What Small Business Owners Should Know About Professional Indemnity and Public Liability Insurance in Australia

There are multiple insurance options in the market that are available to small businesses in Australia. However, finding the right coverage can be a bit tricky. It’s a challenge that most business owners face.

If you’re caught off guard without the right type of insurance, it can be a costly road to take.

As a matter of fact, the Insurance Council of Australia (ICA) found that around 10% of small businesses are underinsured, leaving them exposed to significant financial and legal risks.

For small business owners, knowing which insurance to consider matters very much so. While both professional indemnity and public liability insurance cover compensation claims, the nature of these claims differs.

Learn the difference between the two coverage types, what they cover, and how to determine the right protection for your business.

Also Read: How to Review Your Insurance in 30 Minutes

What’s the Difference Between Professional Indemnity and Public Liability Insurance?

Professional indemnity and public liability insurance are two separate types of business insurance. It’s easy to confuse the two as they’re both insurance policies that are great means of cover for small businesses in Australia.

However, the nature of the claims they compensate for differs from one another.

Public liability insurance covers your business for claims made by members of the public for injury, illness, or damage to property. On the other hand, professional indemnity insurance covers your business for professional mistakes or negligence that causes your clients or customers to lose money.

Also Read: 5 Risks from Inadequate Insurance

How Public Liability Insurance Works?

Public liability insurance protects your business if someone is injured on your premises or their property is damaged because of your business activities. It can cover the costs of your legal defence, compensation payments, medical costs, and loss of income.

In Australia, public liability claims can result in compensation payouts of $200,000 or more, depending on severity.

Examples of public liability claims include:

A customer slipping on a wet floor in your store and sustaining an injury.
A contractor accidentally damaging a client’s property while on-site.
A falling sign or fixture causing injury to a passerby.
Spilled food or drink in a café leading to an accident.

Benefits of public liability insurance include:

Covers Third-Party Injuries: Protect your business if someone is physically harmed due to your operations.
Property Damage Liability: Covers repair or replacement costs if you damage someone else’s property.
Legal Cost Protection: Pays for legal representation, court fees, and settlements (often the most expensive part of a claim).

How Professional Indemnity Insurance Works?

Professional indemnity insurance, on the other hand, protects your business against claims arising from professional errors or negligence that result in financial loss or reputational damage for your clients or customers.

If a client believes your advice, service, or expertise has caused them harm, they may take legal action. This also includes suing you for poor business advice, defamation, libel, or sub-standard work.

Examples of professional indemnity claims include:

Providing incorrect advice that leads to financial loss for a client
Failing to deliver services as agreed in a contract
Making errors in reports, designs, or strategies
Unintentional breaches of copyright, confidentiality, or data protection

Benefits of professional indemnity insurance:

Negligence Protection: Covers claims arising from errors or failure to meet professional standards.
Protection for Specialised Services: Protect your business if you provide expert advice or technical services to your customers or clients.
Covers Intellectual Property and Data: Provides protection against claims involving copyright infringement, confidentiality breaches, or mishandling of sensitive data.

Which Business Insurance Should Small Business Owners Consider?

Do you interact with your clients or customers? Does your business provide professional service or advice? If you answered yes to these two questions, then you need both professional indemnity and public liability insurance.

But if you only said yes to one, your insurance needs may be more specific.

If you only interact with customers in person (for example, retail, hospitality, trades), then public liability insurance is what you need. It protects you from claims involving injury or property damage.
If you only provide advice, expertise, or professional services (such as consulting, marketing, accounting, or design), then professional indemnity insurance is what you need. It protects you from claims of negligence, errors, or financial loss.

Protect Your Business with Professional Indemnity and Public Liability Insurance

Looking for professional and public liability insurance to run your small business in Australia? Consider teaming up with Empire Cover.

We've partnered with the best business insurance brokers to provide our members with access to comprehensive business insurance, including business packages, public liability, professional indemnity, commercial property, construction insurance, management liability, and specialist covers.

Get a quote today and we’ll help you protect your business from claims.

If you're not yet a member, you'll need to join EmpireOne to take advantage of our exclusive coverage options.