For any self-employed tradesman, public liability is going to be the most commonly required form of insurance.

For any business it’s important to keep costs down, so naturally you’ll want to keep your public liability insurance cost down too!

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In this guide we’ll take a look at what makes up the cost of your cover, and how you might be able to reduce it.

How much is it?

Let’s start with the basics.  Asking how much public liability costs is like asking how much a boat costs!  It could be a few hundred dollars for an old tinny, or millions of dollars for a luxury yaught.

It’s the same with public liability.  It could be as low as $400 a year for a one-person business doing a standard trade like carpentry, or it could be over a million dollars a year for a huge global company.

Even within the trades the variance can be huge depending on the size of your business and your business activities.

Broadly speaking though, for any trades business with a handful of staff and not doing anything too risky, the cost is going to be somewhere between $400 and $4,000 per year.

So what dictates where you sit within that range?

What affects my public liability cost?

There are two main factors that will affect the public liability insurance cost for a tradesman:

  1. The amount of cover required
  2. Your trade or occupation
  3. The size of your business

Let’s take a closer look…

The amount of cover required

We’ll start with the easy one, which is the amount of cover required.  Generally there are three levels of cover available, being $5 million, $10 million and $20 million.

Some insurers also offer $15 million, and some offer amounts over $20 million, but the theory is the same, which is that the more cover you require the more expensive the premium will be.

The good news is that the price doesn’t go up in proportion to the amount of cover.  For example doubling your cover from $5m to $10m isn’t going to double your premium.  It will increase, but nowhere near double.

Your trade or occupation

Your trade or occupation will also have a major impact on your premium.  It’s not so much just your trade that matters, but what activities your business actually undertakes.

For example you might be an carpenter by trade, but your business is actually a licensed builder and you’re doing new builds.  In this case your insurance cost is based on being a builder, not a carpenter.

The insurance company prices your insurance based on the risk involved.  It’s just like your car insurance.  If you drive a car seen to be a higher risk, like a turbo or V8, you’ll pay a higher premium.  If you drive a standard Camry, you’ll pay less!

So if you’re undertaking a trade or business activities seen as low risk, such as standard residential carpentry or electrical, your premium is going to be at the low end of the price scale.

Public Liability Insurance Cost

But if you’re a welder, the price is going to be higher as it is seen as a more high risk occupation.

Occupations that may have had a cheaper premium can still get more expensive though, depending on some additional factors.

For example you might be an electrician, which is considered low risk, but if you’re working at airports or power stations, you’re at risk of a much larger claim if things go wrong.  Therefore the insurer will charge a higher premium.

It’s important to tell your insurer or broker about any of these high risks activities, even though it will mean your insurance costs more.  The alternative is that they will decline your claim because you didn’t tell them something you should have, which will be a whole lot more expensive in the long run!

The size of your business

Finally, the size of your business can have a major impact on your insurance costs.

Some insurers base the size of your business on the number of staff you have, whilst others base it on the size of your annual revenue.

Either way, the larger your business, the most chance the insurers think there could be a claim, and therefore the higher premium they will need to charge.

Keeping your cost down

The most obvious way to keep your public liability insurance cost down is to shop around.  Or better yet, use a good insurance broker who will shop around for you.

It’s important not to simply choose the cheapest public liability insurance though, as this can end up costing you more in the long run.

You need to make sure the policy is still going to be appropriate for your needs.  There’s no point saving fifty dollars on your insurance, only to lose fifty thousand when your claim isn’t paid…

This is another area where a good insurance broker can help.  They can help you to find a policy that not only meets your business needs, but also provides the lowest cost for the right cover.

Keeping your insurance company or broker up to date on changes within your business can also help to keep your costs down.

For example you might have taken out your policy when you were doing electrical work on mining sites, but now you’re back to doing residential work.

The cost difference here can be huge, so you might be paying for extra risk that is no longer there.

The same goes with the size of your business.  If your number of staff have reduced, or you expect your revenue for the year to be lower, let your insurer know and you might find some extra savings.

More information

Now that you know what can affect your public liability insurance cost, you should be in a better position to secure yourself the best possible price.

And remember if you don’t have the time to do all the research yourself, find a good insurance broker to do the work for you.  We might just know one…

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