Public Liability Insurance: What small business owners need to know

Public liability insurance is a core business cover in Australia. It can come to your rescue if someone sues you for property damage or injury caused by your business operations. Otherwise, you will have to pay all the expenses out of your pocket, which may seriously hurt your cash flow or even business viability.

It is important for small business owners to know how Public Liability Insurance works and be aware of the typical inclusions and exclusions to help them choose suitable cover for their business activities and risks.

This brief guide will explain some of the key things you should know about public liability insurance in Australia.

How is Public Liability Insurance defined in Australia?

In Australia, public liability insurance may cover a small busines owner for the cost of repairing property damage or paying for medical expenses for personal injury to a third party for damages that have been caused by their business operations.

In the language of insurance, you may be liable or responsible for something that occurs due to your business activities, including the negligence of your employees.

For example, a customer sustains an injury at your auto repair shop after being struck by a tool that falls from a shelf. Or you accidentally break an expensive jar while drilling at your client’s house. If the affected party is not forgiving, they can sue you for compensation.

Your public liability insurance may cover the costs of damages, including legal fees. This way, you do not need to pay out of your pocket.

The Difference between Professional Indemnity and Public Liability:

Public liability is often confused with professional indemnity as both sound similar. But they are not the same.

The difference between public liability and professional indemnity insurance for small business owners is that:

  • Public liability insurance is designed to protect small business owners against for claims by clients and other parties for injury, illness, or damage to property while
  • Professional indemnity insurance is designed to protect small business owners for claims by clients for professional errors or negligence.

Public liability insurance is typically required by all Australian small business owners while professional indemnity insurance is typically required by Australian businesses that provide advice for a fee-  such as professional services consultants and firms.

Why is Public Liability important for all Australian businesses?

Public Liability insurance is important for all Australian business owners as it may cover customer injuries, customer property damage, and other third-party damages.

It is also generally required for trade subcontractors to get onto building sites and for commercial lease tenants.

Public Liability insurance is vital insurance protection to protect business and personal assets against third party injury and subsequent legal actions that otherwise could bankrupt a small business.

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What It Generally Includes: 

In Australia, public liability insurance can offer coverage against the following scenarios.

  • If someone not employed by you is injured because of your business operations.
  • If your business activities damage someone’s property
  • Cover for product liability
  • Legal costs for public and product liability claims against you.

(NOTE: This is just a general overview of public liability insurance in Australia. The cover may vary from insurer to insurer.)

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How is Public Liability Insurance calculated in Australia?

Some key factors for determining the cost of public liability insurance in Australia are:

  • Risk in Your Business:

Some businesses pose a higher risk than others. Trade industries such as electricians and plumbers can cause serious harm to other people and property if things go wrong. They are likely to face higher public liability premiums than office-based businesses.

  • The Size and Turnover of Business:

A company with 20 people is likely to have a higher cost than a sole trader in the same industry. The larger sum will typically be applied to the larger business.

  • The Claims History:

Size and frequency of claims will impact premiums; and in some instances, very frequent claims may make it difficult to source cover.

And What Public Liability Insurance Can’t Cover

Here are some exclusions for public liability insurance.

  • Injured employees are not covered as they are covered through worker’s compensation insurance. 
  • Punitive damages (penalty) imposed by a judge if your conduct is found intentional.
  • Expenses that occur when products are recalled from the market. 

How to Shop for Public Liability Insurance in Australia?

Many insurance companies provide public liability insurance in Australia. You can even shop the insurance online.

Make sure to compare public liability insurance at different insurers to find the right one made for your business operations.

The cover might not be easy to understand for some businesses, thanks to the varying limits, prices, and inclusions. Therefore, it is better to discuss the elements of the coverage with your insurer or business insurance broker.

Keep in mind that the insurance should cover your liability risks.

*Important: Cover may be available subject to meeting insurers underwriting criteria. Some of the covers listed may or may not be available or may have limitations or exclusions. Cover inclusions vary significantly from insurer to insurer. DO NOT rely upon the above. Check your policy schedule carefully for inclusions and exclusions and limitations. Talk to a business insurance broker for more information.


Author Bio:

Romit Malhotra is the brand representative of Smart Business Insurance, a leading Australian insurance broker. A big foodie, he loves to travel the world. Also, a diligent businessman, Romit likes to pen down his thoughts on related topics whenever he finds some free time.

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