What is public liability insurance?
Public liability insurance protects your business against third-party claims for injury, death or property damage caused by your business activities. It’s a type of business insurance that covers incidents involving customers, suppliers or members of the public where your business is found legally responsible.
Here’s how public liability insurance works in a nutshell:
- Covers expenses such as lawyers’ fees, court costs and settlements.
- Pays damages awarded to the injured party or for the cost of repairing/replacing damaged property.
- Operates on a per-claim basis, meaning you can claim each time an incident occurs, subject to policy limits and exclusions.
- Applies to accidents at your premises, at a client’s site, or in public places during the course of your day-to-day operations.
Examples of public liability insurance…
- A customer slips on a wet floor in your shop and injures their back.
- A tradesperson accidentally damages a client’s property while carrying out work.
- A supplier trips over loose cabling at your office and breaks their arm.
- Your business stand at an expo causes damage to the venue’s flooring.
What does public liability insurance typically cover?
Legal and defense costs
Fees and expenses involved in defending your business against third-party claims. This includes court costs, settlements and your own legal representation, which can escalate quickly if a case drags on or requires specialist lawyers.
Compensation for personal injury
If a customer, supplier or member of the public is injured or killed as a result of your business activities, it helps cover the compensation owed. This may include medical treatment costs and loss of income if the injured person is unable to work.
Compensation for property damage
Money owed to cover the repairs or replacement if you’re found liable for accidentally damaging someone else’s property. Examples include a tradie cracking a client’s tiles during a renovation, or a retail store causing water damage to a neighbouring shop.
Side note:
Public liability cover is one of the most common types of business insurance in Australia. In fact, some landlords make it a condition of your commercial lease, and in certain industries and states it’s mandatory. For example, Business Tasmania states that while public liability isn’t mandated by state law, it may be compulsory in some situations.
What doesn’t public liability insurance cover?
Damage to your own property
If a fire destroys your office furniture, public liability may not cover it, unless it’s specified in your policy. You’d likely need property or business interruption insurance instead.
Contractual liability
Your business misses a contract deadline and the client demands payment for the delay. Since this arises from a contractual obligation, public liability doesn’t step in.
Professional advice
A client loses money because your consultancy report contained errors. Professional indemnity insurance is needed here to handle a claim like this.
Product guarantee or warranty
A blender sold to a customer stops working within the warranty period. Cover for repairs or replacement generally falls under product liability insurance or the manufacturer’s warranty.
Faulty workmanship
A newly built deck collapses due to poor construction. While repairing the deck itself isn’t covered, damages to a neighbour’s property might be.
Employers’ liability
An employee sprains their ankle while lifting heavy boxes at work. Workers’ compensation usually covers this.
Asbestos
Disturbing asbestos during renovations triggers health risks for anyone nearby. Public liability typically excludes asbestos claims due to the extreme hazards.
Fines and penalties
Authorities issue a hefty fine for breaching safety regulations. Public liability insurance won’t pay for legal penalties or regulatory fines.
Deliberate damage
A staff member intentionally scratches a client’s expensive flooring. Malicious acts like this are usually excluded from public liability cover.
Cyber attacks
Hackers encrypt your business data, holding it hostage for ransom. You’d need cyber liability insurance to recover from such an attack.
Pro tip:
Many providers bundle public liability into broader business insurance packages, often tailored to specific industries (e.g. “Trades & Services” or “Sole Trader Insurance”). If you’re eyeing a multi-cover deal, don’t just skim the paperwork – check the fine print or chat with an insurance broker to make sure you’re fully covered.
How much does public liability insurance cost?
The cost of public liability cover for businesses typically ranges from $30 to $100 per month, according to insurer and advisory firm HMD, with an average of about $63.53 per month.
Meanwhile, brokerage Smart Business Insurance estimates annual costs of $500 to $1,500 for sole traders and small businesses.
As you’ll see below, the actual cost of premiums depends on several factors unique to your business.
What factors impact the cost of premiums?
Industry and profession
Certain industries carry unique risks. For example, a large construction company faces a higher chance of causing property damage, while a cafe might be exposed to claims if a customer slips and gets injured on the premises.
Cover level amount
You can normally choose up to $20 million in public liability cover, depending on your business needs. Higher cover limits generally mean higher premiums, so it’s worth speaking to an insurance broker to choose a level that balances cost with adequate protection.
Annual turnover
Insurers consider your business revenue when calculating premiums. A higher turnover often indicates more activity and higher potential risk, which can increase your premium.
Number of employees
The more staff you have, the greater the chance of an incident occurring on-site (or off-site if your business is mobile).
Claims history
Your past claims play a big role in pricing. A business with frequent or high-value claims may face higher premiums, while a clean claims history may help keep costs lower.
Policy excess
This is the amount you agree to pay out of pocket when making a claim (e.g. $500 or $1,000). Choosing a higher excess usually lowers your premium, while a lower excess increases it. It’s a trade-off between upfront cost and financial risk when a claim occurs.
You can potentially lower the cost of public liability cover by taking advantage of special offers for new customers. For example, CGU and NRMA offer a 10% discount when you buy a policy online. You might also save by bundling with an insurer you already use for home, contents or car insurance.
Why take out public liability cover?
Businesses of all sizes take out public liability insurance to protect themselves from the unexpected. Even when you run a safe, well-managed business, accidents can happen. And without cover, the costs of legal claims or compensation could be enough to shut your doors.
Case study: Caffeine and a freak accident
A popular inner-city cafe has decorative shelving above its main seating area, displaying coffee beans, plants and books. One busy morning, a poorly secured shelf gives way, and a heavy jar falls, striking a customer on the head and causing a concussion.
Here’s how this hypothetical scenario could pan out:
How to find the best public liability insurance
Whether you’re a small business owner, a sole trader, or looking for cover on behalf of a larger business, here are the key steps to finding the best public liability insurance:
Assess your needs
Start by looking at the specific risks your business faces and deciding how much coverage you realistically require (hint: you may want to lean on a professional’s help here). Consider the nature of your work, your industry requirements, and whether you need any additional cover, such as product liability or professional indemnity.
Compare providers
Not all insurers offer the same benefits, so it pays to shop around. Compare coverage limits (typically ranging from $5 to $20 million), policy features, exclusions, and customer reviews to see which provider best meets your goals and objectives.
Get a few quotes
Obtain personalised quotes from multiple insurers to get a sense of the cost and coverage options available. Some insurance packages may have public liability cover bundled with other insurances that suit your business needs.
Review the policy carefully
Before committing, read the Product Disclosure Statement (PDS). Make sure you understand the inclusions, exclusions, excess amounts, and any optional add-ons to ensure the policy fully protects your business.
A final note...
Once you purchase a policy, your insurer will issue a Certificate of Currency, a formal document confirming that your business is covered for public liability and for how long. It includes your policy number and other essential details you may need if you ever make a claim.
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