Public Liability Insurance is one of the most misunderstood covers in Australian small business. Some owners think it’s only for large companies, others assume it covers every possible claim. Both assumptions are wrong, and the gap between what people think it covers and what it actually covers is where expensive mistakes happen. Here are the six myths that come up most often, and what’s actually true.
Is Public Liability Insurance only necessary for big businesses?
No. Business size has no bearing on liability risk. Any business that has contact with customers, suppliers, or the public, even a home-based business with no storefront, can be held liable for a claim.
Picture a small home-based business where a courier drops off a package, trips on the front step, and injures their ankle. Without cover, the business owner is personally responsible for that person’s medical costs and lost income. A sole trader working from a spare room carries the same liability exposure as a business with a shopfront and staff, because the legal test is about the incident, not the size of the business behind it.
Does Public Liability Insurance cover employee injuries?
No. Public Liability Insurance covers claims from third parties, such as customers, suppliers, or members of the public. It does not cover injuries to your own employees.
If a staff member is injured on the job, that falls under Workers’ Compensation Insurance, which is compulsory for employers in every Australian state and territory under state and territory-based schemes. Each jurisdiction runs its own scheme with its own rules, but the requirement itself doesn’t vary: if you employ staff anywhere in Australia, you need Workers’ Compensation cover, separate from and in addition to Public Liability.
What doesn’t Public Liability Insurance cover?
Public Liability Insurance is not a catch-all policy. It’s built specifically to cover third-party injury and property damage, which means several common business risks fall outside it entirely.
Public Liability Insurance does not cover:
- Damage to your own property or stock
- Injuries to your own employees (covered under Workers’ Compensation)
- Financial loss caused by professional errors or bad advice, with no accompanying injury or property damage (covered under Professional Indemnity Insurance)
- Breaches of contract
- Intentional damage or illegal activity
A business that provides both physical work and professional advice, a builder who also designs, for example, often needs both Public Liability and Professional Indemnity cover to close this gap.
Do only high-risk businesses need Public Liability Insurance?
No. Construction sites and trades carry obvious exposure, but the businesses that get caught out are often the ones that assumed they were too low-risk to need cover. Cafés, event organisers, market stallholders, retail shops, and personal trainers all face genuine liability exposure through ordinary daily operations.
A customer tripping over a loose rug in a boutique, or a spilled drink causing a slip in a restaurant, can result in a legal claim regardless of how careful the business is. Liability risk comes from having people, staff, customers, or the public, physically present in or around your business, not from working in a nominally “risky” industry.
Is Public Liability Insurance too expensive for small businesses?
Not usually. Cost depends on industry, cover limit, and location, but entry-level cover for low-risk small businesses commonly starts from around $30 to $50 a month, well below what a single claim would cost to defend.
Legal defence costs alone can run into tens of thousands of dollars before any compensation is factored in. Measured against that exposure, the monthly premium is a small, predictable cost rather than a financial burden, and most brokers can tailor the cover level ($5 million, $10 million, or $20 million) to match what your contracts or venues actually require, rather than defaulting to the most expensive option.
If my business takes every precaution, do I still need Public Liability Insurance?
Yes. Public Liability Insurance responds to accidents, not negligence, which means even a genuinely careful, well-run business can still face a claim.
The relevant question isn’t whether an incident is likely. It’s whether the business could absorb the legal fees, compensation, and lost time if one happened anyway. Cover exists precisely for the claims that couldn’t have been fully prevented.
Need cover? Get a quote today
No matter the size of your business, Public Liability Insurance can be the difference between staying afloat or shutting down after an unexpected claim. Coverscope Insurance Brokers do the hard work to find the right policy for your business, ensuring you’re covered.
