You’ve landed on the perfect business idea, started to crunch the numbers and begun to map out exactly what it’s going to take to turn your concept from dream to reality.
Or maybe your business has been up and running for a little while and, now that the dust has settled, you need to make sure your insurance is up to scratch.
Either way, you might have hit a wall of confusing jargon – and there’s probably one term you’re seeing everywhere: public liability insurance.
So what is it? What exactly does it cover? Could failing to take out public liability cover be an insurance mistake? And how does public liability insurance compare to the other types of small business insurance you might be considering?
To help cut through the confusion so you can get back to building your business feeling confident you know what public liability cover is, we’ve put this guide together to answer those questions, and a few others.
What is public liability insurance?
Public liability insurance is a type of business insurance.1
It’s designed to cover you if a third party gets injured or their property gets damaged because of your business’s negligence.1
Public liability insurance is useful for any business that interacts with people face to face, including if customers or members of the general public visit your business or if you visit customers’ premises.2
What does public liability insurance cover?
It covers your potential liability to pay compensation if a member of the public – or, in other words, a third party – has their property damaged or gets injured, and they make a claim against your business.2,3 It might cover both physical and psychological or emotional injuries.1
It could also cover your business’s legal costs to defend and manage a public liability claim.3
To help you understand more about the actual types of events that public liability insurance might provide cover for, here’s a closer look at its inclusions – together with a few scenarios you might relate to, depending on the type of business you’re in.
Third party injuries
If a business has been negligent, public liability insurance may provide cover for events such as:
- A customer slipping on a retail store’s freshly mopped floor, where a warning sign wasn’t displayed.4
- A member of staff preparing refreshments at an event spills hot water on someone, which burns them.5
- A client at a photographer’s studio trips on a loose cable and gets hurt.6
Third party property damage
Public liability insurance might also provide cover for events such as:
- A caterer damages a client’s expensive equipment by accidentally spilling coffee all over it.7
- A tradie accidentally damages a client’s fence during a job.8
- A fire breaks out in a cafe’s kitchen while the chef is cooking, damaging the landlord’s building.1
What public liability insurance doesn’t cover?
There are several business-related incidents that public liability insurance doesn’t cover.1 Some of these include:1
- Injury to workers
- A product injuring someone or damaging their property
- Professional negligence
- Loss or damage to portable business equipment
- Theft, damage or loss of business property or stock
- An unexpected event interrupts business activities.1
Is public liability cover the same as workers compensation insurance?
No. While public liability insurance covers claims for injury or property damage made against your business by customers or members of the public, workers compensation insurance is what covers your employees if they get injured or sick because of work.1,2
If your business employs staff, you must get workers compensation insurance from the workers compensation regulator in your state or territory:1
- ACT: WorkSafe ACT
- NSW: State Insurance Regulatory Authority
- NT: NT WorkSafe
- Qld: WorkCover Queensland
- SA: ReturnToWorkSA
- Tas: WorkSafe Tasmania
- Vic: WorkSafe Victoria
- WA: WorkCover WA1
Is there a difference between public liability insurance and professional indemnity insurance?
Yes – while similar in nature, they provide cover for different business risks.1,2
Unlike public liability insurance, professional indemnity insurance helps cover professionals in many industries against negligence claims made in relation to their advice or services.1,2
Having professional indemnity insurance is mandatory for some professions1 – and because it covers different risks than public liability insurance, some businesses may require both types of insurance.1,2
Is having public liability cover compulsory?
For some industries and business types, yes, public liability insurance is a legal requirement.1
For example, in some states and territories, it’s a mandatory part of licensing requirements for certain trades,3 while other types of businesses need public liability cover regardless of where they operate in Australia.8
Plus, most commercial lease agreements stipulate public liability insurance as a requirement for the business that’s renting the property.9
But, even if public liability coverage isn’t mandatory in your industry and you’re not planning on signing a commercial lease, business owners may still have a legal responsibility for damages or injuries to another person or property.10
So, if someone is injured – or their property gets damaged as a result of your business activities – you could be subject to a legal claim for damage. And without insurance to help cover the costs involved, a single claim could be enough to close down some small businesses.11
Do I need public liability insurance if I’m a sole trader or self-employed?
Maybe. If your profession is legally required to have public liability insurance or you interact with your customers in person then, even as a self-employed one-man band, you might like – or need – to consider getting cover.2
Does Youi Small Business Insurance include public liability cover?
