Liability insurance safeguards you against financial losses if your actions, negligence, or property condition cause someone injury, death, property damage, or financial loss due to relying on your advice or services.
There are three main types of liability insurance:
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Public liability
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Professional indemnity
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Product liability
While businesses commonly purchase liability insurance to manage risks inherent in daily operations, liability coverage is also included in many property insurance policies, such as home and contents insurance.
What Does Liability Insurance Cover?
Liability insurance protects against two primary financial risks:
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The legal costs involved in defending a claim against you.
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Compensation and related legal costs you may be required to pay if the claim is upheld.
Policies typically have an excess payable by the policyholder and set limits on total coverage and per-claim payouts.
Public Liability Insurance
Public liability insurance covers individuals, businesses, events, contractors, or community facilities if they are held legally responsible for causing injury, death, property damage, or economic loss through negligence.
If you run a business, you could be liable for damages or injuries to others. Although public liability insurance is optional in many cases, it’s strongly advised across industries because lawsuits for negligence can be unpredictable and expensive.
In some cases, like public events or certain facilities, public liability insurance is mandatory and enforced by licensing authorities.
This coverage is often included in property insurance (home, commercial, marine) and business insurance packages but can also be purchased separately, especially for larger businesses or organizations without fixed premises.
Note that public liability insurance usually does not cover intentional illegal acts or hazardous activities.
If your policy bundles public liability with other covers, confirm the coverage amount is sufficient—some insurers may offer lower premiums by including minimal liability limits, which might leave you underinsured.
Professional Indemnity Insurance
Professional indemnity insurance is designed for people who provide advice or professional services. It protects you if a client suffers a loss because of your advice or services and decides to take legal action.
Certain professions, such as medical practitioners, often require specific professional indemnity coverage (like medical indemnity insurance) to meet licensing or registration requirements.
Product Liability Insurance
If you manufacture, sell, distribute, or import products in Australia, product liability insurance is essential.
This insurance protects you if your product causes injury or damage to a person or business. It’s crucial because claimants can sometimes pursue legal action without having to prove negligence or intent to harm.
Liability insurance is a key safeguard for managing risks and ensuring financial protection against unforeseen legal claims. Always review your policies carefully to understand the scope and limits of your coverage.
