What Does Product Liability Insurance Cover?

Product liability insurance can respond when a product causes injury, death or property damage to another person or business. A business that makes, sells or supplies goods may need it, even when its involvement is a repair or service. Figures checked 1 October 2026 against business.gov.au’s guide to types of business insurance; exact cover must be checked in the policy’s Product Disclosure Statement (PDS).

What does “caused by the product” mean?

The product must cause an insured event affecting another person or business. The events identified in the business.gov.au guidance are:

• injury
• death
• property damage

That is a response to harm caused by the product, rather than a promise to replace or repair the product itself. The guide separately lists stock, product and asset insurance for a business’s own property, stock and products. Your PDS needs to define what counts as the product, what causal connection is required and what is excluded.

What kinds of businesses may need it?

You may need product liability insurance if your business:

• makes goods
• sells goods
• supplies goods
• performs repair or service work involving goods

The cited guidance says a business may need this cover; it does not say every business involved in those activities must carry it. A business may also need insurance because the people it deals with require it.

The relevant cover depends on the business type, the products or services involved and the risks those activities create.

Is product liability insurance compulsory in Australia?

The cited business.gov.au guide does not state that every Australian business must carry product liability insurance. It says legal insurance requirements depend on the type of business and that some businesses must have liability insurance before they can legally operate.

It also notes that some states and territories require public liability insurance for certain occupations. That is a separate requirement and should not be treated as a general product-liability mandate.

Check the regulator page that applies to your business, any requirements from the people you deal with, and the policy PDS. business.gov.au also recommends seeking professional advice about insurance required by law.

How is product liability different from public liability?

The main difference described in the business.gov.au guidance is what causes the loss and which type of exposure is involved.

The relevant liability cover can depend on your industry. A repair or service business may need product liability insurance, while a claim involving negligent professional advice may raise a professional indemnity question. These categories can overlap, so the policy wording and the facts of the loss matter.

What costs will the policy pay?

The business.gov.au summary identifies potential insured events but does not state a product-liability payout amount, policy limit, excess or exclusion. It also does not confirm whether legal defence costs are included.

Before relying on the policy, check the PDS for:

• the definition of the product and insured activities
• the required connection between the product and the loss
• covered benefits and legal costs
• exclusions and conditions
• policy limits and any excess
• notification and claim requirements

Talk to a licenced insurance broker, authorised insurer or business adviser if the wording is unclear.

What should you check before choosing cover?

• Write down what your business makes, sells, supplies, repairs or otherwise supplies to customers.
• Ask whether each activity falls within the proposed product liability policy.
• Read the PDS rather than relying only on a short policy description.
• Check whether the people you deal with require a particular type or level of cover.
• Check the relevant regulator page for any legal requirement that applies to the business.
• If using an authorised general insurer, business.gov.au says one can be found on the Australian Prudential Regulation Authority’s register.
• If using an insurance broker, business.gov.au says the broker’s licence can be checked on the Australian Securities and Investments Commission’s professional register.

This is general information, not financial or legal advice. Confirm legal requirements with the relevant regulator and review the policy PDS for the terms that apply to your business.

Sources

• Types of business insurance | business.gov.au

FAQ

What does product liability insurance cover in Australia?

It may respond when a product causes injury, death or property damage to another person or business. The exact events, exclusions and payment terms depend on the policy PDS.

Can a repair or service business need product liability insurance?

Yes. business.gov.au says a business may need product liability insurance if it makes, sells or supplies goods, even when the work takes the form of a repair or service.

Is product liability insurance mandatory?

The cited business.gov.au guidance does not impose a blanket requirement on every Australian business. Requirements depend on the business type and may come from law, the relevant regulator or the people the business deals with.

Is product liability insurance the same as public liability insurance?

No. Product liability is described around loss caused by a product, while public liability is described around loss caused by negligence. The categories can overlap, so check the PDS for the specific trigger and exclusions.

Does product liability insurance pay legal costs?

The cited product-liability guidance does not confirm this. Check the PDS for any defence costs, legal expenses, limits, conditions and claim requirements.