Public Liability vs. Professional Indemnity insurance: What’s the difference?

Public Liability and Professional Indemnity are two of the most common types of business insurance in Australia. They both cover compensation claims, but the main distinction is the types of events and risks covered.

Public Liability insurance is designed to provide protection for you and your business in the event a customer, supplier or a member of the public brings a claim against you due to their being injured or sustaining property damage as a result of your negligent business activities.

Professional Indemnity protects you against losses claimed by a third party due to alleged or actual negligence in your professional services or advice. Subject to applicable limits, your Professional Indemnity insurance will meet the associated compensation payable to a third party together with your defence costs (which can include legal costs, investigator costs and expert fees).

How does Public Liability insurance work?

Public Liability insurance provides compensation for:

• personal injury suffered by a third party (e.g. a customer, supplier or member of the public)
• damage to property owned by a third party due to your negligent business activities
• legal and defence costs associated with a covered claim

Many Public Liability policies also provide cover for product liability. Product Liability insurance protects your business against claims by third parties relating to property damage or personal injury allegedly caused by your products.

How does Professional Indemnity insurance work?

Depending on the type of Professional Indemnity insurance you take out, your policy could cover:

• Payment of compensation as a result of a claim, including but not limited to Court awarded damages
• An award of legal costs against you
• Reasonable legal costs incurred in defending or responding to the claim
• Claim investigation costs
• Disciplinary proceeding costs

Do I need Public Liability insurance?

Public Liability insurance may be required for certain businesses to operate in Australia, including:

• Occupations such as Consultants/Contractors/Tradespeople 
• Businesses that have clients visiting their home or out and about meeting clients
• Businesses that have an office, showroom, shop or any premises
• Any kind of business that interacts with customers or the public

You may want to check state and/or territory laws, with professional/industry associations, and your business contracts to understand your Public Liability requirements (if any).

Do I need Professional Indemnity insurance?

Professional Indemnity insurance can be useful for businesses who provide professional advice and services, such as (Example only):

• Anyone who provides professional advice or services to a business or individual
• Contractors looking to work for the government and many organisations required to have cover to be awarded a contract

Some of the professions that typically take out Professional Indemnity insurance include: Health Professions, IT Contractors, Management Consultants, Accountants, Estate Agents etc.  For some professions, holding Professional Indemnity insurance is a prerequisite for registration and/or association membership.

Do I need both Public Liability and Professional Indemnity insurance?

Deciding whether you need both Public Liability and Professional Indemnity insurance depends on the specific nature of your business. If your business activities include interacting with the public or clients and providing professional advice or services, carrying both types of insurance could safeguard against a wider range of potential risks.

While Public Liability insurance covers you against physical risks to people and property, Professional Indemnity insurance covers financial losses resulting from your professional advice or services. Together, they ensure that your business is protected from a broad range of potential claims, safeguarding your financial stability and reputation.

Want to know more?

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