Business insurance protects your company from financial losses when things go wrong. It covers costs from events like customer injuries, property damage, employee accidents, or legal claims. Some types are legally required in Australia while others are optional but smart to have. Whether you need it depends on your business structure, industry, number of employees, and the risks you face.
This guide walks you through what business insurance cover is compulsory and what’s worth considering. You’ll learn how to assess your actual needs, understand the legal requirements in your state, explore common policy types, and get practical advice on comparing quotes. By the end, you’ll know exactly what insurance your business needs and how to get the right cover without paying for protection you don’t need.
Why business insurance matters in Australia
Running a business without proper insurance puts your entire operation at risk. One lawsuit, workplace injury, or property damage claim can drain your savings and force you to close. Even a small claim for public liability can cost tens of thousands in legal fees and compensation before you factor in lost income while you deal with the issue.
The real cost of running uninsured
Australian courts regularly award substantial damages for business-related incidents. A customer who slips in your shop could claim $50,000 or more for medical bills and lost wages. If your business causes property damage to a client’s home or office, you’ll pay every dollar of repair costs plus legal expenses out of pocket. These costs spiral quickly when lawyers get involved.
Without cover, a single claim can wipe out years of profit and put your personal assets on the line.
Protection beyond legal compliance
Insurance does more than tick legal boxes. It gives you peace of mind to focus on growing your business instead of worrying about worst-case scenarios. When something does go wrong, you get expert claims support and faster resolution rather than handling everything yourself. Most policies also cover defence costs even if a claim against you turns out to be groundless, saving you thousands in legal fees you’d never recover.
How to work out what cover you need
Start by listing every activity your business does and who you interact with. Write down if customers visit your premises, whether you visit client sites, if you give professional advice, if you sell or transport products, and how many people work for you. This exercise reveals your actual exposure to claims rather than what you assume you need. Most business owners discover risks they hadn’t considered when they map out their daily operations.
Match cover to your business activities
Your business activities determine which policies make sense. If customers or the public enter your workplace, public liability insurance protects you from injury claims. When you provide advice or professional services, professional indemnity covers mistakes that cost clients money. Businesses that sell, supply or repair products need product liability insurance for defects or safety issues. Ask yourself: what could go wrong in my normal working day, and who would make a claim against me?
The answer to "do I need business insurance" changes completely based on what your business actually does each day.
Factor in your structure and scale
Sole traders face different risks than companies with employees. If you work alone from home, you might only need public liability and income protection. Add employees and you must get workers compensation by law. Scale matters too: a cafe with foot traffic needs broader cover than a freelance designer working remotely. Consider your assets as well. If you own expensive equipment, stock, or lease commercial premises, property insurance prevents one disaster from ending your business. Walk through a typical week and note every piece of equipment you rely on, every location you work from, and every person who could potentially get hurt or suffer a loss because of your business activities.
Legal insurance requirements for Australian businesses
Australian law mandates certain insurance types depending on your business structure and activities. You must comply with these requirements before you start trading, and penalties for operating without compulsory cover include hefty fines and criminal prosecution. The specific requirements vary by state and territory, but three types apply nationally to most businesses.
Workers compensation insurance
You must get workers compensation insurance if you employ anyone in your business. This cover protects employees who get injured or become ill because of their work. Every state and territory runs its own workers compensation scheme with different rules about when cover becomes compulsory. In Victoria, you need it when you pay more than $7,500 annually in wages or employ apprentices. New South Wales requires it as soon as you hire your first employee. Check your local WorkCover or WorkSafe authority for exact thresholds that apply to your situation.
Sole traders aren’t covered by workers compensation, so you need your own income protection and accident insurance instead.
Compulsory motor vehicle insurance
Businesses that use motor vehicles must have third party personal injury insurance (also called compulsory third party or CTP). This cover forms part of your vehicle registration in most states. It protects you from injury claims when your business vehicle causes an accident. The basic CTP only covers injuries to other people, not property damage or damage to your own vehicle, which require separate comprehensive or third party property policies.
