Understanding which business insurance is mandatory in Australia is essential for business owners, employers, and sole traders. While not every type of insurance is legally required, failing to hold compulsory cover can result in fines, legal action, or the inability to operate your business.

Operating without the right insurance exposes businesses to serious financial and legal risks. Learn more about the risks of operating without business insurance and how uninsured claims can impact your business.

This guide explains what insurance Australian businesses must have, when it applies, and what additional cover is strongly recommended.

Is Business Insurance Mandatory in Australia?

There is no single business insurance policy that is mandatory for all businesses in Australia. However, certain types of insurance are legally required depending on your business structure, activities, and whether you employ staff.

In practice, many businesses must hold specific insurance policies to:

• Comply with Australian laws and regulations
• Meet contractual or licensing requirements
• Protect against significant financial risk

Workers Compensation Insurance (Mandatory for Employers)

If your business employs workers, Workers Compensation Insurance is legally mandatory in every Australian state and territory.

This insurance covers employees for:

• Workplace injuries or illness
• Medical expenses
• Lost wages
• Rehabilitation costs

Workers compensation requirements vary by state, but all employers must hold cover from an approved insurer or state authority.

Learn more about Workers Compensation Insurance and employer obligations.

Compulsory Third Party (CTP) Motor Insurance

If your business owns or operates vehicles, Compulsory Third Party (CTP) insurance is mandatory. This cover is required to register vehicles and provides protection for injuries caused to other road users.

CTP insurance does not cover property damage or vehicle repairs, so businesses often require additional commercial motor insurance.

When Is Public Liability Insurance Required?

Public Liability Insurance is not legally mandatory in all cases, but it is often required by:

• Local councils
• Landlords
• Event organisers
• Principal contractors
• Licensing bodies

Many businesses cannot operate without public liability insurance, particularly those that:

• Interact with the public
• Work at client premises
• Operate from leased locations
• Provide on-site services

Read more about Public Liability Insurance and when it’s required.

Professional Indemnity Insurance (Mandatory for Some Professions)

For certain professions, Professional Indemnity Insurance is mandatory under industry regulations or licensing requirements.

This commonly applies to:

• Financial advisers
• Accountants
• Engineers
• Consultants
• Architects and designers

Professional indemnity insurance protects against claims arising from advice, errors, or professional services.

👉 Learn more about Professional Indemnity Insurance.

Other Insurance Commonly Required by Contract or Licence

While not legally compulsory, the following types of insurance are often required by contracts, regulators, or industry standards:

• Management Liability Insurance – for companies with directors and employees
• Cyber Insurance – increasingly required for businesses handling customer data
• Business Insurance Packages – often required by landlords or financiers

Holding these policies can be essential for winning contracts and protecting your business.

If you’re unsure which insurance policies apply to your situation, this guide explains what insurance you need for your small business and how coverage requirements vary.

What Happens If You Don’t Have Mandatory Insurance?

Operating without required insurance can lead to:

• Fines and penalties
• Breach of contract or lease agreements
• Legal claims against your business
• Personal liability for directors or sole traders
• Loss of licences or inability to operate

Even where insurance is not legally mandatory, the financial consequences of operating without cover can be severe.

How an Insurance Broker Can Help

Understanding which insurance is mandatory for your business can be complex, particularly when requirements vary by state, industry, and business structure.

An experienced business insurance broker can:

• Identify which insurance policies are legally required
• Explain contractual and licensing insurance obligations
• Arrange suitable cover from approved insurers
• Ensure your business remains compliant
• Assist with claims and ongoing policy reviews

Working with a broker helps ensure you meet your legal obligations while avoiding unnecessary or unsuitable cover.

Final Thoughts

While not all business insurance is mandatory in Australia, some types of cover are legally required, and others are essential for operating your business safely and compliantly.

If you’re unsure which insurance your business must have, seeking professional advice can help prevent costly mistakes. For a broader overview of protecting your business, read our short guide to insurance success for business owners.

Speak with Morgan Insurance Brokers to confirm your mandatory insurance requirements and arrange suitable cover for your business.