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All businesses, large and small, face the risk of liability. Professional liability insurance and general liability insurance both provide protection for your business. The main difference between these two types of insurance is the different risks they cover.
What Is Professional Liability Insurance?
Also known as errors and omissions (E&O) insurance, professional liability insurance is designed to protect you in case a client files a claim for damages resulting from the services your business provides. For example, if a web developer’s error costs a client online business, the client may sue for damages. Professional liability insurance provides coverage for financial damages in claims of malpractice, negligence, errors, and omissions in the course of performing a professional service.
Who Needs Professional Liability Insurance?
If you are trained and educated to perform a service or trade, you should have professional liability insurance. A disgruntled client can file a lawsuit, even though you perform your professional duties diligently and responsibly. Professionals who need errors and omission insurance include lawyers, doctors, dentists, real estate brokers, accountants, bookkeepers, and financial advisors. This coverage protects against claims of bad faith, bad advice, misrepresentation, copyright infringement, and malpractice.
What Is General Liability Insurance?
General liability insurance protects your business against third-party claims regarding:
Bodily injury sustained on your premises
Property damage caused by your business or its employees
Injury caused by your products
Slander, libel, or copyright infringement
Who Needs General Liability Insurance?
Most businesses need general liability coverage. Defending against a lawsuit can take a heavy financial toll, even when your company is not at fault. We live in a litigious society. Many companies eventually face some type of lawsuit covered by general liability insurance. If your company manufactures or sells a product, you may want to consider a product liability policy, in addition to general liability insurance.
What Are the Differences Between Professional Liability and General Liability Insurance?
These two types of liability insurance cover different types of exposure. Professional liability insurance is designed to protect professionals who face exposure to liability in performing a service. It covers attorney fees, court costs, and damages they may be required to pay, resulting from claims of malpractice, misrepresentation, bad faith, bad advice, copyright infringement, etc. General liability insurance, on the other hand, protects a business from a wide range of claims, including bodily injury, property damage, personal injury (libel or slander), and product liability.
In a nutshell, general liability insurance covers physical injury or property damage arising from business operations. Professional liability insurance covers claims of negligence related to professional advice or services. Both are claims-made policies, meaning you are covered if you have insurance when you file a claim, regardless of when the event occurred. However, professional liability insurance has a retroactive date exception. This means a claim resulting from an event that occurred before the retroactive date of the policy will not be covered.
Depending on your type of business, you may need both professional liability and general liability insurance for adequate protection. Our experienced agent will be happy to advise you and assist you in obtaining the liability coverage you need.