The federal government is moving to close a loophole that exposes politicians to costly lawsuits.

Special Minister of State Gary Gray says MPs on all sides of federal politics will be indemnified for public and management liability and workers' compensation.

Mr Gray said the change, which does not require legislation, follows on from a recommendation in the 2010 Belcher Report - the first comprehensive review of MP entitlements in more than 35 years.

"In an increasingly litigious society ... politically motivated litigation has the potential to affect the work of MPs and the parliament," he said in a statement.

"The threat of litigation itself may affect behaviour in the parliament.

"We need to guard against this."

This would be done by purchasing management liability insurance, similar to that available to company directors.

The government has already implemented a number of Belcher recommendations like cutting expensive travel entitlements such as Life Gold Passes, overseas study travel and post-service travel.

The review had noted MPs weren't covered by public liability insurance for activities outside their electorate offices or parliament, leaving them exposed to potential civil claims.

Mr Gray said the new legal cover would apply from July 1.

But it won't cover wilful, reckless, dishonest, fraudulent or malicious acts.