The Beliefs That Cost You Real Money
Every year, Australian small business owners lose thousands — sometimes hundreds of thousands — not because of a bad business decision, but because they held a belief about insurance that turned out to be entirely wrong. Not slightly wrong. Wrong in the way that means a claim gets declined, an asset isn’t covered, or a legal liability lands squarely on your personal bank account.
These aren’t obscure technicalities. They’re the myths that circulate through business networks, get repeated at barbecues, and get reinforced by well-meaning professionals who aren’t insurance specialists. They feel true because they sound reasonable — and most owners never test them until something goes wrong.
Here are the ten most common and costly ones — what people believe, why it’s wrong, and what you should do about it.
Myth 1: “I Work from Home, So I Don’t Need Business Insurance”
What people believe
You run your business from a spare bedroom or a converted garage. Your home and contents insurance covers the building and everything in it — including your computer, your stock, and the client who occasionally visits for a meeting. Surely that’s enough.
Why it’s wrong
Standard home and contents policies are designed for domestic risks, not commercial ones. Most explicitly exclude business activities, limit business equipment to a token amount (often $2,000 to $5,000), and won’t cover liability arising from business operations. If a client visits your home for a meeting and trips on your front step, your home insurer will almost certainly decline the public liability claim because the injury arose from a business activity. If a courier delivering business stock injures themselves on your property, same problem. If your business activities cause damage to a neighbour’s property — say, a chemical spill from a home-based detailing business — your home policy will walk away.
The reality
You typically need either a home business extension added to your home policy (if your insurer offers one) or a separate business insurance policy covering your equipment, stock, and public liability. The good news is that home-based business insurance is usually inexpensive — often a few hundred dollars a year — because the risks are lower than a retail premises. The bad news is that if you don’t arrange it and something happens, the gap is entirely yours.
Practical takeaway: Call your home insurer and ask two questions. “Am I covered for business equipment beyond the standard limit?” and “Does my public liability cover extend to business visitors?” If the answer to either is no — and it usually is — you have a gap that needs filling.
Myth 2: “My Landlord’s Insurance Covers My Business”
What people believe
You rent a commercial space. The landlord has building insurance. You pay rent. So if a fire destroys the premises, the landlord’s insurance handles everything — your contents, your lost revenue, any liability claims. That’s what the rent is for.
Why it’s wrong
A landlord’s building insurance covers exactly one thing: the structure itself — walls, roof, fixed fittings. It does not cover your business contents (stock, equipment, furniture, fit-out you installed). It does not cover your business interruption losses if you can’t trade while the building is being repaired. And it absolutely does not cover your liability if someone is injured on the premises and names you in the claim. If the damage was caused by something your business did — a kitchen fire in your café — the landlord’s insurer may pursue you to recover what they paid out, through a right of subrogation.
The reality
As a tenant, you need your own insurance for three things: contents and fit-out, business interruption, and public liability. Your lease almost certainly requires public liability insurance — many specify $10 million or $20 million minimum. Without it, you’re in breach of your lease and the landlord can terminate.
Practical takeaway: Read your lease. Find the insurance clause. It will tell you exactly what cover you’re required to hold as a tenant. That’s your minimum starting point — not your landlord’s policy.
Myth 3: “I’m a Sole Trader, I’m Too Small to Need Insurance”
What people believe
Insurance is for big businesses with premises and employees and deep pockets worth suing. If you’re a sole trader — a tradie, a consultant, a cleaner, a freelance designer — you’re too small to be worth claiming against, and too small to justify the cost of insurance. Nobody sues a one-person operation.
Why it’s wrong
Your size has nothing to do with your exposure to causing loss or damage. A sole trader electrician who causes a house fire faces the same damages bill as an electrical company with twenty employees. A sole trader accountant who gives negligent advice faces the same professional indemnity exposure as a mid-tier firm — the client’s loss doesn’t change based on how many people work in the practice. In fact, sole traders face greater personal risk because there’s no corporate structure between the claim and your personal assets. If a court awards damages against you personally — not a company, but you — the claimant can pursue your house, your savings, your car, and your future earnings.
The reality
Sole traders need the same core covers as small companies: public liability, professional indemnity (if you give advice), and cover for tools and equipment. What changes is the premium, which is typically lower because your revenue and operational scale are smaller. You’re not paying for insurance you don’t need — you’re paying for the protection your business structure can’t provide.
