There seems to be some confusion in the insurance industry over general liability and professional liability. These two forms of insurance policies are believed to cover the same events for professionals in the business industry.
It is important to note that some similarities exist between general liability insurance and professional liability insurance but they do not cover for the same kind of events.
In this article, we discuss what these insurance policies are, the similarities between general liability and professional liability, their differences, and the professionals who need each of them.
Understanding the difference between general liability and professional liability insurance covers will help you make the right decisions as touching insurance covers for your business.
Proceeding, we would do some definition of terms.
What is General Liability Insurance?
General liability insurance (also known as business liability insurance) is insurance coverage for businesses of all forms which protects them from a variety of claims arising from damage properties and goods, bodily injuries, and personal injuries.
General liability insurance pays for the financial cost incurred when business operations cause a customer to sustain bodily injuries or permanent disabilities. The insurance policy will cover medical bills and any other expenses that may arise.
Products you sell at your business premises are at risk of being stolen or damaged. The loss of products is paid for by general liability insurance.
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Who Needs a General Liability Insurance?
Every and anyone who owns a small business, a big corporation, or a general contractor is supposed to have general liability insurance. It is an insurance policy that covers every kind of business.
General liability insurance usually comes with a Business Owner’s Policy (BOP) which is a complete insurance package for all business owners.
What is Professional Liability Insurance?
The professional liability insurance (also known as Errors & Omissions and professional indemnity insurance) is coverage for businesses and professionals who offer services, advice, and general consultancy.
Claims can be filed against you as a consultant in any field over issues arising from supposed negligence.
As a professional, clients may meet you to provide advice to them or possible solutions to their needs. If they get to suffer any loss or damage upon yielding to the advice consulting with you produced or while you render your services to them, you will have to face some legal actions.
Your professional liability insurance is what pays for the legal fees should there be a lawsuit, payment for property damage, and for the medical expenses needed to treat any bodily injuries.
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Businesses and professionals that need professional liability insurance includes the following:
1. Real Estate agents
6. Attorneys and much more
Typically, professional liability insurance will cover claims on negligence even though it is alleged negligence. Because events like this are unavoidable, it is important for every business to own professional liability insurance.
Also, most clients will be comfortable working with you when you own professional liability insurance as it gives them the peace of mind that they do not have to worry about losing since you own insurance coverage.
2 Similarities Between General Liability Insurance and Professional Liability Insurance
Though they are different insurance coverages, general liability and professional liability are the same on some fronts. They were actually designed to serve as insurance covers for businesses in the following forms:
1. Protection Against Liabilities
They are both covers to protect businesses against liabilities and lawsuits. Clients may file lawsuits against your business when they suffer a loss or damage due to your business operations. These lawsuits may cripple your business and lead you to bankruptcy.
To this end, it is important to be protected against such occurrences. Both general liability insurance and professional liability insurance cushions the effect of liabilities.
2. Contractual Requirements
In the United States of America, some government authorities and clients may not deal with you except you have a general liability insurance or professional indemnity insurance. It is expected that every business owner has an insurance cover before they start operations.
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Differences Between General Liability and Professional Liability Insurance
The differences between general liability insurance and professional liability insurance are in the events they cover. It is true they are insurance coverages for businesses but they have their own specialties.
For general liability, it protects businesses and their owners from lawsuits that may be filed by clients who get injured or got their property damaged in the course of your business operations.
For instance, while visiting your online store warehouse, a customer may get injured. General liability insurance covers the medical expenses that will be incurred to treat the patient.
Also, due to a fire outbreak or a collapse of your building premise, you would need to make some repairs, replace damaged inventory, or get a new building. Such events could lead to an interruption of your business operations leading to losses.
With general liability insurance, you are protected from these events and when they take place, the effect will be cushioned effectively.
On the other hand, professional liability insurance compensates for financial losses or damages a client may suffer courtesy of alleged or actual negligence. If your professional advice caused the client to lose money, you will be dragged to court for payment or possible compensation.
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For example, let’s say you are a financial adviser and someone meets you to offer him your opinion on investment and on the strength of your advice, the person invests his money in the opening. Should the investment go sour and your client loses money, he would definitely sue you for losses. General liability will cover for physical losses and damages while a professional liability will not cover for that and vice versa.