Yes. At Youi, public liability insurance is included as standard with every Small Business Insurance policy.12
“Products liability is also automatically included in our Small Business Insurance,” says Mervyn Hartley, Youi’s Head of Product – Home and Small Business.
“If your business makes, sells or supplies goods, this could cover you for compensation which you are legally liable to pay to a third party if one of your products injures someone or damages their property.”
There are also some optional covers which may be added to a Small Business Insurance policy at Youi. These include:
- Professional indemnity – with this optional cover, you’re covered for civil liability claims or inquiries that arise from the professional advice or specialist services you provide to clients.13
- Business property damage – under this option, contents and/or stock in trade at your business premises are covered for loss or damage caused by incidents such as fire, storm, flood or theft. Stock in trade is also covered while it’s in transit to or from your business, and refrigerated stock in trade, for example food, flowers or pharmaceuticals, is covered for deterioration.14,15
- Business items – this covers loss or damage to your portable business items, including electronic devices and tools of trade.16
- Business interruption – if an unexpected event temporarily disrupts your operations, this helps cover your lost profit and extra operating costs.13
How much public liability insurance do I need?
“The amount of public liability cover that your business might need can depend on a number of different factors,” says Hartley.
These can include the typical activities your business usually performs, whether you regularly work on high-value customer assets such as vehicles, and how much access the public has to your business.11
“At Youi, we offer multiple liability limits to suit different business needs,” says Hartley. “You can choose from three levels of business liability cover – $5million, $10million and $20million.”
While a $5million public liability policy might be enough for a business with relatively low foot traffic, businesses looking to sign a commercial lease or apply for a local council tender may be required to upgrade to $10million or $20million.4
How much does public liability insurance cost?
It depends. “The cost of a Small Business Insurance policy with Youi will be determined by factors such as the amount of business liability cover you choose and if you’ve decided to add any of our optional covers to the policy,” says Hartley.
“Where your business is located, the type of business you’re running and whether or not you employ staff are other factors we take into consideration. These kinds of details all play a role in helping us gauge the risk of covering your business.”
Now that you know a little more about public liability insurance, you might like to consider starting a quote with us to get an idea of how much Small Business Insurance could cost with Youi. Whether you’re reviewing your current insurance cover or buying business insurance for the first time, you can start a quote online or by giving our team a call on 1300 010 648.
1 Source: Australian Government – Types of business insurance, n.d.
2 Source: Business Victoria – Find the right insurance, October 2022
3 Source: Insurance Council of Australia – Public Liability Submission ICA, March 2026
4 Source: Sprintlaw – Public Liability Insurance Explained: Why Your Business Needs It, February 2025
5 Source: Wyndham City Council – Public Liability Insurance for Uninsured Casual Hirers of Council Facilities, 2025-2026
6 Source: Creative Workplaces – Business insurance, n.d.
7 Source: AMK Lawyers – What Is A Public Liability Claim In Queensland, And How Are They Made, April 2025
8 Source: DSC – Ask DSC: what insurance do I need as a registered NDIS provider?, April 2024
9 Source: APNL Accountants & Advisors – 5 Clauses Tenants Should Look For When Reviewing a Lease, n.d.
10 Source: NSW Government Service NSW – Get liability insurance for your business, July 2025
11 Source: Victorian Chamber of Commerce and Industry – Public liability insurance for SMEs: Do you need it?, February 2026
12 Exclusions, limits and additional fees may apply. For full details, see the Small Business Insurance PDS.
13 An additional cost applies for optional covers. Conditions, limits and exclusions apply. For full details, see the PDS & Policy Wording.
14 Business Property Damage cover is optional and an additional cost applies. Conditions, limits and exclusions apply. For full details, see the PDS & Policy Wording.
15 Loss or damage caused by flood, storm or bushfire within the first 72 hours of your policy commencing is only covered in limited circumstances.
16 Business Items cover is optional and an additional cost applies. Conditions, limits and exclusions apply. The most we will pay for each item is $2,500, up to a total of the Business Items amount noted on your policy schedule per claim, unless a High Value Business Items amount is noted on your policy schedule, in which case the most we will pay for all items with a replacement value of more than $2,500 is the High Value Business Items amount shown on your policy schedule.
