For many business owners in Australia, understanding and choosing the right insurance cover for their business can be confusing and time consuming. One of the questions we most frequently get asked is about the difference between public liability and professional indemnity insurance. Ensuring you have the right insurance coverage is crucial for protecting your business against financial and legal risks and these two covers are among the most important forms of business insurance. But what do they cover and how do they differ?
In this guide, we’ll provide a definition of both public liability and professional indemnity insurance, highlight the key differences, explain which businesses need them and provide a checklist of the risks each policy helps mitigate.
Professional Indemnity and Public Liability Insurance: What’s the Difference?
Public Liability Insurance Definition
Public liability insurance protects businesses against claims for injury or property damage suffered by third parties due to your business activities. This includes incidents that occur on your premises, at a client’s site or as a result of your services or products.
What It Can Cover:
✔ Injury to customers, clients or members of the public due to your business activities.
✔ Property damage caused by your business.
✔ Legal fees and compensation costs associated with a claim.
Example Scenarios:
- A customer slips on a wet floor in your retail store and breaks their wrist. Public liability insurance may cover you for the injured parties medical costs and legal expenses if you are legally liable if they decide to sue.
- A contractor accidentally damages a client’s property while carrying out work. The insurance covers the repair costs.
- The offshore manufacturer of George’s sunscreen accidentally contaminates the product with chemicals that cause customers to break out in a painful rash. They file a class suit against George to compensate them for the injury. Luckily, George’s policy covers him for the costs of going to court and the damages awarded to the customers.
- A festival attendee gets injured while at an event you have organised. Public liability insurance is essential if they decide to seek compensation from you.
Professional Indemnity Insurance Definition
Professional indemnity insurance (also known as PI Insurance or Errors and Omissions cover) is a form of liability insurance designed for businesses that provide professional services, advice or expertise. It protects against claims of negligence, errors or omissions that could lead to financial loss for a client.
What It Can Cover:
✔ Claims of professional negligence or misconduct.
✔ Legal costs associated with defending a claim including inquiry costs by a regulatory body
✔ Direct financial loss of the business caused by the dishonest or fraudulent conduct of an employee which is first discovered during the period of insurance
✔ Compensation for financial losses suffered by clients due to your advice or services.
✔ Public relations & crisis management expenses
Example Scenario:
- An accountant makes an error in a client’s tax return, resulting in financial penalties. Professional indemnity insurance covers legal defence and compensation costs.
- A marketing consultant gives incorrect advice that causes a business financial losses. The insurance covers the claim.
- An engineer who designs the supporting foundations of a residential property makes an error with the site calculations which leads to the slab cracking and damage to the property of the owner. His company is liable for this loss but because he has professional indemnity insurance, he’s covered for this amount – as well as any legal expenses if the matter goes to court.
Professional Indemnity vs Public Liability: Key Differences
Who Needs Public Liability and Professional Indemnity Insurance?
Certain businesses may need one or both types of cover.
Businesses That Need Public Liability Insurance:
- Retailers, cafés, and restaurants – Customers are regularly on-site, increasing the risk of slips, trips, and injuries.
- Tradespeople and contractors – Work often takes place in public or at client sites, increasing the risk of property damage.
- Event organisers – Hosting events brings potential risks to attendees and property.
Businesses That Need Professional Indemnity Insurance:
- Consultants and business advisers – Providing advice that could financially impact clients.
- Medical and allied health professionals – Incorrect advice or treatment can have serious consequences.
- Architects and engineers – Design flaws or miscalculations can lead to costly legal claims.
Businesses That Need Both Insurance Types:
Some businesses require both public liability and professional indemnity insurance to be fully protected. These include:
- Personal trainers and fitness coaches – Liability if a client is injured, plus indemnity if training advice leads to harm.
- IT professionals – Public liability if hardware installations cause damage, plus indemnity for IT errors.
- Tradespeople who provide advisory services – Builders, plumbers, or electricians who offer consultations.
Checklist: What Risks Do These Insurance Policies Mitigate?
Public Liability Insurance Covers:
✅ Injury to customers or third parties on your premises or job site.
✅ Accidental property damage caused by your business operations.
✅ Legal costs associated with defending claims.
✅ Compensation payouts for injuries or damages.
Professional Indemnity Insurance Covers:
✅ Claims of professional negligence or incorrect advice.
✅ Financial losses suffered by clients due to mistakes or omissions.
✅ Breach of professional duty or misleading service claims.
✅ Legal defence costs and compensation payments.
How to Determine the Right Insurance for Your Business
- Assess Your Business Activities – Do you interact with customers in person or provide professional advice?
- Consider Industry Requirements – Some industries have mandatory insurance requirements.
- Evaluate Your Risk Exposure – How likely are claims based on your work environment?
- Speak to an Insurance Broker – A specialist business insurance broker can tailor a policy to your exact needs.
Get the Right Business Insurance Today
Whether you need public liability insurance, professional indemnity insurance or both, the right cover is essential to protect your business from financial and legal risks. At AIB, we specialise in helping businesses find the best insurance solutions tailored to their industry and risk profile. Our Business Pack insurance packages include some of the most common covers that you might need.
Get a quote today to ensure your business is fully covered and prepared for any potential claims.
Important notice
This article is of a general nature only and does not take into account your specific objectives, financial situation or needs. It is also not financial advice, nor complete, so please discuss the full details with your Steadfast insurance broker as to whether these types of insurance are appropriate for you. Deductibles, exclusions and limits apply. You should consider any relevant Target Market Determination and Product Disclosure Statement in deciding whether to buy or renew these types of insurance. Various insurers issue these types of insurance and cover can differ between insurers.
Steadfast Group Ltd ACN 073 659 677
Important notice – Steadfast Group Limited ABN 98 073 659 677
This article provides information rather than financial product or other advice. The content of this article, including any information contained in it, has been prepared without taking into account your objectives, financial situation or needs. You should consider the appropriateness of the information, taking these matters into account, before you act on any information. In particular, you should review the product disclosure statement for any product that the information relates to it before acquiring the product.
Information is current as at the date the article is written as specified within it but is subject to change. Steadfast Group Ltd and Steadfast Network Brokers make no representation as to the accuracy or completeness of the information. Various third parties have contributed to the production of this content. All information is subject to copyright and may not be reproduced without the prior written consent of Steadfast Group Limited.
