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.

Frequently Asked Questions

• How much does business liability insurance cost in Australia?

  The cost of business liability insurance in Australia varies widely depending on your business type its size your industry your turnover and the level of cover you need. Small low risk businesses may pay a few hundred dollars annually while larger businesses or those in high risk industries could pay several thousand dollars or more.

• What factors influence the cost of liability insurance?

  Several factors influence liability insurance premiums including your business industry its annual turnover the number of employees your claims history the specific risks associated with your operations and the sum insured. High risk activities like working at heights or with dangerous machinery will generally result in higher premiums. Your geographical location and the length of time you have been in business can also play a role.

• Is professional indemnity insurance compulsory for certain professions?

  Yes, professional indemnity insurance is compulsory for many professions in Australia. Industry bodies professional associations and state or territory licensing authorities often mandate it for roles such as doctors lawyers accountants architects and financial advisors. This ensures that clients are protected from financial loss or damages resulting from professional negligence or errors.

• What happens if my business operates without adequate liability insurance?

  Operating without adequate liability insurance exposes your business to significant financial risk. If a third party suffers injury property damage or financial loss due to your business activities and makes a claim against you you will be personally responsible for all legal defence costs and any compensation awarded. This can lead to severe financial hardship business closure and reputational damage.

• How do I choose the right liability insurance for my business?

  To choose the right liability insurance for your business assess your specific risks and legal obligations. Consider what services or products you offer where you operate how many employees you have and any contracts that require specific insurance levels. Speaking with an experienced insurance broker can help you identify appropriate cover types and sums insured tailored to your business needs.

• What is the difference between public liability and general liability insurance?

  In Australia, public liability insurance is the primary cover for claims involving third party personal injury or property damage due to your business operations. Liability insurance is often a broader term used in other countries like the US that encompasses public liability product liability and sometimes other covers. While the terms are sometimes used interchangeably in Australia public liability is the specific type you will typically encounter.

• Can I bundle different types of liability insurance together

  Yes, many Australian insurers offer business insurance packages that allow you to bundle various types of liability insurance such as public liability professional indemnity and product liability with other covers like property or cyber insurance. Bundling can often result in cost savings and simplifies policy management ensuring comprehensive protection for your business under one policy.

• How do I make a liability insurance claim

  To make a liability insurance claim you should first notify your insurer as soon as possible after an incident occurs even if no formal claim has been made against you yet. You will need to provide full details of the incident including dates times locations parties involved and any witnesses. Gather all relevant documentation such as incident reports photographs and correspondence. Your insurer will then guide you through the claims process.

Written by

Gary Ross Hunter

Journalist

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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