Types of business insurance and what they cover in Australia

Published Monday 26 January 2026

Table of contents

• Insurance required by law
• Types of business insurance
• Industry-specific insurance requirements
• Getting started with small business insurance
• Reviewing your business insurance coverage
• Protecting your business beyond insurance
• FAQs on business insurance

Key takeaways

• Obtain workers compensation insurance if you have employees, as it's legally required in Australia and covers lost wages and medical costs when staff are injured or become ill because of their work.
• Assess your specific business risks and industry requirements to determine which types of insurance you need, as different businesses face different exposures that require tailored coverage like public liability, professional indemnity, or product liability insurance.
• Review your insurance coverage annually or when significant business changes occur, such as hiring staff, changing business structure, adding new locations, or introducing new products or services.
• Combine insurance with a business continuity plan to protect against risks that insurance can't cover, such as supply chain disruptions or major client loss, and test this plan at least once a year.

Insurance required by law

In Australia, if you have employees, you're legally required to have workers compensation insurance. This covers lost wages and medical costs if a staff member is injured or becomes ill because of their work.

The specific rules can vary between states and territories, so it's a good idea to check with your local regulator.

Types of business insurance

You can choose from several types of cover, depending on how your business operates and the risks you face.

Workers compensation

Workers compensation insurance is the cover you must have if you employ staff. It helps pay wages and medical costs if a worker is injured or dies because of their job. You still need to keep a safe workplace through strong health and safety practices.

Public liability

Public liability insurance can protect your business if you cause damage to someone else's property, injure someone, or make a member of the public ill. In many cases it can also cover legal costs and court-awarded compensation.

Public liability insurance covers the public, not your employees, so you also need workers compensation insurance if you have staff.

Professional liability

Professional indemnity insurance covers financial loss when mistakes in your professional work cause harm to clients or customers. Regulators often require this cover for businesses providing legal, medical, engineering or financial advice.

For example, the Australian Securities and Investments Commission (ASIC) requires financial services licensees with revenue of $2 million or less to have a minimum amount of cover of at least $2 million.

Property

Property insurance protects your business buildings and their contents from theft, fire and natural disasters. This coverage is essential because many small businesses keep all their assets in one location, making comprehensive protection critical for business continuity.

Vehicle

Commercial vehicle insurance covers your business vehicles for loss and damage from accidents or theft. Depending on the policy, it can also cover injuries from accidents and your liability if other road users make claims against you.

Product liability

If you sell or supply products, this insurance can protect you if a product you've sold causes injury, illness, or damage. It covers legal costs and compensation claims, giving you peace of mind.

Business continuation

Business continuation insurance replaces lost income if your business has to close or scale back operations because of events outside your control. This coverage provides cash to help restore your business to full capacity more quickly.

Industry-specific insurance requirements

Some professions have unique risks and may need specialised insurance. For example, builders may need contract works insurance, and IT consultants may require cyber liability insurance. Research what is standard in your industry so you can choose the right level of cover.

Getting started with small business insurance

Getting the right insurance balance requires careful planning. You can follow these steps to get started.

1. Assess your actual risks. The right level of cover helps you avoid large financial losses, with small business insurance gaps having the highest financial impact at $1.4 million in 2022.
2. Seek advice from peers. Speak to other business owners about the types of insurance that work for them.
3. Consult your accountant. Ask for professional guidance before you approach insurance brokers.
4. Compare coverage options. Make sure you understand what each policy includes and excludes before you decide.

Reviewing your business insurance coverage

Regular insurance reviews ensure your coverage matches your current business needs and risks. Review your policies annually or when significant changes occur. Common triggers include:

• Business structure changes:Moving from sole trader to company can change your insurance needs
• Growth or downsizing: Staff changes can affect your workers compensation requirements
• New locations or assets: Extra premises or equipment may need new or updated cover
• Industry changes:New services or products may call for different types of liability insurance

Protecting your business beyond insurance

Insurance provides financial protection, but preparation prevents problems. A business continuity plan helps you navigate challenges that insurance can't solve, such as natural disasters, major client loss, or supply chain disruptions. To keep it effective, the Australian Prudential Regulation Authority recommends you review and test your plan at least once a year.

Create your plan to identify potential risks and establish response procedures before problems occur. Download the free business continuity plan template or try Xero for free.

FAQs on business insurance

Here are some common questions small business owners ask about insurance.

What type of insurance is most important for a small business?

This depends on your business, but public liability insurance is fundamental for most, as it covers accidents involving the public. If you have employees, workers compensation is legally required. For service-based businesses, professional indemnity insurance is also crucial.

How do I know how much insurance coverage I need?

The right amount of coverage depends on your industry, business size, and level of risk. It's a good idea to talk with an insurance broker or a trusted advisor. They can help you assess your risks and find a policy that fits your needs without over-insuring.

Can I get a single policy for all my business insurance needs?

Many insurers offer a 'business pack' or 'business owners policy' that bundles common types of coverage, like public liability and property insurance. This can be a simpler and more cost-effective way to get the protection you need.