Public Liability vs Product Liability Insurance: Which One Do You Need?
If you sell products or provide services in Australia, you may need public liability insurance, product liability insurance, or both. These policies protect your business from financial loss if someone is injured or their property is damaged due to your products or operations.
Many business owners assume these two types of cover are the same, but they protect against different risks. Understanding the difference can help you avoid costly claims and legal issues.
What Is Public Liability Insurance?
Public liability insurance covers claims made by members of the public if they are injured or suffer property damage due to your business activities.
What Does It Cover?
- Injuries caused by your business operations – for example, a customer slipping on a wet floor in your café.
- Property damage caused by your business – for example, a tradesperson accidentally breaking a client’s window while working.
- Legal and compensation costs – if a claim is made against your business for the above.
Who Needs Public Liability Insurance?
This cover is essential for businesses that interact with the public, including:
- Retailers, cafes, and restaurants.
- Tradespeople, contractors, and construction workers.
- Event organisers, market stallholders, and festival coordinators.
- Cleaning and maintenance businesses.
- Beauty salons, hairdressers, and wellness clinics.
Even if your business does not have a physical storefront, you may still be liable for accidents that occur at a client’s premises or public space.
What Is Product Liability Insurance?
Product liability insurance covers claims arising from faulty or unsafe products that cause injury, illness, or property damage. It protects businesses involved in the manufacturing, distribution, or sale of goods.
What Does It Cover?
- Injuries caused by a defective product – for example, a child’s toy with a choking hazard.
- Property damage due to a faulty product – for example, an electrical appliance that catches fire due to a defect.
- Legal fees and compensation pay outs – related to product liability claims.
Who Needs Product Liability Insurance?
This cover is essential for businesses that make, sell, or distribute physical products, including:
- Manufacturers of consumer goods, electronics, and machinery.
- Importers and wholesalers who sell overseas products in Australia.
- Tradespeople, contractors, and construction workers.
- Retailers, including online stores, sell physical products.
- Food and beverage businesses, including cafes, caterers, and food producers.
- Cosmetic and skincare brands.
Under Australian Consumer Law (ACL), businesses can be held liable for faulty products even if they did not manufacture them. Importers and retailers can also be sued if the manufacturer is based overseas and does not have an Australian presence.
Key Differences Between Public Liability and Product Liability
| Feature | Public Liability Insurance | Product Liability Insurance |
| Covers | Injuries and property damage due to business activities | Injuries and property damage due to defective products |
| Who is covered? | Customers, suppliers, and the general public | Consumers and businesses affected by a faulty product |
| Examples of claims | A café customer slips and falls on a wet floor | A beauty cream causes an allergic reaction |
| Legal fees covered? | Yes | Yes |
| Essential for? | Businesses interacting with the public | Businesses manufacturing, importing, or selling products |
Do Some Businesses Need Both?
Yes, businesses that sell products and interact with the public often need both public liability and product liability insurance.
For example:
- A café needs public liability insurance in case a customer slips on a spilled drink, but it also needs product liability insurance if someone gets food poisoning from a meal.
- A homeware retailer needs public liability insurance in case a customer is injured in-store and product liability insurance in case a faulty electrical item causes a house fire.
- A cosmetic brand selling skincare products needs product liability insurance for allergic reactions and public liability insurance for in-store accidents.
- A carpenter that constructs a deck will have exposure for both Public and Products Liability.
Holding both policies ensures full protection against both business operation risks and product-related risks.
What Happens If You Do Not Have the Right Insurance?
Without the correct insurance, a single claim could cause significant financial losses.
In Australia:
- Public liability claims can involve legal fees, medical expenses, and compensation pay outs, which can be in the tens or hundreds of thousands of dollars.
- Product liability claims can lead to lawsuits, product recalls, and reputational damage. Under the Australian Consumer Law, businesses must repair, replace, or refund faulty goods, and failing to do so can result in legal action.
Some industries and contracts require businesses to hold public liability and product liability insurance. For example, market stallholders, event organisers, and food producers may need proof of insurance to operate legally.
Which Insurance Should You Choose?
- If your business interacts with the public, public liability insurance is essential.
- If your business sells, imports, or manufactures products, product liability insurance is necessary.
- If you do both, having both policies provides complete protection.
Choosing the Right Insurance for Your Needs
Understanding the difference between public liability and product liability insurance ensures your business has the right protection. Without the right cover, a single claim could lead to significant legal and financial consequences.
If your business interacts with customers or operates in public spaces, public liability insurance is essential. If you manufacture, import, or sell products, product liability insurance is required. Many businesses need both to ensure full protection.
Coverscope helps businesses find the right insurance tailored to their industry and risk exposure. Whether you need public liability insurance, product liability insurance, or a comprehensive business policy, we can help you compare options and choose the best coverage.
Want to get started? Contact Coverscope today to find the right insurance solution for your business
