Understanding General and Professional Liability Insurance

As a business owner, you’ll know that managing risk is an important part of your operations. Risks exist in all facets of business, from property damage to employee injuries. While it is impossible to predict when or if a lawsuit will occur, there is a way to protect your business and limit your exposure to financial loss. This is where general and professional liability insurance comes in.

What is General Liability Insurance?

General liability insurance covers your business against claims of bodily injury, property damage or personal injury that your business may cause to others. This type of insurance also covers legal fees and damages your business may be required to pay as a result of the claim. It is one of the most common types of insurance policies that small businesses carry to protect themselves against unforeseen damages that can result in financial loss.

What does General Liability Insurance cover?

General liability insurance typically covers:

Types of Coverage
Description
Bodily Injury
Covers medical expenses, loss of income, and legal fees if a third party is injured on your business property.
Property Damage
Covers damage to a third party’s property caused by your business operations.
Personal Injury
Covers damages caused by slander, libel or copyright infringement.

It is important to note that there are exclusions in your general liability insurance policy. For example, damage caused by your product or service may not be covered under a general liability policy, for that you need professional liability insurance policy.

What is not covered under General Liability Insurance?

General liability insurance typically does not cover:

Types of Coverage
Description
Professional Services
Covers errors and omissions made by a professional. This is not covered under general liability insurance.
Intentional Acts
Covers accidental damages, not damages that occur as a result of an intentional act.

What is Professional Liability Insurance?

Professional liability insurance, also known as errors and omissions (E&O) insurance, covers your business against claims of negligence, professional misconduct, or errors in your professional services. It safeguards your business against financial loss when specified clients claim that the advice, service, or product you provided was inadequate.

What does Professional Liability Insurance Cover?

Professional Liability Insurance typically covers:

Types of Coverage
Description
Professional Services
Covers errors and omissions made by a professional, which may lead to financial loss for the client.
Legal Fees
Covers legal fees and damages if a client claims that they’ve suffered financial loss due to the advice or services rendered by you.
Reputation Damage
Covers the cost of legal fees in case an individual or company sues you for defamation or libel.

What is not covered under Professional Liability Insurance?

Professional liability insurance typically does not cover:

Types of Coverage
Description
Intentional Acts
Covers accidental damages, not damages that occur as a result of an intentional act.
Bodily Injury
Covers medical expenses, loss of income, and legal fees if a third party is injured on your business property. This is not covered under professional liability insurance.
Property Damage
Covers damage to a third party’s property caused by your business operations. This is not covered under professional liability insurance.

Conclusion

General and Professional Liability Insurance plays a vital role in protecting your business from financial loss. General liability insurance provides coverage for instances of property damage, bodily injury, and personal injury while professional liability insurance provides coverage for instances of professional misconduct, negligence or errors. By understanding the differences between the two types of insurance policies, you can make an informed decision and ensure that your business is protected against unexpected risks.

FAQs

Why do I need General Liability Insurance?

You need general liability insurance to protect your business against financial loss due to property damage or bodily injury that your business may cause to others. This type of insurance also covers legal fees and damages your business may be required to pay as a result of the claim.

Who needs Professional Liability Insurance?

Professional liability insurance is necessary for those in the service sector, consultants, and professionals who provide advice or services to clients. It protects them against claims of professional misconduct, errors or negligence.

Is it necessary to have both types of insurance?

Yes, it is necessary to have both types of insurance to protect your business against all potential risks. General liability insurance covers your business against claims of property damage, bodily injury, or personal injury while professional liability insurance covers your business against claims of professional misconduct, errors, or negligence.

How much does General and Professional Liability Insurance Cost?

The cost of general and professional liability insurance varies depending on the business size, type of business, and level of risk. It is recommended that you compare multiple insurance policies to get an idea of the cost and coverage options that are available to you.

How do I choose the right insurer for my General and Professional Liability Insurance?

When choosing an insurer for your General and Professional Liability Insurance, consider the following factors:

  • The insurer’s reputation and financial stability
  • The coverage options and limitations of the policy
  • The price and affordability of the policy
  • The customer support and claims handling service

It is also essential to read the policy documents carefully and understand what is covered and not covered by the insurance policy.