Public liability in some industries
Certain professions and industries face mandatory public liability requirements set by licensing bodies or industry regulators. Building and construction businesses often need minimum public liability cover of $10 million or $20 million to get trade licences. Professional service providers might need specific cover amounts to maintain their registration.
Common types of business insurance cover
Beyond compulsory policies, several optional insurance types protect your business from common risks. These covers fill gaps that mandatory insurance doesn’t address and can save your business when unexpected events occur. Understanding what each policy does helps you decide which ones match your actual business risks rather than paying for unnecessary protection.
Public liability insurance
Public liability covers your legal costs and compensation when someone gets injured or their property gets damaged because of your business activities. This insurance applies when customers visit your premises, when you work at client sites, or when your business operations affect members of the public. A tradie who accidentally breaks a water pipe and floods a client’s kitchen would claim on public liability for the damage. So would a retailer whose customer trips on loose flooring and breaks an arm.
Most commercial leases and client contracts require proof of public liability cover before you can start work.
Cover limits typically range from $5 million to $20 million depending on your industry risk level. Building trades usually need higher limits than office-based services.
Professional indemnity insurance
Professional indemnity protects you when your advice, designs, or professional services cause financial loss to a client. Accountants, consultants, architects, engineers, and IT professionals face claims for mistakes or oversights that cost clients money. This policy covers your legal defence costs and any compensation you must pay. An accountant who files incorrect tax returns leading to ATO penalties would claim on professional indemnity. So would a consultant whose flawed business advice results in lost revenue.
Property and business interruption cover
Property insurance protects your physical business assets including buildings, equipment, stock, and contents from fire, theft, flood, and storm damage. Business interruption insurance covers your ongoing expenses and lost income when an insured event forces you to close temporarily. These policies work together to keep your business financially stable during recovery from disasters or major incidents that stop normal trading.
Costs, quotes and choosing a policy
Business insurance costs vary dramatically based on your industry risk level, business size, and claims history. A desk-based consultant might pay $400 annually for basic public liability, while a building company needs $3,000 or more for comprehensive cover. The question "do i need business insurance" often becomes "can I afford not to have it" when you compare premiums against potential claim costs that could reach hundreds of thousands of dollars.
Getting accurate quotes
Provide complete information when requesting quotes to avoid coverage gaps or denied claims later. Insurers need to know your exact business activities, annual revenue, number of employees, and any previous claims in the past five years. Underestimating your revenue or omitting certain activities leads to inadequate cover limits or policy exclusions that leave you exposed. Request quotes from at least three insurers to compare pricing and policy terms. Brokers can save you time by getting multiple quotes simultaneously, though you pay slightly more for their service.
Always read the Product Disclosure Statement carefully before buying any policy to understand what’s covered and what’s excluded.
Comparing policies effectively
Look beyond the premium price when comparing policies. Check the excess amount you’ll pay per claim, coverage limits for different claim types, and specific exclusions that might affect your business. A cheaper policy with $5 million public liability and a $1,000 excess might cost you more overall than a slightly pricier policy with $10 million cover and a $500 excess if you face frequent small claims. Review waiting periods for income protection, territorial limits for public liability, and whether professional indemnity covers past work or only future services.
Where to from here
You now understand which business insurance policies you legally need and which optional covers protect your specific risks. The answer to "do i need business insurance" depends on your business structure, activities, and industry requirements in your state. Start by getting your mandatory workers compensation and vehicle insurance sorted if you haven’t already. Then assess your exposure to public liability claims and professional mistakes based on what you actually do each day.
Compare quotes from multiple insurers to find coverage that matches your actual risks without paying for protection you don’t need. If your business uses vehicles for rideshare, taxi, courier delivery, or commercial purposes, National Cover offers competitive motor insurance with comprehensive protection and expert claims support specifically designed for Australian businesses.
