TABLE OF CONTENTS
- What is public liability insurance?
- Why do sole traders need public liability insurance?
- What is professional indemnity insurance?
- What are the common types of sole trader businesses in Australia that need public liability insurance?
- What’s the average public liability insurance sole trader cost?
- How do I insure myself as a sole trader?
Public liability insurance should never be an afterthought, especially for small business owners and sole traders. It’s a specific type of insurance that will protect you against financial losses – sometimes severe – if your business activities accidentally cause injury to a person or damage to property.
In Australia, having an adequate level of public liability cover could be the difference between a thriving business and a financial pit. That’s why we’ve put together this guide to not only give you an informative overview of what public liability insurance is, but also what type of businesses need it, how much it costs and how to get it so you can be covered immediately.
What is public liability insurance?
Business insurance such as public liability insurance is a way to shield businesses from both legal and financial repercussions if you are found liable for injuries or property damage to a third party, including:
● Customers and clients
● Suppliers
● Members of the public who engage with your business
In Australia, public liability insurance covers the expenses of professional services like legal defence and any compensation that your business needs to pay out over the incident. Because accidents can happen when you least expect them — and because the financial consequences can be massive — it really is essential insurance for sole traders and small businesses.
The policy itself will cover situations like slip-and-fall accidents on business premises, damage to a client’s property during service delivery, and even injuries caused by products you manufacture or sell.
Bear in mind that it doesn’t cover employees who are injured on the job, which you’ll find within workers’ compensation insurance. It’s also not the insurance cover required to protect personal assets, your own business premises and other business assets, nor is it personal accident insurance.
Why do sole traders need public liability insurance?
Sole traders tend to do their jobs independently — in other words, providing services or products directly to the public — so there’s a much greater risk if something goes wrong. You’ll be exposed to challenges that, if they result in injury or damage, could lead to legal claims.
Having sole trader insurance like public liability cover means you’ll have a safety net that protects you against potentially crippling legal costs and compensation orders. So a single incident won’t jeopardise your entire business, and instead give you peace of mind to focus on growth and improving your service delivery.
Without this type of insurance cover, sole traders will be held personally liable for any claims made against their business, which could be financially devastating. Public liability insurance cover not only safeguards your finances but could also increase your professional credibility as a sole trader, as some clients and partners will ask for proof of insurance before doing business with you. Therefore, it’s an investment in yourself and your operations.
What is professional indemnity insurance?
Professional indemnity insurance is a policy that protects people who provide professional advice or services for a living, like consultants, accounts, insurance brokers, and architects, against claims of negligence, errors, or omissions. It covers legal costs, settlements, and judgements if a client alleges that your professional services caused them financial loss or reputational harm.
Whereas public liability insurance covers physical injury and property damage, professional indemnity insurance handles any claims related to the quality and accuracy of your professional services. Having both types of insurance as a sole trader can help shield your business from a wide range of potential legal threats, so it’s worth keeping in mind.
What are the common types of sole trader businesses in Australia that need public liability insurance?
Most sole trader businesses in Australia could get useful benefits out of public liability insurance, especially if you directly interact with members of the public.
Here are a few different types of sole traders that should look into taking out a policy:
● Tradespeople like electricians, plumbers and builders.
● Retailers with physical shopfronts.
● Personal trainers and fitness instructors.
● Consultants and freelancers who work with clients on-site.
● Event organisers involved in planning and managing events.
What’s the average public liability insurance sole trader cost?
There’s no one-size-fits-all price. Your public liability insurance cost may be higher or lower than that of other sole traders based on several factors, such as the nature of your business, its size, how regularly you interact with the public, and the level of coverage you need.
However, it’s important to balance the cost of a policy with its benefits. If you spend less than $100 per month on $20 million worth of public liability insurance and are covered adequately and accurately, then this may be worth the price. As always, compare policies and quotes to make sure you’re getting the best deal possible for your business insurance.
Your insurance provider will consider everything from your business’s location to annual turnover and any previous claims you’ve made, so keep in mind that some factors might unavoidably make your small business more expensive to insure.
How do I insure myself as a sole trader?
1. Assess your sole trader risks: Identify the specific risks associated with your business operations, including interactions with clients and the public.
2. Determine your level of cover needed: Based on your risk assessment and financial exposure, decide on the level of coverage required. Many clients will ask you to have at least $20 million of public liability coverage.
3. Compare providers: Research different insurance companies to compare their policies and premiums.
4. Speak to an insurance broker: An expert broker can help to find the right policy for your business if you can’t decide yourself.
5. Buy the policy: Once you’ve settled on a policy, take it out and carefully examine the Product Disclosure Statement (PDS) to get the terms and conditions.
It’s equally important to review and update your insurance policy as needed. Looking over your policy and comparing it to what else is on the market every year or so will help to keep your business protected and give you peace of mind that you’re on the right level of cover.
Public liability insurance is just one type of business insurance that’s a must for sole traders. It’s the only way to get protection against potential legal and financial challenges arising from your daily business activities.
