A Quick Primer On General And Professional Liability Insurance Coverage

Posted on: 16 December 2020

While many people who start a business understand that doing so is a risk, they often overlook what risks can result after their business is operational. Through diligent research and consultation, prospective entrepreneurs can seek advice on how to insure themselves from common risks.

Advisers recommend that all businesses should have liability insurance. Common sense should dictate that it is the right thing to do. No business owner wants to lose everything they have worked for due to unforeseen circumstances or errors due to lack of experience.

For this reason, businesses can choose between general liability insurance or professional liability insurance.

To help you understand general and professional liability insurance and determine if you need both, here is a quick primer on what the two types of insurance cover.

General Liability Insurance 

Advisers recommend that all businesses carry general liability insurance, also known as commercial general liability. These insurance policies cover a business owner if their business is responsible for:

  • Personal injury
  • Medical costs for an injury 
  • Defamation/Reputation damage 
  • Property damage 
  • Copyright violations 

Without general liability insurance, a business owner risks losing everything if they are found liable for any of the above.

Professional Liability Insurance

Professional liability insurance is sometimes referred to as errors and omissions insurance. Professional liability insurance coverage can be a supplement to general liability coverage and goes above and beyond the basic coverage.

While it is technically true that errors and omissions insurance is not a requirement, it should not be dismissed as unnecessary. Professional liability covers damages caused by business-related services such as:

  • Paperwork errors
  • Errors or damages you caused personally
  • Contractual omissions or breaches
  • Given substandard service
  • Given bad advice
  • Hired bad subcontractors

Errors and omissions policies also have a duty to defend clause allowing the insurer to defend your company or settle the situation and avoid going to court. In this situation, your insurer takes care of all legal issues while you pay attention to continuing with your business.

How To Choose Which Insurance To Get

It would seem irresponsible to start a business without liability insurance, and having general liability insurance may be ideal while your business is in its infancy. However, as your business matures, it may be wise to diligently research how professional liability insurance coverage applies to your business model. After all, unforeseen accidents and mistakes can happen, and you don't want to risk losing your business without a solid defense.