General Liability Insurance: Getting the Limits Right
General liability insurance limits set the maximum the insurer will pay under the relevant policy terms. Choose a limit by reviewing your work, contracts and potential claims. Check both individual claim limits and any total limit across the policy period.
Business.gov.au explains the main liability cover types. Use this guide to discuss your required limits, exclusions and legal costs with a broker.
ABS Insurance Brokers Pty Ltd is an Australian-owned brokerage based at Bankstown Airport in Sydney, arranging general, commercial, construction and aviation insurance for businesses across the country. This article explains what general liability insurance covers, how it relates to public liability, and how to work through the limit question with a clear head.
What general liability insurance actually covers
General liability insurance is known in Australia as public liability insurance. The two names describe the same style of cover: protection against claims for bodily injury and property damage that arise out of your business activities.
In practical terms, the policy responds when your business is held liable for something that happened to a third party. According to business.gov.au, public liability insurance covers you if someone dies, gets injured or has their property damaged because of your negligence. Allianz describes the same cover as helping to pay compensation to a third party for damage to their property or injury to them. CGU notes that the cover extends to the legal costs incurred in defending or settling a liability claim, which matters because defence costs can accumulate long before any settlement is agreed.
Typical claims include a customer slipping on a wet floor, a visitor tripping over equipment left on site, a delivery damaging a neighbouring property, or a subcontractor causing damage while working for you. The common thread is that someone outside your business suffered loss and believes your business was responsible.
Where the duty of care bites hardest
Some operations carry more exposure than others. Construction sites with moving plant, public footpaths and multiple trades on site create constant interaction with people and property. Hospitality venues and retail shops invite the public onto premises. Farms host visitors, contractors and machinery. Strata and professional services firms deal with third party property and information daily. The higher the foot traffic and the heavier the equipment, the more likely a claim becomes.
Public and products liability, explained together
Many Australian policies bundle public liability with products liability under a single section. Products liability responds when someone is injured or has property damaged by a product you supplied, manufactured, sold or installed. This matters for anyone in the supply chain, not just manufacturers. A supplier or installer can be drawn into a claim even if the fault originated further up the line.
QBE describes its general liability offering as covering personal injury claims, property damage and advertising liability. Advertising liability is a useful inclusion. Chubb explains that a commercial general liability policy can help protect a business if someone accuses it of causing physical damage, or of using copyrighted material. If your marketing includes testimonials, images or product claims, advertising liability is worth understanding rather than skimming past on the schedule.
Professional indemnity is a separate policy
General liability and professional indemnity are often confused. General liability responds to physical injury and property damage. Professional indemnity responds to claims about advice, design, or services that caused a financial loss rather than a physical one. A builder who gives a client a cost estimate and gets it wrong is in different territory to a builder whose scaffold falls onto a parked car. Some businesses need both, and the limits are set separately.
What the limit of liability really means
The limit is the maximum amount the insurer will pay for all claims covered under that section. Allianz, for example, offers small business public liability limits of $5 million, $10 million or $20 million. Those figures are not interchangeable. They are three very different answers to the same question, and the right one depends on the worst realistic scenario your business could face.
A serious injury to a member of the public can involve medical costs, lost income, rehabilitation, care and compensation for pain and suffering. A property damage claim can involve repair, replacement, loss of use and consequential losses for the affected party. Legal costs sit on top of the compensation figure throughout. The limit needs to be large enough to absorb all of that from a single event, because one incident is all it takes.
Check how defence costs sit against the limit
Policies differ in how defence and legal costs are treated relative to the limit. In some structures those costs sit inside the limit and erode it, so a long-running defence eats into the money available to settle. In others they sit outside. This single detail can change how much protection you genuinely have. Ask the question directly and get the answer in writing before you compare premiums between insurers.
How to choose general liability insurance limits
There is no universal number, but there is a sensible process. Work through these steps before you renew or sign anything.
- Identify who could realistically be harmed by your operations. Members of the public, clients, visitors, subcontractors, delivery drivers and neighbouring businesses all count.