Practical takeaway: The question isn’t “am I big enough to need insurance?” It’s “can I afford to pay a six-figure claim out of my personal assets?” If the answer is no, you need insurance regardless of your size.
Myth 4: “Public Liability Covers Everything”
What people believe
You’ve got public liability — $20 million of it. Whatever goes wrong — a client sues, your equipment gets stolen, a contract goes bad — public liability has you covered. It’s the all-purpose business insurance.
Why it’s wrong
Public liability covers one specific thing: your legal liability for personal injury or property damage to third parties arising from your business activities. It does not cover professional negligence (that’s professional indemnity). It does not cover your own property — tools stolen from your vehicle, stock damaged in a flood. It does not cover employee injuries (that’s workers compensation). It does not cover contractual liabilities beyond what you’d have at common law.
The reality
Public liability is one piece of a larger puzzle. Depending on your business, you may need professional indemnity, contents and equipment cover, business interruption, cyber insurance, or management liability. Thinking public liability covers everything is like assuming third-party car insurance will fix your own vehicle — it won’t, because that’s not what it’s for.
Practical takeaway: Write down your business’s top three risks — the things most likely to cause you financial loss. Then check which insurance covers each one. If “public liability” is your answer for all three, verify that against the insuring clause. You’ll probably find a gap.
Myth 5: “My Business Structure Protects My Personal Assets”
What people believe
You’ve incorporated. Your business is a company or a trust. If the business gets sued, the worst that can happen is the company loses its assets. Your house, your savings, your personal accounts — those are safe behind the corporate veil. That’s the point of the structure.
Why it’s wrong
The corporate veil is real but not impenetrable. Directors can be held personally liable for insolvent trading, for workplace health and safety breaches, and for unpaid PAYG withholding and superannuation via director penalty notices. Beyond statutory liability, the corporate structure doesn’t protect you from claims against you personally — if you personally give negligent advice, make a defamatory statement, or injure someone through your own actions, you can be sued directly. And even if a claim is brought against your company rather than you personally, defending it costs money. If the company can’t fund its own defence and your insurer isn’t covering defence costs, you’re paying out of your own pocket or watching the company collapse.
The reality
A company or trust structure reduces your exposure but doesn’t eliminate it. Management liability insurance covers directors and officers for claims from managing the company. Professional indemnity covers claims from your professional advice, whether against you or your company. Adequate insurance across all your exposures is what actually protects your personal assets.
Practical takeaway: Ask your lawyer: “In what circumstances could I be personally liable for something my business does?” The list will be longer than you expect. That list is what you need insurance for.
Myth 6: “Cheaper Premiums Mean Better Value”
What people believe
Insurance is a commodity. All policies with a $20 million public liability limit are basically the same product, so you buy the cheapest one. Anyone paying more is getting ripped off.
Why it’s wrong
Two policies both offering “$20 million public liability” can be dramatically different products. A cheaper premium almost always means you’re getting less of something: narrower definitions of covered activities, more exclusions, higher excesses, lower sub-limits on specific claim types, or less generous claims triggers. One policy might have a $500 excess; the cheapest might have a $5,000 excess that makes smaller claims uneconomical. Sub-limits are especially important — a policy might offer $20 million overall but cap property in your care at $250,000 or damage to underground services at $100,000. If your claim falls into a capped category, the difference between $20 million and $100,000 is the difference between fully covered and catastrophically underinsured.
The reality
The comparison that matters is coverage versus coverage, not premium versus premium. Before choosing the cheapest quote, compare the insuring clause, exclusions, excess, sub-limits, and claims trigger. If you can’t identify why the cheap policy is cheaper, that’s not a bargain — it’s a risk you haven’t spotted.
Practical takeaway: When comparing quotes, put them side by side and look at the differences beyond the price. If one is significantly cheaper, find what it excludes or limits that the others include. The answer is always there — you just have to look for it.
Myth 7: “I Don’t Need to Read the PDS — All Policies Are Basically the Same”
What people believe
The Product Disclosure Statement is a fifty-page legal document written by lawyers for lawyers. It all says the same thing. You don’t need to read it — insurance is standardised, and if there were something unusual in there, the comparison site would have flagged it.
