If you’re a small business owner researching cover, you might come across the term “General Liability insurance” and wonder what it means in Australia.
Commercial General liability (CGL) insurance is a broad form of business insurance designed to cover your legal responsibility for third-party claims that arise from incidents connected to your business — for example, injury to someone else or damage to their property.
At BizCover, we do not sell General Liability insurance. So while we don’t sell General Liability, as Australia’s number one online business insurance service, we do know a fair bit about insurance.
Below, we’ll explain what General Liability covers, whether your business should consider it, and how it compares with Public Liability and Professional Indemnity in the Australian market.
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.
Typically, General Liability insurance is designed to protect your business if someone makes a third-party claim for injury, illness, or property damage linked to your operations.
The term is most commonly used in the United States, where policies are usually sold as Commercial General Liability (CGL) insurance.
In Australia, this type of cover is more often referred to as Business Liability insurance and is typically provided through Public Liability and Product Liability insurance.
What does general liability insurance cover?
As a rule of thumb, General Liability insurance is intended as a “catch all” kind of policy, as it provides broad protection against third-party claims. Typically speaking, it 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.
For example:
- 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 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.
For example:
- 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.
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 take out Public Liability and Professional Indemnity insurance to cover the key risks that sit under “general” or business liability. General (business) liability in the Australian market usually refers to a combination of Public Liability and Product Liability cover, protecting your business if your work or products cause third-party injury or property damage.
Professional Indemnity insurance complements this by covering claims that arise from negligent advice, errors, or omissions in the professional services you provide.
Businesses choose liability insurance for a range of practical reasons, including:
- 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.
- 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.
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.
| 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 generally, 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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