We all love a bargain. Whether it’s finding a cheaper supplier or saving on utility bills, cutting costs is part of running a profitable business in Australia.
But when it comes to business insurance, "cheap" can be dangerous.
In the last few years, we’ve seen a flood of "direct-to-consumer" insurance products online. These are the ones that promise you a Public Liability quote in 60 seconds. They are fast, they are convenient, and the premiums often look incredibly low.
But there is a reason they are cheap. To keep the price down, these automated policies are often stripped of critical features or filled with strict exclusions.
If you buy a policy without reading the 100-page Product Disclosure Statement (PDS) - and let’s be honest, who has time for that? - you might be paying for a safety net that has holes in it.
Key Takeaways: Common PDS Exclusions
If you are short on time, here is why cheap, automated policies often fail at claim time:
- Height Restrictions: Many budget policies strictly exclude any work done above 10 metres (or 2 storeys).
- Subcontractor Liability: You may not be covered for damage caused by subbies unless you have written proof of their own insurance.
- Forced Entry Required: Standard "Burglary" cover often denies claims if there are no signs of break-in (e.g. picked locks or stolen keys).
- Hot Works Bans: Welding or grinding without strictly following Australian Standard AS 1674 often voids fire coverage.
- Undisclosed Activities: Automated policies only cover the exact job description selected; new revenue streams are often uninsured.
Here are 5 common exclusions hidden in the fine print of "off-the-shelf" policies that could leave your business exposed.
1. Height Limit Exclusions: Are you covered for working above 2 storeys?
The Scenario: You’re a painter, electrician, or handyman. You buy a standard "Trades Pack" online. You take a job painting the eaves of a two-storey house. You fall off the ladder and injure yourself or damage the property.
The Exclusion: Many budget policies have a strict height limit, often set at 10 metres or even lower. If you were working above that height when the accident happened, your claim is instantly declined.
The Reality: A standard two-storey house often exceeds these budget limits. You need a policy that matches the actual work you do, not just a generic "handyman" box.
2. The Subcontractor Loophole: Liability for uninsured workers
The Scenario: You run a small building company and hire a subbie to help out for a week. The subbie accidentally drills through a water pipe, causing massive damage.
The Exclusion: Many basic policies cover your employees but exclude subcontractors. Or, they contain a clause stating you are only covered if you checked the subbie’s own insurance and obtained a written indemnity agreement before they started work.
The Reality: If you didn’t tick that compliance box, you could be liable for their mistake, and your insurer won’t pay a cent.
3. Theft Without Forced Entry: Why isn’t walk-in burglary covered?
The Scenario: You are a café owner or retailer. You arrive in the morning to find stock missing, but the back door lock wasn't smashed - someone perhaps picked it or used a stolen key.
The Exclusion: Many "Burglary & Theft" sections in cheaper policies require visible evidence of "violent and forcible entry." If there are no smash marks, broken glass, or damaged locks, the insurer may argue it was an "inside job" or negligence and decline the claim.
The Reality: Theft is theft, but "Theft without forced entry" is often an optional extra that isn't included in the budget pack.
4. Hot Works Conditions: Welding, Grinding, and Fire Safety Protocols
The Scenario: You are a mechanic or fabricator doing a quick weld or using an angle grinder on site. A spark flies and ignites some dry grass or oily rags nearby.
The Exclusion: Fire is a huge risk. Budget policies often have a total exclusion for "Hot Works" (welding, cutting, grinding) unless you follow a strict Australian Standards protocol (e.g., having a spotter, specific extinguishers, and a cooling-off period).
The Reality: If you didn’t follow the protocol to the letter, or if your policy excludes hot works entirely, you are on your own for the fire damage.
5. Business Activity Mismatch: The danger of unlisted services
The Scenario: You listed your business as "Marketing Consultant" online. Later, you start offering "Web Hosting" services to clients. A server crashes, and a client sues you for data loss.
The Exclusion: Insurers cover you only for the business activities listed on your schedule.
The Reality: If your business evolves (as most small businesses do) but you don't update your "cheap" automated policy, your new revenue streams are likely uninsured. A broker would catch this during a review; a computer algorithm won't.
Don't Leave It to Chance
The problem with these exclusions isn't that they exist. It's that you don't know they are there until you try to make a claim. By then, it’s too late.
At Tank Insurance, we don't sell "off-the-shelf" products. We read the PDS so you don't have to. We ensure your policy matches your actual height requirements, your actual staff setup, and your real business risks.
Truth be told, online platforms are not bad at all. It comes down to simplicity and convenience. But you do get what you pay for. This article is to highlight the fact that you need to know what you are covered for, and where there may be exclusions. If an online insurer provides a policy that covers all bases, then you're set. But reviewing all of that can be confusing.
That’s where we step in as insurance brokers.
Don't risk your livelihood to save a few dollars a month.
Unsure if you’re covered? Talk to a Tank broker today, and we will review your current policy for hidden exclusions.
Frequently Asked Questions (FAQs)
What is a Product Disclosure Statement (PDS)?
The Product Disclosure Statement (PDS) is the full, legal contract between you and the insurer. It details exactly what is covered, what is excluded, and the specific conditions you must meet for a claim to be paid. Reading the PDS is critical because the brief policy schedule only gives a summary.
Does my Public Liability policy automatically cover my subcontractors (subbies)?
Generally, no, not automatically. Many standard Public Liability policies only cover your direct employees (PAYG). To be covered for a subcontractor's mistake, you usually must either: 1) ensure the subbie has their own adequate insurance, or 2) specifically declare the subbie's wages/payments to your insurer and pay the corresponding premium.
Will my business insurance pay for theft if the door was unlocked or a key was stolen?
Typically, no, unless you buy extra cover. Most standard Australian business insurance policies require visible evidence of "violent and forcible entry" (e.g., a smashed window or a compromised lock) for a burglary claim to be valid. Theft without evidence of forcible entry is a common exclusion that must be added as an optional extra.
What are "Hot Works" and why do insurers exclude them?
Hot Works refer to activities that generate sparks or high heat, such as welding, cutting, grinding, and brazing. Insurers exclude them due to the high risk of fire. If you perform Hot Works, your policy will usually require strict adherence to Australian Standards (like AS 1674), including having a fire spotter, proper extinguishers, and a cooling-off "fire watch" period.
If my business activities change, is my policy still valid?
No, if your new activity is not listed on your policy schedule, it is likely uninsured. Insurance policies are specific to the activities you declare. If you were insured as a "Marketing Consultant" and started offering "Web Hosting," your Professional Indemnity claim for the latter activity would likely be denied due to the "Business Activity Mismatch."