Why it’s wrong
The PDS is the contract. When you buy a policy, you’re agreeing to the terms in that document. If you haven’t read it, you’re agreeing to terms you don’t know. When a claim is declined based on a PDS exclusion, “I didn’t read it” is not a defence. The law treats you as having read and understood the documents you agreed to. And policies are not standardised. Different insurers have different wording, exclusions, and claims philosophies. Take “manual work” exclusions: an IT consultant running cables through walls might think they’re doing IT work. Their insurer might classify it as manual work and exclude the claim. Another insurer’s policy might not have that exclusion. Same business, same activity, two outcomes — determined entirely by PDS wording.
The reality
You don’t need to read the PDS like a lawyer. Read three sections: the insuring clause (what triggers cover), the exclusions (what’s not covered), and the claims conditions (what you must do and when). That’s the difference between knowing what you’ve bought and guessing.
Practical takeaway: Before buying any policy, read the insuring clause and exclusions. If your core business activity sits within an exclusion or isn’t clearly within the insuring clause, that policy isn’t suitable regardless of the premium. Find the exclusions before you buy, not after the loss.
Myth 8: “Workers Comp Isn’t Required for Casuals and Contractors”
What people believe
Workers compensation only applies to full-time and part-time permanent employees. Casual workers, freelancers, and contractors you pay on invoice — they’re not “real employees,” so you don’t need to cover them. They’re responsible for their own insurance. That’s the whole point of engaging them as contractors.
Why it’s wrong
The distinction between an employee and a contractor for workers comp is not determined by the label you use, how you pay them, or whether they have an ABN. It’s determined by the actual working relationship: the level of control you exercise, whether they’re integrated into your business, whether they do the same work as your employees. A “contractor” who works exclusively for you, uses your tools, follows your directions, and wears your uniform may be classified as a worker for workers comp purposes — regardless of what the contract says. Casual employees are even more straightforward: they are employees, and you need workers comp for them. Irregular hours or casual loading don’t change their status.
The reality
Workers comp requirements vary by state and territory, but the principle is consistent: if a person works in your business and the relationship has employment characteristics, you probably need to cover them. Getting this wrong is costly — uninsured workers comp claims can run into hundreds of thousands for a single serious injury, plus regulatory penalties reaching six figures in some states.
Practical takeaway: If you engage casuals or contractors, talk to your workers comp insurer or state regulator about whether they need to be covered. Describe the actual working relationship, not the contractual label. If the answer is unclear, err on the side of covering them. The premium cost is trivial compared to the cost of an uninsured claim.
Myth 9: “Once I Have Insurance, I’m Covered Forever”
What people believe
You bought the policy. The premium is paid. The certificate of currency is filed. You’re done. Insurance sits in the background doing its job, and you don’t need to think about it until renewal — or ever, because it renews automatically.
Why it’s wrong
Insurance is not set-and-forget. Your cover is a snapshot of your business at the time you applied, based on what you disclosed. If your business changes — and businesses change constantly — your cover may no longer fit, and in some cases may no longer be valid. Material changes include: changing the nature of your work, significant revenue increases, moving premises, expanding interstate or overseas, acquiring another business, restructuring, hiring employees, or taking on larger contracts. You have an ongoing duty of disclosure — if your business has changed materially and you haven’t told your insurer, a claim may be declined or reduced.
Then there are policy mechanics. Limits of indemnity can be exhausted. Claims-made policies (common for PI) only cover claims made and notified during the policy period — if the policy expires without renewal or run-off cover, later claims aren’t covered even if the work was done during the period. Exclusions and notification requirements don’t expire just because you’ve been a loyal customer.
The reality
Your insurance needs active management. Review your cover at least annually and whenever your business goes through a material change. Ask: has anything changed that my insurer should know? Does my cover still match what I actually do? Are my limits adequate for my current contracts?
Practical takeaway: Set a recurring calendar reminder for six weeks before renewal. When it fires, review what’s changed in your business over the past year and notify your insurer of anything material. Better a conversation before renewal than a dispute after a claim.
Myth 10: “I Can Just Get Insurance After Something Goes Wrong”
What people believe
Insurance is for emergencies. If a client threatens to sue, a storm damages your premises, or equipment breaks down, you’ll take out insurance then and it’ll cover the problem. Why pay premiums for years when you can get cover at the point you actually need it?
Why it’s wrong
This isn’t just wrong — it’s a fundamental misunderstanding of what insurance is. Insurance covers unforeseen future events, not events that have already happened or are in progress. Every policy contains exclusions for known claims, known circumstances, and pre-existing damage. If a client threatens legal action and you buy PI cover the next day, that claim isn’t covered — the threat was known before the policy started. If a storm is forecast for the weekend and you buy contents cover on Friday, damage from that storm isn’t covered — it was a known risk. If your building has a slow leak causing damage for months and you take out a policy when you notice it, the damage predates the policy.
