Running a business as a sole trader gives you full control, but it also means you’re personally responsible for anything that goes wrong. If a customer, supplier or member of the public suffers injury or property damage because of your business, you could be left facing an expensive legal battle.
That’s where public liability insurance comes in. But is it essential for sole traders, or just an optional extra? Let’s break it down.
What Is Public Liability Insurance?
Public liability insurance helps cover legal and compensation costs if someone makes a claim against your business for:
Injuries – A customer trips over equipment and breaks their wrist.
Property damage – You accidentally spill coffee on a client’s expensive laptop.
Legal expenses – If you need to defend yourself in court.
For sole traders, even one unexpected claim can be financially devastating. Unlike companies, which have a separate legal identity, a sole trader is personally liable for all debts and legal costs.
Is Public Liability Insurance Required for Sole Traders?
Public liability insurance is not legally required for sole traders in Australia, but many industries, contracts and workspaces won’t allow you to operate without it.
You May Need Public Liability Insurance If You:
Work in trades – Electricians, plumbers and builders often need insurance to work on-site.
Operate a market stall – Most markets require proof of cover before you can set up.
Offer freelance or consulting services – Some clients insist on it before signing a contract.
Run a home-based business – Home insurance may not cover business-related claims.
Use shared workspaces – Many co-working spaces require insurance for members.
Even if no one is forcing you to have it, think about the risks. Would you be able to afford compensation and legal fees if someone sued you?
What Happens If You Don’t Have Public Liability Insurance?
Without cover, you’ll need to pay out of pocket if a claim is made against you. Legal fees alone can cost tens of thousands, even before factoring in compensation pay outs.
Potential Examples:
- A carpenter drops a tool while working at a client’s house, cracking expensive tiles. The homeowner demands thousands for repairs.
- A personal trainer runs outdoor boot camps. A participant trips over equipment, breaks an ankle and sues for medical costs.
| Situation | With Public Liability | Without Public Liability |
| Client trips over your equipment | Covered | Pay medical costs yourself |
| You damage a customer’s property | Covered | Pay repair costs yourself |
| Legal action against you | Covered | Pay legal fees yourself |
Even minor accidents can lead to big bills. Without public liability insurance, you bear the full financial burden.
How Much Does Public Liability Insurance Cost for Sole Traders?
The cost varies depending on your:
Industry – High-risk jobs like trades attract higher premiums.
Coverage amount – Most policies offer $5 million, $10 million or $20 million cover.
Business activities – Regular interaction with the public may increase costs.
Location – Working in busy areas or on client sites can raise the risk level.
Most sole traders pay between $350 and $1,500 per year. The exact price depends on the level of risk associated with your work and the above mentioned factors.
Should Sole Traders Get Public Liability Insurance?
While not required by law in most cases, public liability insurance is highly recommended for sole traders who deal with the public, visit client locations or operate in shared spaces. Even a small accident could lead to huge financial consequences.
Key Takeaways:
- Sole traders are personally responsible for claims against their business.
- Many contracts, venues and industries require proof of insurance.
- Even small incidents can result in expensive legal battles.
- Public liability cover is affordable compared to the cost of a major claim.
If you’re unsure whether you need insurance, consider how you’d manage a legal claim or compensation pay out on your own. In many cases, public liability insurance is a small price for that peace of mind.
Need Cover? Get a Public Liability Insurance Quote Today
If you’re a sole trader looking for the right cover, we can help. Coverscope has over 22 years of experience and our experts tailor to your industry and deliver a fast, obligation-free quote.
