Public Liability Insurance vs Professional Indemnity: What’s the Difference?
If you run a business in Australia, chances are you have heard of public liability insurance and professional indemnity insurance. Many business owners assume they are the same or that they only need one. However, these policies protect against very different risks.
Choosing the right cover could mean the difference between financial security and major losses if something goes wrong. Here is what you need to know.
What Is Public Liability Insurance?
Public liability insurance protects your business if a customer, supplier, or member of the public is injured or their property is damaged due to your business activities.
What Does It Cover?
- Injury claims, such as a customer slipping on a wet floor in your shop and breaking their wrist.
- Property damage, such as a tradesperson accidentally breaking a client’s glass door while working.
- Legal costs, covering legal fees if a claim for the above is made against you.
Who Needs Public Liability Insurance?
This cover is essential for businesses that interact with the public, including:
- Tradespeople and contractors, such as plumbers, electricians, and carpenters.
- Retail businesses, including shops, cafes, salons, and shopping centres.
- Event organisers, including market stallholders, festival coordinators, and wedding planners.
- Freelancers and consultants who work on-site with clients.
- Hospitality businesses, including restaurants, catering services, and food trucks.
- Cleaning services, such as home and office cleaners who work at client locations.
Even if your business does not have a physical location, you may still be liable for accidents caused by your business activities. Sole traders, in particular, should carefully consider whether they need public liability insurance.
What Is Professional Indemnity Insurance?
Professional indemnity insurance covers businesses that provide advice or professional services. It protects against claims of negligence, mistakes, or poor advice that result in financial loss for a client.
What Does It Cover?
- Errors and omissions, such as an accountant miscalculating a client’s tax, leading to penalties.
- Breach of duty, such as an architect designing a faulty structure that requires costly repairs.
- Legal fees, covering legal defence costs for the above and compensation pay outs.
Who Needs Professional Indemnity Insurance?
This insurance is crucial for businesses offering specialist advice or expertise, including:
- Consultants and business coaches, such as management consultants and marketing strategists.
- Lawyers, accountants, and financial advisors who provide legal or financial guidance.
- Engineers and architects responsible for designing or approving projects.
- Health professionals, including physiotherapists, nutritionists, psychologists, and chiropractors.
- Real estate agents and mortgage brokers, who provide property or loan advice.
- IT professionals, such as software developers and cybersecurity consultants, who advise businesses on technology solutions.
Key Differences Between Public Liability and Professional Indemnity
| Feature | Public Liability | Professional Indemnity |
| Covers | Physical injury or property damage | Financial loss due to advice or professional service |
| Who is covered? | Public, including customers, visitors, and suppliers | Clients receiving advice or services |
| Examples | A customer trips over loose carpet in a shop | A consultant gives incorrect advice |
| Legal fees covered? | Yes | Yes |
| Essential for? | Any business with public interaction | Any business offering professional advice or services |
Do Some Businesses Need Both?
Yes, some businesses require both public liability and professional indemnity insurance.
For example:
- A personal trainer could be liable if a client slips on a wet gym floor, which would fall under public liability insurance. If their training program results in an injury due to poor advice, professional indemnity insurance may be required.
- An IT consultant could damage a client’s computer during an office visit, which would be covered under public liability insurance. If they provide faulty software recommendations that cause financial loss, professional indemnity insurance would apply.
- A beauty therapist could be sued if a client has an allergic reaction to a skincare treatment, which may be covered under public liability insurance. If the reaction was caused by incorrect advice about a product, professional indemnity insurance would apply.
Businesses that involve physical interaction and professional advice should consider holding both policies to ensure complete protection.
What Happens If You Do Not Have the Right Cover?
Not having the right insurance can be financially devastating. In Australia:
- Public liability claims can result in substantial legal and medical costs, even for a minor accident.
- Professional negligence claims can also be costly, particularly if a mistake causes a major financial loss for a client.
Some industries require insurance by law. For example, accountants, architects, and health professionals in Australia must hold professional indemnity insurance. Many trade licences and event permits also require public liability insurance.
Which Insurance Should You Choose?
- If your business interacts with the public, public liability insurance is essential.
- If you offer advice or professional services, you need professional indemnity insurance.
- If you do both, having both policies provides complete protection.
Your Next Steps
Understanding the difference between public liability and professional indemnity insurance ensures your business has the right protection. If you are unsure which policy suits your needs, speak to one of our insurance brokers to help tailor a solution for your business.
Want to compare public liability and professional indemnity insurance quotes? Get started today with Coverscope by calling 1300 900 207 or fill out our quick quick form and we will be in touch.
