Common Misconceptions About Public Liability Insurance
The most common misconceptions about public liability insurance are that it’s only for big or high-risk businesses, that it covers your staff and your own property, and that your home, landlord’s or venue’s insurance already protects you. None of these are true. Public liability covers one thing: your legal liability when your business injures someone else or damages their property.
The gap between what business owners think it covers and what it actually covers is where expensive mistakes happen. Here are the 12 myths that come up most often, and what’s actually true.
Public liability myths at a glance
| Myth | Reality |
|---|---|
| Only big businesses need it | Business size has no bearing on liability risk |
| Only high-risk businesses need it | Any business with people around it carries risk |
| Home and contents insurance covers my home business | Home policies exclude liability from business activity |
| My landlord’s insurance covers my business | It covers the building, not your operations |
| It’s compulsory by law for every business | Only some licences require it, but most contracts and leases do |
| It covers my employees | Staff injuries need workers’ compensation |
| It covers everything | It has clear exclusions |
| It doesn’t cover products I sell | Most policies include products liability |
| If I’m careful, I don’t need it | Careful businesses still get sued |
| $5 million is enough for everyone | Many leases and contracts ask for $10 million or $20 million |
| I can only buy an annual policy | One-off and short-term cover is available |
| It’s too expensive for small businesses | Cover starts from a few hundred dollars a year |
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 shopfront, can be held liable for a claim.
Picture a home-based business where a courier trips on the front step while delivering stock and injures their ankle. If the business is found liable, the owner can face that person’s medical costs and lost income. A sole trader working from a spare room can face the same claim as a business with a shopfront and staff, because the claim turns on the incident, not the size of the business behind it.
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 slipping on a spilled drink in a restaurant, can lead to a claim. Liability risk comes from having people physically present in or around your business, not from working in a nominally risky industry.
Does home and contents insurance cover a home business?
No. Standard home and contents policies cover your legal liability as a homeowner or renter, such as a guest slipping on your stairs, but they generally exclude liability arising from business activity. If a client visiting for a business meeting is injured, or you damage a customer’s property while working, your home policy is unlikely to respond.
Running an undeclared business from home can also affect your home cover, so tell your home insurer about it. Liability from the business itself needs a separate public liability policy or a business insurance package.
Does my landlord’s insurance cover my business?
No. Your landlord’s policy covers the building, the landlord’s own fixtures and the landlord’s liability as the property owner. It doesn’t cover your stock, fit-out or equipment, and it doesn’t cover claims arising from your business, such as a customer injured in your shop.
Most commercial leases go further and require you to hold your own public liability policy, often at $10 million or $20 million, before you get the keys. Not holding it can put you in breach of the lease.
Is public liability insurance compulsory by law?
Not for every business. There’s no single national law that requires it, but some licences do. Queensland electrical contractors, for example, must hold at least $5 million in public and products liability to get or renew their licence, and Victorian plumbers must hold at least $5 million in public and completed work liability.
For most businesses, the requirement comes from contracts rather than law. Landlords, head contractors, councils, venues and market organisers usually ask for a certificate of currency before you can trade or start work. Our guide to whether sole traders need public liability insurance covers the state-by-state rules.
Does public liability insurance cover employee injuries?
No. Public liability covers claims from third parties, such as customers, suppliers, contractors and members of the public. It doesn’t cover injuries to your own employees.
Staff injuries are covered by workers’ compensation, which is generally compulsory once you employ staff. Each state runs its own scheme with its own rules and exemptions. NSW, for example, exempts employers who pay $7,500 or less in wages a year and don’t employ apprentices or trainees.
Does public liability insurance cover everything?
No. Public liability is built to cover third-party injury and property damage, which means several common business risks fall outside it. Policies commonly exclude:
- Your own property: damage to your own premises, stock, tools, equipment or vehicles.
- Employee injuries: these fall under workers’ compensation.
- Advice and professional services: financial loss caused by advice or design errors, with no injury or property damage, needs separate cover.
- Faulty workmanship: the cost of fixing your own defective work, although injury or damage the defect causes to others may be covered.
- Product recalls: the cost of withdrawing or replacing your own faulty products.
- Fines and penalties: court-imposed fines, regulatory penalties and punitive damages.
- Deliberate or illegal acts: intentional damage or criminal behaviour.
- Contractual liability: liability you take on under a contract that goes beyond your normal legal liability, unless the policy is extended to cover it.
- Asbestos and pollution: usually excluded unless specifically added.
- Registered vehicles on public roads: these are covered by CTP and commercial motor insurance instead.
Does public liability insurance cover the products I sell?
Usually, yes. Most policies are sold as public and products liability, which covers injury or property damage caused by a product you make, sell, supply or install. Products liability doesn’t cover recalling or replacing a faulty product. If you import goods and the overseas maker has no place of business in Australia, Australian Consumer Law can treat you as the manufacturer, so declare any imported or own-brand products when you apply.
Not sure whether your policy includes it? The cover type on your certificate of currency will tell you. A policy that includes products cover usually lists both sections, while one that names public liability only may leave you exposed if a product you sold causes harm.
If I’m careful, do I still need public liability insurance?
Yes. Public liability responds when you’re held legally liable for injury or damage, which usually means a claim that you were negligent. Careful businesses still face claims, because an accident only has to happen once, and a claim can be made against you whether or not it succeeds.
Most policies also cover the legal costs of defending a claim, including claims that turn out to be unfounded. For a small business, defence costs alone can run into tens of thousands of dollars.
Is $5 million public liability enough?
For some businesses, yes, but often not. $5 million suits low-risk work with little public contact and no contract asking for more, and it’s the licensing minimum for some trades. Many commercial leases, councils and client contracts set $10 million as the minimum, and government work and larger construction sites often require $20 million.
Check the highest limit in any lease, contract or venue agreement you’re bound by before you buy. Moving from $5 million to $10 million or $20 million usually costs far less than the step up in cover.
Do I have to buy an annual public liability policy?
No. One-off and short-term public liability cover is available for single events, market stalls and short work periods, from a single day to a few months. If you trade regularly, an annual policy is usually better value and saves arranging cover each time.
When you buy short-term cover, make sure the dates include set-up and pack-down, not just the hours you’re open, and get a certificate of currency for the venue or council.
Is public liability insurance too expensive for small businesses?
Not usually. Typical Coverscope starting prices per year are:
| Business type | Starting at |
|---|---|
| Market stallholders | $125 |
| Consultants and home-based services | $370 |
| Lower-risk trades (e.g. carpenters, plasterers, tilers) | $430 |
| Retail shops | $550 |
| Higher-risk trades (e.g. plumbers, electricians, roofers) | $600 |
These are starting prices, not quotes. Your premium depends on your industry, cover limit, turnover and claims history.
Get the right public liability cover
Whatever the size of your business, the right public liability insurance can be the difference between carrying on and closing after an unexpected claim. Coverscope compares policies from a range of insurers, checks your cover against your lease and contracts, and helps if you ever need to claim.
This article provides general information only and doesn’t constitute personal financial advice. Insurance requirements vary by industry, state and contract, so confirm your obligations with a qualified broker.
