Costs, Price Factors and 2026 Rules
Public liability vs professional indemnity insurance: which does your business need?
The difference between public liability and professional indemnity cover in Australia, occurrence versus claims-made, examples by occupation and when you need both.
Public liability insurance covers claims that your business physically injured someone or damaged their property. Professional indemnity (PI) insurance covers claims that your advice, design or professional service caused someone a financial loss. A plumber whose leaking joint floods a client's kitchen needs public liability; an accountant whose mistake costs a client a tax penalty needs professional indemnity. Many businesses do both kinds of work and need both policies, because each one typically excludes what the other covers.
This guide sits in the public liability cost overview section. Examples are illustrative.
The core difference
| Public liability | Professional indemnity | |
|---|---|---|
| What triggers a claim | Injury to a person or damage to property caused by your business activities | Financial loss caused by a breach of professional duty: negligent advice, design, error or omission |
| Typical basis | Occurrence: the policy in force when the injury or damage happened responds | Claims-made: the policy in force when the claim is first made against you (and notified) responds |
| Typical exclusions | Professional advice, faulty workmanship, contractual liability | Bodily injury and property damage (often), fraud, contractual liability beyond the law |
| Common buyers | Trades, retail, hospitality, events, landlords | Accountants, engineers, architects, IT consultants, financial advisers, health practitioners |
| Compulsory? | Not by general law, but often required by contracts and venues | Compulsory for some professions; see compulsory business insurance |
Occurrence versus claims-made, with an example
The basis of cover decides which year's policy pays, which matters when you change insurer, change limits or stop trading.
Illustrative timeline for a building designer:
- 2024: designs a deck. Holds PI with insurer A, retroactive date 1 July 2020.
- 2025: switches PI to insurer B with continuity, retroactive date still 1 July 2020.
- March 2026: the deck fails and the owner sues for the cost of rebuilding.
Under a claims-made PI policy, insurer B's 2025–26 policy responds, because the claim was first made during that period and the design work was done after the retroactive date. If the designer had retired in 2025 and let the PI lapse, there would be no policy in force when the claim was made, unless they had bought run-off cover.
If the same deck had collapsed and injured a guest, and the claim was framed as injury caused by the business's activities, a public liability policy written on an occurrence basis would look at the policy in force when the injury happened. Many PL policies exclude injury arising from professional design advice, however, which is exactly the gap that catches dual-role businesses.
See claims-made notification and run-off for how to protect yourself when changing PI policies.
Who needs which: examples
| Business | Public liability | Professional indemnity | Why |
|---|---|---|---|
| Electrician | Yes | Sometimes | PL for property damage and injury; PI if they design systems or give energy advice for a fee |
| Bookkeeper | Usually low-cost cover for visitors and client sites | Yes | Main risk is financial loss from errors; registered BAS agents must meet Tax Practitioners Board PI requirements |
| Interior designer | Yes | Yes | Supervises installations (PL) and specifies designs and products (PI) |
| IT contractor | Sometimes | Yes | Contracts often require both; PI covers failed projects and data errors |
| Personal trainer | Yes | Often packaged | Injury claims from training advice can fall in either, depending on the wording |
| Cafe owner | Yes | Rarely | Slips, food-related injury and property damage |
Where the two policies overlap or leave gaps
- Advice that leads to physical damage. An engineer's design error that causes a wall to collapse onto a car involves both property damage and professional services. PL policies usually exclude claims arising from professional advice or design; PI policies may exclude property damage or cover it only when it arises from the professional service. Ask insurers how each wording treats this exact situation.
- Faulty workmanship. Neither PL nor PI pays to redo your own defective work. PL may pay for resulting damage to other property.
- Product recommendations. Recommending a product that turns out to be unsuitable may be a PI claim; supplying a defective product that injures someone is a products liability claim. See product liability for importers and sellers.
- Contractual promises. Both policies generally exclude liability you accept under a contract that goes beyond what the law would impose. See contractual liability and indemnity clauses.
Pricing differences
PL premiums are usually rated on turnover and activities. PI premiums are usually rated on fee income, the type of professional work, the split of work by client type, contract values, the limit and the claims history. PI excesses are often higher than PL excesses and may apply to defence costs as well as damages.
Illustrative comparison for a small engineering consultancy:
- PL, $20 million limit, $500 property damage excess: $780 a year including taxes
- PI, $2 million limit, $5,000 excess: $4,900 a year including taxes
- Combined cost: $5,680 a year
The PI premium is larger because the consultancy's main exposure is the financial consequence of its designs.
Professional standards schemes
Some occupational associations run professional standards schemes approved under state and territory Professional Standards Acts. Members who meet insurance and risk management requirements can have their liability for certain damages capped. If your association has a scheme, your PI policy must usually meet the scheme's minimum requirements. See the Professional Standards Councils.
Frequently asked questions
Does public liability cover bad advice?
Generally no. Public liability policies usually exclude claims arising from professional advice or services. That is the role of professional indemnity insurance.
Can I buy one policy that covers both?
Some insurers sell combined or packaged policies for particular occupations, with separate sections and limits for each type of liability. Check each section's limit and excess.
Why is PI written on a claims-made basis?
Professional mistakes can take years to surface. A claims-made basis lets the insurer price claims made in the current period rather than estimating claims that may emerge decades later.
Do I need run-off cover when I retire?
If you held PI, claims about past work can still be made after you stop trading. Run-off cover keeps a claims-made policy in place for that risk. Ask your insurer or broker about cost and length.
Sources
- ASIC — requirements for licensees, including compensation arrangements for financial services
- Tax Practitioners Board — professional indemnity requirements for registered tax and BAS agents
- Professional Standards Councils — approved professional standards schemes
- business.gov.au — overview of business insurance types