- Review your contracts. Head contracts, client agreements, leases and supplier terms frequently state a minimum limit that must be held. If a contract requires a figure higher than your current limit, you are exposed.
- Check landlord and principal requirements. Property leases and principal contractor arrangements often set their own minimums.
- Consider the size of the potential claim, not the likelihood. Serious injuries and major property damage produce large numbers regardless of how careful your team is.
- Add a buffer for cost growth. Compensation and repair costs rise over time, so a limit that was comfortable several years ago may no longer be.
- Confirm the limit is per occurrence and understand whether it aggregates across the policy period.
- Review every year and whenever your work changes, including new sites, new products, new states or larger projects.
Why premiums should not decide the limit
It is tempting to take the lowest limit because it produces the lowest premium. That logic collapses the moment a claim exceeds the limit, because the shortfall becomes your business’s problem. The cost difference between tiers is usually modest compared with the gap in protection, and the shortfall does not disappear because the premium was cheaper.
The better comparison is between limits at the same level, looking at policy wording, exclusions, defence cost treatment and the insurer’s claims approach. A slightly higher premium for a clearly worded policy with a sensible limit is often better value than the cheapest option on the page.
General liability insurance limits: mistakes to avoid
- Copying the limit from a previous policy without checking whether the business has changed.
- Ignoring a head contract or lease clause that specifies a minimum limit.
- Assuming public liability covers professional advice, design work or financial loss.
- Forgetting products liability when goods are supplied or installed.
- Leaving the limit unchanged through years of growth in project size and turnover.
- Not asking how defence costs interact with the limit.
Do sole traders and ABN holders need cover?
business.gov.au notes that some types of business insurance are required by law or by the people you deal with, while others are a matter of choice. Whether liability cover is compulsory for your operation depends on your industry, your licensing requirements and the contracts you sign. A sole trader working on a client’s premises can still be held liable for injury or damage. Confirm your obligations with the relevant authority, and check what your clients require before you start work.
Getting the limit right with a broker
The limit question is really a risk question. A broker reviews your operations, reads the contract and lease clauses that set minimums, compares policy wordings rather than just premiums, and explains how defence costs and exclusions affect the outcome. For businesses in construction, aviation, hospitality, farming, strata and professional services, that review often surfaces requirements that were not obvious from a quote form alone. Getting the limit right at the start is far easier than discovering the gap after a claim has been made.
Frequently Asked Questions
Is general liability insurance the same as public liability insurance in Australia?
Yes, in Australia the terms are used interchangeably. General liability insurance is also called public liability insurance here, and it protects a business against claims for bodily injury and property damage. Some policies bundle public and products liability into one section, while others separate them. Check your policy schedule to see exactly which sections apply and what each one covers.
Should I choose a $5 million, $10 million or $20 million limit?
It depends on your exposure, not on a rule of thumb. Insurers such as Allianz offer $5 million, $10 million and $20 million options for small business. The right choice reflects the severity of a realistic worst case, the minimums written into your contracts and leases, and whether defence costs erode the limit. Review it every year.
Does general liability insurance cover my own tools, stock or premises?
No. Liability cover responds to claims made by third parties for injury or property damage attributed to your business. Your own buildings, stock, plant and equipment are handled under separate property, business interruption or plant and equipment policies. Many businesses need both liability and property cover running alongside each other, and the limits are set independently for each.
Can I change my limit during the policy period?
Limits are normally set when the policy starts, and changes usually take effect at renewal or when a material change in your business is notified to the insurer. If you take on a larger project, sign a new head contract or move into a new state, tell your broker straight away. Waiting until renewal can leave you underinsured in the meantime.
How do I know if a contract requires a higher limit?
Read the insurance clauses in every head contract, subcontract, lease and supplier agreement before signing. These clauses commonly state a minimum liability limit the party must hold. If a required figure sits above your current cover, either increase the limit or seek a variation before work begins. A broker can review the wording and confirm what is achievable.
