If you’re a small business owner researching insurance options, then you may be wondering what general liability insurance is and whether or not you need it.
General liability is a term commonly used outside of Australia, particularly in the United States. This may explain why it’s a little hard to find information on general liability in Australia.
Here, most insurance providers tend to sell Public Liability and Professional Indemnity insurance. We’ll go into these two kinds of insurance types later.
While general liability is not commonly sold in Australia, it does have a few things in common with Public Liability and Professional Indemnity insurance.
What is general liability insurance?
General liability insurance (sometimes referred to as commercial liability insurance or business liability insurance) is a type of cover designed to protect businesses from the financial impact of third-party claims.
What does general liability insurance cover?
General liability insurance might be thought of as a “catch all” kind of policy, because it provides broad protection against third-party claims. Typically speaking, general liability insurance is designed to protect businesses from common risks such as:
- Bodily injury to third parties: For example, if a customer or member of the public is injured on your premises or as a result of your work.
- Property damage caused by business operations: When your negligent business activities cause damage to someone else’s property.
- Personal and advertising injury: Coverage for claims like libel, slander, or defamation that can occur through business communications or advertising.
- Legal expenses, settlements or court costs: Covering the costs of defending a claim, as well as any damages awarded to the third party.
What is the difference between general liability and Public Liability insurance?
While Public Liability and general liability insurance are related, they cover different scopes of risk and are often used in slightly different contexts, especially outside of Australia.
Public Liability insurance is a type of cover commonly purchased by customer-facing businesses in Australia. It’s designed to help cover you if a third-party (such as a customer, a supplier, or a member of the public) claims that your negligent business activities caused them injury or property damage.
Here are two examples of different scenarios that could potentially be covered by Public Liability insurance:
- A customer in a cafe slips in a puddle of water caused by a leaking fridge and injures themselves.
- A contractor accidentally damages a client’s property while working on-site.
General liability insurance, on the other hand, is broader. In addition to covering bodily injury and property damage like Public Liability, it often includes personal injury, advertising liability and defamation claims.
What is the difference between general liability and Professional Indemnity insurance?
Professional Indemnity insurance (also sometimes called Errors & Omissions insurance) is designed specifically for businesses that provide professional advice or services. It protects against claims of financial loss caused by mistakes, negligence or failure to deliver professional services as promised.
Here are three examples of different scenarios that could potentially be covered by Professional Indemnity insurance:
- A real estate agent provides incorrect advice to clients, therefore losing them money.
- A building practitioner completes a job with defects in the building work that cause structural issues.
- A beautician causes injury to a client while applying waxing strips.
In short, general liability protects against physical accidents and certain business-related injuries or damages, while Professional Indemnity protects against financial or professional errors that result in injuries or financial losses for a third party.
Do Australian businesses need liability insurance?
In Australia, many businesses choose to take out Public Liability and Professional Indemnity insurance. Together, these two different kinds of policies can help to cover businesses from third party claims related to injuries, property damage, and financial losses or injuries caused by providing negligent advice or services.
Some of the reasons why businesses often take out liability insurance include the following:
It gives you peace of mind: Having adequate insurance in place allows you to focus on the important things – that is, running and growing your business.
It’s required for contracts: Many commercial leases and event venues will ask for proof of Public Liability insurance before a contract is signed. Some supplier and partner contracts may also expect the same.
It’s required by law: In some cases, certain roles are required by law to hold Professional Indemnity insurance. This varies by each state and territory, but one example includes lawyers in both New South Wales and Victoria.
It helps protect your business assets and future: In some scenarios, a Public Liability or Professional Indemnity claim can run into the tens or hundreds of thousands of dollars – sometimes even millions. Legal fees, fines and penalties, compensation and other considerations can all rack up quickly.
How much does general liability cost in Australia?
There are many different factors that contribute to the cost of an insurance policy. These can include, but are not limited to, location, industry, size of the business and claims history.
The below table demonstrates what BizCover customers pay on average for Public Liability and Professional Indemnity insurance:
| Average cost of Professional Indemnity insurance for BizCover customers | Average cost of Public Liability insurance for BizCover customers |
|---|---|
| $97 per month | $39 per month |
How much general liability insurance do I need?
No matter what kind of insurance policy you are considering, determining the right amount of coverage depends on key factors including:
- The size of your business
- The risks your face
- The potential financial impact of a claim.
Coverage limits are usually expressed as the maximum amount your insurer will pay per claim, and choosing the right limit is essential in ensuring adequate protection.
$5 million may be an adequate cover limit for a small business, depending on various factors; but for a larger company with a team of employees, a limit of $15 million or $20 million may be more appropriate.
When a business does not have sufficient insurance coverage to cover the cost of a claim, this is what’s known as underinsurance.
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Every small business is unique with different insurance needs. That’s why BizCover offers free, fast and easy insurance quotes online to make life simpler for business owners. Get multiple quotes from leading insurance providers and get covered in minutes.es not have sufficient insurance coverage to cover the cost of a claim, this is what’s known as underinsurance.
This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording or Product Disclosure Statement (available on our website). Please consider whether the advice is suitable for you before proceeding with any purchase. Target Market Determination document is also available (as applicable).
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