Liability insurance and professional indemnity

If you own a business, you can be liable for damages or injuries to another person or property. Though liability insurance is mostly optional, you might want to consider it for your business if the likelihood of legal action is high.

In some industries, liability or professional indemnity insurance is mandatory before you can legally operate. Check our Industry fact sheets to learn more about your industry or talk to your industry association.

The types of liability insurance available vary and some are more relevant to certain industries or occupations. Find out more about each of the liability insurance options below:

Public liability

Public liability insurance helps protect you and your business against the financial risk of being liable for negligence. Negligence is causing reasonably foreseeable harm, including:

  • injury or death, such as drink or food making a customer sick
  • for some occupations, negligent advice such as saying a generator can power a business in a blackout and it turns out it is not, causing a loss
  • nervous shock, such as emotional distress or a recognised psychiatric illnesses
  • property damage, such as negligently causing a fire
  • consequential loss, which occurs in very rare cases where a negligent act causes a third party business to lose expected revenue.

Management liability

If a manager or director conducts illegal or unethical practices that cause losses to individuals or businesses, management liability covers your assets and the business.

Management liability insurance is fairly complex and most policies have many levels of cover.

Most management liability policies are available as a package and can also cover:

  • directors’, officers’ and trustees’ liability
  • employment practices liability
  • government fines or tax audit costs
  • cyber and privacy liability
  • private capital raisings.

Talk to your insurance broker or authorised insurer about options that are most suitable for your business.

Professional indemnity

Professional indemnity insurance is a range of insurance products that help cover the cost of legal action. Depending on the product, this may include liability due to:

  • Breaches of contract, such as:
    • not achieving the results of a contract (for example, not building a boat on time)
    • providing negligent advice (for example, giving bad financial advice or the wrong dietary advice).
  • Mistakes providing a service, such as:
    • not auditing a company’s accounts properly
    • medical malpractice when performing a surgical procedure
    • giving poor legal advice.
  • Professional associations may offer industry-specific indemnity insurance at a much lower cost.

Product liability

If you sell, supply or deliver goods, even in the form of a repair or service, you may be liable if your products cause:

  • injury or death
  • property damage
  • nervous shock, such as emotional distress or a recognised psychiatric illness.

Product liability insurance covers you if any of these events happen to another business or person when your product fails.

Find out more...

  • Learn how to manage risk by reducing things that may have a negative impact in your business.
  • For a list of authorised insurance companies, see Australian Prudential Regulatory Authority’s (APRA’s) register of general insurers.
  • Check if your insurance broker’s Australian Financial Services’ license is current on the Australian Securities and Investments Commission’s professional register.
  • Read more about product liability on the Australian Competition and Consumer Commission website.
  • Read about fair trading for details on product safety, product recalls and trade measurement and labelling.
  • See our page on insurance in your state or territory.

Thanks for your feedback. If you have any ideas on how we can improve, we'd love to hear them.

Please provide your comments in the feedback form.

You might also be interested in