There’s also a timing issue. Even the fastest online quote-and-buy process takes time, and during that time the notification clock is running on the claim. Most policies require you to notify the insurer of claims or potential claims as soon as reasonably practicable. If you’ve been sitting on a problem for weeks while shopping for insurance, you may have already breached the notification requirements of the policy you’re trying to buy.
The reality
Insurance is not reactive. You build your program before the loss, maintain it while things are calm, and it responds when you need it. Trying to get insurance after an event is like buying a fire extinguisher while the kitchen is on fire — the time to acquire it has passed.
Practical takeaway: The best time to buy business insurance is before you need it. The second-best time is today. If you’re reading this without cover in place, fixing that now costs you a premium. Fixing it after a claim costs you everything.
How to Audit Your Own Insurance Beliefs
If you’ve recognised yourself in any of these myths, act on it. Start by writing down what you actually believe about your insurance — not what your policy says, but what you assume. “I’m covered for X.” “My policy would pay if Y happened.” Then test each belief against your policy documents. If you can’t find the coverage in the insuring clause, or it sits within an exclusion, that belief is a gap.
Next, run a scenario. Pick the worst realistic event for your business — a client suing, a fire, a cyber attack — and trace through what would happen using your policy documents. Who do you call? What’s the notification deadline? What’s the excess? Are there sub-limits that cap the payout? Would your business survive the gap between the loss and the claim payment?
If you can’t answer those questions with confidence, your insurance has a knowledge gap. And knowledge gaps turn into coverage gaps at precisely the moment you discover them.
If you’re not sure where to start, comparing quotes from multiple insurers is a practical first step. Getting a quote through BizCover takes about ten minutes and lets you see quotes from a panel of Australian insurers side by side — not a substitute for reading the PDS, but a starting point for understanding your options. For complex risks, speak to an insurance broker with a legal duty to act in your best interests.
Frequently Asked Questions
Do I need business insurance if I only have a side hustle?
Yes, if your side hustle creates liability exposure or involves equipment you couldn’t afford to replace. Being part-time or earning modest income doesn’t change the legal principles of negligence. A weekend photographer who damages a client’s property faces the same liability as a full-time studio. Premiums for low-revenue operations are typically low enough that going without is hard to justify.
What’s the minimum insurance I should have as a new business owner?
At minimum, public liability insurance — it covers the most common claim type (injury or property damage to third parties) and is required by most leases, client contracts, and industry bodies. If you provide advice or professional services, add professional indemnity. If you have tools or equipment, add contents or portable equipment cover. If you employ anyone, workers compensation is mandatory. Start there and expand as your business grows.
Will making a small claim increase my premium?
Probably. Many insurers apply a claims-free discount you lose after any claim regardless of size. A single small claim after several claim-free years is different from your third liability claim in two years, but even one claim typically affects renewal pricing. For very small losses, paying out of pocket can be more economical than sacrificing your claims history.
What happens if I don’t have insurance and someone sues me?
You’re personally responsible for defending the claim and paying any damages. Legal costs alone can reach tens of thousands before a hearing. If you lose, the court can order you to pay the claimant’s damages plus their legal costs — in Australia, costs orders regularly exceed the damages themselves. If you can’t pay, the claimant can pursue bankruptcy proceedings. Insurance doesn’t just pay claims — it funds your defence, often the more critical function.
Can I rely on the cooling-off period to test a policy?
The cooling-off period (minimum 14 days) lets you cancel a new policy and receive a refund of the premium minus non-refundable government charges, a pro-rata deduction for days the policy was in force, and possibly a small admin fee. It’s designed for reviewing documents after purchase, not for free temporary cover. If you’ve made a claim during the cooling-off period, the full annual premium is generally non-refundable. Use it to read the PDS carefully — not as a fallback.
This article provides general information only and does not constitute insurance, legal, or financial advice. Policy terms, exclusions, and conditions vary between insurers and products. Always read the Product Disclosure Statement (PDS) for any insurance product before making a purchase decision. The scenarios and examples described are general illustrations only and may not apply to your specific circumstances. comparebusinessinsurance.au may receive a commission from BizCover for referrals. Information current as at June 2026.