Public liability insurance is one of the most important policies a tradie can hold — and one of the most misunderstood. Many tradies have it because a client asked for it, without really knowing what it does.
Here's a clear explanation of what public liability covers, what it won't, and how to choose the right cover for your trade.
What Public Liability Insurance Covers
Public liability (PL) insurance covers you when your work causes injury to a third party or damage to their property. In plain language: if something you do on the job hurts someone or breaks something that isn't yours, PL pays the claim.
Examples of covered claims: - A customer trips over your tools left on their driveway and breaks their wrist - You accidentally drill through a water pipe hidden in a wall, flooding the floor below - You're repainting a house and a dropsheet blows into traffic, causing an accident - A subcontractor drops a beam onto a neighbour's fence - You leave a site insecure and someone is injured entering
These events can result in legal liability for compensation, medical costs, property repair, and legal defence costs. Without PL insurance, you pay those out of your own pocket — and on a serious claim, that could bankrupt you.
What Public Liability Insurance Doesn't Cover
This is just as important to understand. PL does not cover:
- Your own injuries — that's ACC (accidents) or income protection (illness)
- Your own tools and equipment — that's tools and equipment insurance (separate policy)
- Damage to your own vehicle — that's vehicle insurance
- Faulty workmanship — if you do a bad job and have to redo it, PL won't pay
- Intentional acts — no insurance covers deliberate damage
- Professional advice errors — if you give wrong advice (as distinct from doing the work), this falls under professional indemnity (relevant for engineers, designers, some specialist trades)
- Contract disputes — unpaid invoices, scope disagreements, variation disputes
Understand the exclusions before you rely on your policy in a claim. Read the Product Disclosure Statement (PDS) for each policy you consider.
How Much Cover Do You Need?
PL policies are sold in cover levels — the most common being $1 million, $2 million, $5 million, and $10 million.
$1 million is the minimum most clients and principal contractors accept, and suitable for low-risk sole trader work — residential repairs, painting, gardening, small carpentry.
$2 million is the standard for most tradies — builders, plumbers, electricians, roofers. A serious property damage or injury claim can easily reach $1 million once legal costs, medical expenses, and consequential losses are tallied.
$5 million+ is required for higher-risk specialisations, large commercial work, work on high-value properties, or when your principal contractor's contract requires it. Some commercial and government contracts specify minimum PL levels — read the contract carefully.
When in doubt, $2 million is the safe default for most NZ tradies.
What Does It Cost?
PL premiums depend on your trade, annual turnover, number of employees or subcontractors, and cover amount. As a guide:
| Trade | Cover | Approx. Annual Premium |
|---|---|---|
| Painter / cleaner (low risk) | $1M | $400–$600 |
| Builder / carpenter | $2M | $700–$1,200 |
| Electrician / plumber | $2M | $800–$1,400 |
| Roofer | $2M | $1,000–$1,800 |
| Demolition / excavation | $2M | $1,500–$3,000+ |
These are rough estimates — get quotes for your specific situation. Premiums increase significantly if you employ staff (your employees' actions are your liability).
Is it tax-deductible? Yes. Public liability insurance is a legitimate business expense and fully deductible against income.
When Clients and Contractors Require It
For residential homeowners, many won't ask for proof of insurance. But they absolutely should — and the absence of PL insurance means they carry the risk if your work causes damage.
For commercial work, main contractors and project managers almost universally require proof of PL insurance before you set foot on site. You'll typically need to provide a certificate of currency — a document from your insurer confirming you're covered, the policy level, and the expiry date.
Subcontractor agreements commonly require: "The subcontractor shall hold and maintain public liability insurance of not less than $[X] million and provide a certificate of currency on request."
If you don't have PL, you simply won't get the work. It's a business-critical document.
Combined Policies: Tools, PL, and More
Many NZ tradie insurance providers offer bundled policies that combine: - Public liability - Tools and equipment (tools stolen or damaged) - Contract works / works in progress (damage to work you're currently doing)
Bundled policies are usually cheaper than buying each cover separately. NZ providers worth getting quotes from include:
- Crombie Lockwood — specialist commercial insurance, common for tradies
- AIG / Vero / IAG — underwriters used by many brokers
- Builtin NZ — focused on construction and trade insurance
- BizCover — online comparison and instant quotes
- Tradie Insurance NZ — specialised in tradie cover
Use an insurance broker familiar with the construction and trades sector — they understand the exclusions, know which policies cover grey-area scenarios, and can negotiate better terms than going direct.
After an Incident: How Claims Work
If something happens on-site: 1. Ensure safety — attend to any injured persons, secure the site 2. Document immediately — photos, witness details, description of what happened 3. Notify your insurer promptly — most policies require notification "as soon as reasonably practicable" after an incident you think might lead to a claim 4. Don't admit liability — this can affect your claim. Let the insurer assess the situation 5. Cooperate with the claims process — provide all requested documentation
Failing to notify promptly or admitting liability without insurer consent can be grounds to reduce or decline a claim.
Key Takeaways
- PL covers you for third-party injury or property damage caused by your work
- It does not cover your own injuries, your tools, faulty workmanship, or contract disputes
- $2 million cover is the safe default for most NZ tradies
- Commercial contracts often require PL — you need a certificate of currency ready
- Premiums are tax-deductible as a business expense
- Bundle with tools insurance and contract works cover for better value
- Get quotes from a specialist tradie insurer or insurance broker
Read our full guide on How to Choose the Right Insurance for NZ Tradies for a complete picture of all the cover types worth holding.
NZ Tradie Tools provides free calculators, templates, and guides for New Zealand tradies. Insurance products vary significantly — always read the Product Disclosure Statement and consider advice from a licensed insurance broker.