If you run a one-person business in Australia, the two covers you will hear about most are public liability insurance and professional indemnity insurance. Public liability covers you if someone dies, is injured or has their property damaged because of your negligence. Professional indemnity covers mistakes, neglect or breaches of contract that cause a loss for your client. Whether either one is legally required depends on your occupation, your state or territory, and whether you employ anyone.
The Australian Government's business.gov.au states the split directly: "Your business may need certain types of insurance by law or because people you deal with need it. Other types of insurance are your choice." (Types of business insurance | business.gov.au)
What public liability insurance covers
Public liability insurance covers you if someone dies, gets injured or has their property damaged because of your negligence.
In practice that is the cover a client, a landlord or an event organiser is usually asking about when they say you "need public liability" before they will let you on site. business.gov.au notes that insurance may be required "because people you deal with need it" — so even where the law does not force you to hold it, a contract or a venue may.
Is public liability compulsory for a sole trader?
Not automatically. business.gov.au lists public liability among the most common types of insurance required by law, but qualifies it: some states and territories require it for certain occupations. The same page also states that some businesses must hold liability insurance before they can legally operate.
The page does not set out which occupations are covered by those rules, so treat "sole trader" as the starting point, not the answer. Confirm the position with the regulator that covers your occupation in your state or territory before assuming you are exempt.
What professional indemnity insurance covers
Professional indemnity insurance covers mistakes, neglect or breaches of contract that result in a loss for your client. It is the cover that responds when the problem is your advice, your design, your oversight or your professional judgement rather than a physical accident.
business.gov.au states that professional indemnity insurance is mandatory for some professions. The page does not list which professions those are, so if your work involves advice or a professional service, check the requirement with the body that registers or licences your occupation rather than assuming the general rule covers you.
Workers' compensation: for your employees, not for you
If your one-person business has employees, workers' compensation is a different matter. business.gov.au states that employers must get workers' compensation insurance from an authorised insurer, and that the laws vary in each state and territory — check with the state or territory regulator.
The important point for a genuine solo operator: "If you're a sole trader, workers' compensation insurance doesn't cover you. You'll need to get your own personal death, illness and disability insurance." That is the gap most one-person businesses miss when they assume "I'm the business, so I'm covered."
Compulsory vs optional at a glance
| Cover | What it covers | When it is required in Australia |
|---|---|---|
| Public liability | Death, injury or property damage caused by your negligence | Required by some states and territories for certain occupations; some businesses must hold it before they can legally operate; often required by clients or venues |
| Professional indemnity | Mistakes, neglect or breaches of contract that cause a loss for your client | Mandatory for some professions |
| Workers' compensation | Employees injured at work | Required if you have employees; must be taken out with an authorised insurer; rules vary by state and territory |
| Third-party personal injury | Injury to other people caused by your vehicle | Required for vehicles, alongside compulsory third-party arrangements |
| Management liability | Claims against directors, officers and managers for their management practices | Listed by business.gov.au among the types of business insurance to consider |
What to check before you buy anything
Two rules from business.gov.au's Manage your business insurance page are worth holding on to:
- You get a Product Disclosure Statement. An insurance company must give you a product disclosure statement (PDS), which explains in clear words the terms and conditions of your policy. Read it before you buy — exclusions and limits live there, not in the marketing page.
- Brokers must be licensed. Brokers must have a current Australian Financial Services (AFS) licence. You can check a broker's licence on ASIC's register.
This page does not recommend any product, insurer or broker.
This is general information, not personal advice
business.gov.au states outright that its information does not replace professional advice.
The distinction matters legally. According to ASIC's Moneysmart (last updated 18 June 2026), general advice is "a recommendation or opinion about a financial product that's not tailored to your personal circumstances," while personal advice is tailored and providers of personal advice must act in your best interest. (General and personal financial advice - Moneysmart.gov.au)
Everything above is general information about how these covers work in Australia. It is not tailored to your business, your income, your contracts or your state, and it is not a recommendation to buy or skip any policy.
Two things this article deliberately does not state, because the official material does not state them: typical public liability cover amounts or costs, and a list of the professions that must hold professional indemnity insurance. For both, go to the PDS, the relevant regulator, or a licensed adviser who can give you personal advice.