Public Liability Insurance for SMEs: Do You Need It?

Accidents happen, and if someone is injured or their property damaged through your business activities you may find yourself the subject of a legal claim for damages. For some small business owners the cost could close their operation down. Public liability (PL) insurance is an essential protection for businesses of any size that interact with members of the public.

Public liability insurance is there to protect your business if someone — like a customer, supplier or member of the public — trips, slips, falls, or has their property, assets or valuables accidentally damaged because of your business activities. It covers the legal costs and compensation if you're found responsible for accidents that happen at your premises or as a result of your work.

Here are some of the key reasons SMEs need PL insurance and the considerations around setting policy limits business owners need to assess.

Who needs public liability insurance and why

Holding PL insurance is compulsory in certain industry sectors. Others with premises open to the public need to protect themselves from the risk exposures that access brings. In some cases the coverage is required for a single event, such as a competition or fair.

Mandatory public liability insurance is required for:

Trades people: electricians, plumbers and builders may be required to have public liability insurance to obtain and maintain their state-issued licences.

Contract terms: the requirement to hold PL cover may be specified in contractual agreements.

Public events: local councils or permit authorities may require organisers of concerts or festivals to have public liability insurance and may also specify a minimum cover amount.

Strongly advisable to hold public liability insurance for many business like:

Retail and hospitality: cafes, restaurants and shops with public access should have PL insurance in case of risks ranging from slips and falls to food poisoning.

Construction sector: the risk exposures involved in building works makes this coverage essential. Issues such as subsidence or dropping items from heights are unpredictable.

Professional services: PL cover protects businesses in the case of incidents that occur at your premises.

Sole traders: anyone interacting with the public, even from a home-based office or while working on site, can be held liable for injuries or damage.

Market and event stallholders: organisers often require stallholders to have their own public liability insurance.

5 claims cases: how public liability insurance saved these businesses

Case 1 Building trades

A tradie contracted to carry out work on a building in an educational complex was using a cordless grinder when a spark ignited a small fire in the ductwork which spread and triggered the fire alarm as heavy smoke spread through the air conditioning system.

Although his public liability policy contained a hot works exemption, damages were paid on the basis of accidental damage occurring during maintenance work.

Case 2 Motor mechanic's mistake

Due to the mechanic misfitting an internal part of the engine during work on a customer's truck the entire engine was damaged, necessitating repairs to be carried out urgently.

Fortunately the repair business's PL insurance limits covered the cost of replacement parts and a complete do-over.

Case 3 Third party damage

A worker employed by a labour hire company accidentally hit and damaged fibre optic cables owned by a telecommunications provider which sought recompense from the labour provider.

Due to the labour hire company's comprehensive PL insurance cover restitution was made without the need for a legal claim.

Case 4 Unusual installation requirement

An installer mistakenly fixed security screens to the external window frames when the customer had requested they be installed internally. The property owner then demanded replacement of the window frames damaged by screw holes.

Although the business's PL insurance included a wilful damage exclusion the claim for replacement screens was paid as the cost of correcting faulty workmanship.

Case 5 Retail customer slipping over causes injury

A local cafe had a customer slip on a wet floor during a rainy day and injured their wrist, requiring medical treatment. The cafe owner hadn't noticed the wet floor right away and the customer made a claim for the medical expenses which the cafe's public liability insurance covered. The cafe was able to continue trading without facing a major financial setback.

Setting limits: how much PL cover do SMEs need?

Assess your risk exposure: Is your business open to the public, or do you mostly work off-site or from closed premises? The more public access, the higher the risk.

Consider your business activities: Do you use power tools, heat processes or other high-risk equipment? Are your services hands-on (e.g. hairdressing, beauty therapy, tattooing) or low risk (e.g. digital work)?

Think about customer property: Do you work on or service high-value assets, such as buildings or vehicles?

If your public liability cover is bundled as part of a business insurance package: Regularly review the coverage limit.

Know the standard limits: In Australia, the minimum indemnity is usually $5 million, but some contracts or industries may require more.

One policy covers all jobs: You don't need separate PL policies for different jobs — the limit applies across your business activities.

When in doubt: Discuss your needs with an insurance broker to ensure you have the right level of cover.

Connect with us for expertise in business insurance protections

Public liability cover provides valuable business protection against what could be very costly claims if your business activities cause injury to people and/or damages to their valuables/property.

An insurance broker who understands your business and industry's risks can help you to decide the level of insurance cover you need and what should be covered under the policy to help you ensure your business has adequate protection in place.

6 January 2026

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