As a sole trader or small business owner in Australia, you should consider getting public liability insurance. Public liability policies are relatively low cost, but they can protect your business and personal assets from significant damages and claims. If you cause personal injury or property damage to another individual and they sue you, you’ll be liable for legal defense costs and financial damages. Public Liability Insurance Australia protects you in the event a third party makes a claim for bodily injury or property damage caused by your business activities. Your public liability insurance can also cover the legal expenses associated with managing liability claims.
Scope of Coverage
A public liability insurance policy covers:
- Personal injuries suffered by third parties (for instance you customers, suppliers, or members of the public
- Third-party property damage resulting from your business operations
- Legal expenses associated with the covered claims
- Some policies cover product liability.
Exclusions in Public Liability Insurance Coverage
Common exclusions in a public liability insurance policy include:
- Damage to your property
- Injuries to your workers
- Professional negligence
- Contractual liability
- Events that didn’t happen within the policy period
Examples of What Public Liability Insurance Covers
Example 1 – How Public Liability Insurance Protects Businesses
If you repair a pipe and then a month the pipe causes water damage and the client sue, your public liability can cover your legal costs and any damages awarded.
Example 2 – How Public Liability Insurance Protects Small Business Owners
One of your employees is undertaking repairs in customer’s home and they accidentally damage a huge section of the plasterboard. If the customer files a claim, your public liability insurance can cover the damage.
Example 3 – Public Liability Insurance for Small Businesses with Walk-in Customers
The risk of third-party liability is very high for businesses with many walk-in clients. Examples of such business include shops, restaurants, cafes, and retailers. If you own such a business, you’re legally responsible for the people vesting your premises. For instance, if a customer trips and falls while on your premises and makes a bodily injury claim, your policy can cover the claim.
Are You Legally Required to Carry Public Liability Insurance Australia?
In Australia, businesses are typically not legally required to carry public liability insurance. There are exceptions though, where businesses that don’t have public liability insurance can’t operate legally. For instance, electricians in Tasmania and Queensland are required to have public liability insurance. Moreover, if you’re in the construction industry, you won’t be allowed to work in many worksites if you don’t have a Certificate of Currency. This certificate is proof that you have an active public liability insurance policy. However, regardless of whether it’s legally mandated or not, sole traders and small business owners who want to protect their business and personal assets should have public liability insurance.
Businesses That Need Public Liability Insurance the Most
All businesses owners should consider having liability insurance. However, public liability insurance is especially useful if your business activities expose you to third-party liabilities. It’s prudent to have public liability insurance if your business operations entail the following:
- If customers, suppliers, and other people visit your premises
- If your business hosts or participates in public events
- If you produce and/or sell products
- If you work in clients’ sites
Setting Your Coverage Limit
Once you’ve decided to purchase a public liability insurance policy, the next step is to figure out the amount of coverage you need. To find out the ideal amount of coverage, you need to consider the liability risks your business faces as well as the contractual requirements and the standard in your industry.
Are Employees Covered by Public Liability Insurance?
Public liability insurance doesn’t cover your workers. This type of insurance generally only covers liability claims made by third parties, such as customers. Employees’ workplace injuries are covered by compulsory workers’ compensation insurance.
Public Liability Insurance for Sole Proprietorships
Being a sole trade is great because the business structure is simple and easy to manage. However, if a liability claim is made against your sole trading enterprise, your personal assets may be at risk if you don’t have sufficient public liability insurance. This is because sole traders are personally liable for liability claims. Basically, there is no difference between your private and business assets.
You can get advice on the types of insurance your sole trader enterprise needs from your professional association. Your insurance needs will largely depend on the risks your business faces as well as the industry in which you operate. Having adequate public liability insurance coverage can ensure the continuity of your businesses in case of liability claims, and it can protect your personal assets and savings.
If you run a home-based business, you should notify your home insurer that you’re using the home for commercial purposes. You should also seek clarification from your insurer whether they cover liability claims associated with the home-based business. Typically, home insurance policies don’t provide sufficient liability coverage for home-based businesses and so you should ideally purchase a public liability insurance policy that’s tailored for your business.
Levels of Coverage
In Australia, $ 5 million is the minimum amount of public liability insurance available. There is no upper limit, but the maximum amount is usually AU$20 million. Most public liability insurance Australia insurance companies offer four levels of coverage:
- AU$ 5 million
- AU$10 million
- AU$20 million
The Cost of Public Liability Insurance
Some of the factors that determine the cost of public liability insurance include:
- Your occupation or type of trade.
- Business size by revenue or staff numbers
- The kinds of risks inherent in your industry.
- The amount of coverage you need
- Your dependence on subcontractors
In addition to protecting your personal and business assets, public liability insurance is also tax-deductible because the premiums are business expenses.
If you’re a sole trader or small business owner in Australia, you should consider purchasing public liability insurance. This policy will protect your personal and business assets in case a bodily injury or property damage claim is made against you. Your public liability insurance will also cover the legal costs associated with the liability claims. All these benefits make public liability insurance an essential business insurance policy.