a masseuse, you sell someone some lotion that damages their skin after they've applied it at home.
• Professional indemnity. This will come to your aid when you've provided a faulty professional service due to negligence or recklessness. The damage can include injury, property damage, financial losses and even emotional trauma. Example: As a masseuse, you damage someone's ligament by stretching them inappropriately.

Do I need all three?

This is dependant on your business, and the types of risks it's exposed to. If you are unsure, speak to a broker.

Public liability insurance

What is negligence?

Negligence is defined as failing to take due care to avoid causing injury or loss to someone else. For negligence to be proven in court, it must be established firstly that there was a duty of care, and secondly that it was breached. The plaintiff must also be shown to have suffered an injury or loss and that the injury or loss was caused by the breach of duty.

Is public liability insurance compulsory?

If you own a business, public liability insurance is a necessary form of cover and while not compulsory, it should be taken out as a matter of course due to the crippling financial losses that could result from a successful public liability claim (we're talking millions of dollars).

Do I need public liability cover for events?

Public liability insurance is also recommended for anyone responsible for holding any sort of public event and it is often a compulsory requirement of doing so, which is regulated through a licensing authority.

Product liability

I thought this is general liability insurance?

Also referred to as general liability insurance, it is often included as part of a public liability insurance policy and is important to have if you provide products to the public. That's because claims due to product failure can be extremely expensive even if unfounded due to the considerable legal defence costs often involved.

What types of products are covered?

Different types of product liability insurance are designed to protect against the failure of different types of products, and typical examples include protection from liability for damage caused by software, injury caused by equipment and illness caused by food or beverages.

Professional indemnity insurance

Who needs it?

It was previously only required by a few professions such as accountants, lawyers and medical practitioners, where the results of their actions could have particularly devastating consequences. But now professional indemnity insurance is widespread, providing protection to a range of different professionals including insurance brokers, financial advisers and media representatives.

Is there professional indemnity cover for specific industries?

There are different kinds of professional indemnity insurance for different types of professions, such as medical indemnity insurance for medical practitioners and architects indemnity insurance for architects. And some professions require their members to hold professional indemnity insurance as a condition of being able to practise.

FAQs

• Is business liability insurance tax deductible in Australia?

  Yes, premiums paid for business liability insurance are generally tax deductible as an operating expense for Australian businesses. The Australian Taxation Office (ATO) allows you to claim most expenses that relate directly to earning your business income provided you keep accurate records to substantiate the claim.

• Does public liability insurance cover injury to the business owner?

  No, public liability insurance specifically covers your legal liability for injury or property damage caused to third parties and does not provide personal accident cover for the business owner. To protect yourself against the loss of income or medical costs following a work-related injury, you should consider personal accident or income protection insurance.

• Is public liability insurance a legal requirement for all Australian businesses?

  No, public liability insurance is not legally mandatory for all businesses, though it is often a compulsory requirement for certain trade licences, commercial leases and government contracts. Some states specifically require licensed professionals such as electricians and plumbers to hold a minimum level of cover before they can legally operate.

• Can I combine public liability and professional indemnity insurance into a single policy?

  Yes, many Australian insurers offer combined liability policies or 'Business Packs' that bundle public, product and professional indemnity cover together. Bundling these policies can simplify your administrative work, provide a single renewal date and often results in a more cost-effective premium compared to purchasing separate covers.

• Are subcontractors automatically covered under my business liability policy?

  No, most standard policies only cover your direct employees and generally require subcontractors to maintain their own independent public liability insurance. While you may be vicariously liable for their work, most insurers exclude direct cover for subcontractors unless they are specifically named or added as an extension to your policy.

• Do I need public liability insurance if I run a business from home?

  Yes, you should consider public liability insurance if clients, suppliers or delivery drivers visit your home office for business purposes. Standard home and contents insurance policies usually exclude claims arising from business activities, meaning you could be personally liable for any third-party injuries that occur on your property.

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 519 Finder guides across topics including:

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