Public liability insurance is often treated like a checkbox—something business owners purchase because they have to, not because they understand it. But here’s the hard truth: failing to grasp the importance of this insurance could leave your business financially exposed when things go wrong.
In this blog, we’ll debunk the most common misconceptions business owners have about public liability insurance, highlight the serious risks of being underinsured, and explain why speaking to an experienced insurance advisor (like HMDI) could be the smartest business move you make this year. Whether you’re a self-employed tradie or run a growing company with multiple staff, this article will help you make informed decisions to protect your business.
Why Public Liability Insurance Isn’t Just for Big Companies
One of the biggest mistakes small business owners make is assuming public liability insurance is only necessary for large companies or high-risk industries. The truth is, if members of the public come into contact with your business in any capacity—whether at your premises, on a job site, or even in a shared office—you may be legally required to carry public liability insurance.
Even if you’re a sole trader, public liability insurance protects your business against claims for personal injury or property damage caused as a result of your business activities. Without it, you could face a liability claim that’s financially devastating.
This type of insurance covers your business against claims that can arise from everyday incidents—a customer slipping on your wet floor, a courier tripping over your tools, or accidental damage caused while working in someone else’s home. It’s not about the size of your company—it’s about the type of business you run and how you interact with the public.
What Public Liability Insurance Actually Covers
Another common misunderstanding is around what public liability insurance covers—and doesn’t cover. Some business owners believe this type of insurance protects them from all types of claims. Not quite.
Public liability insurance is designed specifically to cover compensation claims made by third parties for personal injury or property damage. For example, if someone suffers an injury or their belongings are damaged as a result of your business, public liability insurance may help cover legal costs and compensation payments.
However, this insurance doesn’t cover damage to your own property, employee injuries (which fall under workers compensation insurance), or poor professional advice—that’s where professional indemnity insurance steps in. Public liability insurance may also exclude specific scenarios based on the nature of your work, so it’s essential to review the relevant product disclosure statement and get professional advice from your broker.
The Real Risk of Being Underinsured
When it comes to insurance, many business owners fall for cheap policies or default to the minimum cover just to tick the compliance box. But public liability claims can quickly reach six or even seven figures, depending on the damage or injury.
If your policy only covers up to $5 million and the claim is for $20 million, you’re liable for the shortfall. A policy might look good on paper, but if it doesn’t align with your business risks, it won’t help when it matters most.
Underinsurance doesn’t just increase your financial risk—it can expose your business to legal consequences if you’re found negligent and uninsured. That’s why it’s critical to work with an insurance adviser who can tailor your public liability insurance policy to the actual needs of your business.
Not All Public Liability Policies Are Created Equal
Thinking all public liability insurance policies are the same is another misconception. Insurers structure policies differently, and what one covers, another may exclude.
Factors like the level of cover, the business activities you undertake, your turnover, and where you operate (each state or territory has its own nuances) all play a role in shaping the right policy for you. Public liability insurance protects your business, but only if it’s tailored to your risk profile.
For example, an electrician who enters residential homes needs a vastly different policy than a café owner with foot traffic on a busy street. Even if two businesses appear similar, their insurance needs can differ. That’s where the experience of an insurance broker like HMDI becomes invaluable.
Confusing Public Liability with Professional Indemnity Insurance
Another major misconception is assuming public liability and professional indemnity insurance are interchangeable. They aren’t.
Public liability insurance protects against physical injury or property damage to third parties, while professional indemnity insurance protects you from financial loss caused by negligent advice or service.
Say you’re a consultant who accidentally provides incorrect financial advice that costs your client thousands. That’s not covered by public liability—it falls under professional indemnity insurance. If you’re in a line of work where your advice is just as valuable as your physical output, both types of insurance are critical.
That’s why many business owners—especially self-employed professionals—need to consider both public liability and indemnity insurance to protect your business completely.
Why Relying on Online Quotes Can Be Risky
Online insurance platforms are fast and convenient, but they can also be misleading. Many business owners get a quote, buy the cheapest option, and think they’re covered. But without the right questions, you might miss key coverages or choose a policy with hidden exclusions.
Public liability insurance is complex, and no algorithm knows your business better than you do. A generic policy might not cover the result of your business activities or account for the unique ways you interact with customers and suppliers.
This is where an experienced broker makes all the difference. They’ll review your insurance needs, explain what public liability insurance covers (and doesn’t cover), and ensure you’re insured against the real risks—not just the ones listed on a form.
How Legal Costs Can Cripple an Uninsured Business
One of the most overlooked consequences of being underinsured is the legal cost. If someone sues your business for injury or property damage and you don’t have the right public liability insurance, the out-of-pocket expenses can be enormous.
Even if you win the case, you’ll still need to pay for your legal defence. And if you lose? Compensation, medical bills, and court fees can sink even the most successful small businesses. Public liability insurance helps cover these legal costs so you’re not left exposed.
Without the right policy, a single incident could cost more than your annual turnover. So, ask yourself: is it worth the risk to save a few bucks on premiums today if it could cost your entire business tomorrow?
Common Mistakes Business Owners Make with Public Liability Insurance
Let’s break down the biggest traps we see over and over:
- Only getting the minimum cover required by a landlord or client without thinking about broader business risk
- Failing to renew on time or review coverage after expanding or changing services
- Assuming their insurer will automatically cover everything, when they haven’t read the product disclosure statement
- Not disclosing all business activities, which can void your policy when it comes time to make a claim
- Choosing insurance without professional advice, based solely on price
These mistakes aren’t just inconvenient—they can cost you everything you’ve worked for. It’s time to understand what public liability insurance is really for and make sure your policy is doing what you think it is.
How to Choose the Right Public Liability Insurance for Your Business
There’s no one-size-fits-all solution here. The right policy depends on your type of business, the risks involved, where you operate, and what you need to protect.
Start by working with a reputable insurance adviser who can offer general advice tailored to your industry. They’ll assess your business activities and ensure you’re protected against both personal injury and property damage claims, and recommend a level of cover that matches your actual exposure.
Whether you’re in hospitality, retail, trades, or consulting, public liability insurance protects your business from unexpected claims that could otherwise shut you down. It’s not just a smart move—it’s a necessary one.
Final Thoughts: Protecting Your Business Starts With the Right Advice
Public liability insurance isn’t just a formality—it’s a vital layer of protection that safeguards your livelihood. But too many business owners are exposed without knowing it, trusting policies they don’t fully understand or relying on the wrong type of insurance altogether.
Don’t wait until it’s too late. Take the time to understand what public liability insurance actually covers, and speak with a trusted insurance broker who can tailor a policy to your business needs. The cost of being underinsured far outweighs the cost of being prepared.
At HMD Insurance, we specialise in helping Australians get the right cover for their unique business activities. Whether you’re a small business owner or part of a growing enterprise, we’re here to make sure your insurance protects what matters most.
Ready to protect your business against claims? Speak to an HMDI adviser today and get peace of mind with public liability insurance tailored to your needs.
