There seems to be some confusion in the insurance industry about general liability and professional liability. These two forms of insurance are assumed to cover the same events for business professionals.
It is important to note that there are some similarities between general liability insurance and professional liability insurance but they do not cover the same type of events.
In this article, we discuss what these insurances 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 coverage will help you make the right decision regarding insurance coverage for your business.
If we continue, we would make a definition of terms.
What is general liability insurance?
General liability insurance (also known as business liability insurance) is insurance coverage for companies of all forms that protects them from a variety of claims arising from damage to property and goods, bodily injury and personal injury.
General liability insurance pays the financial costs that arise when the business causes a customer to suffer bodily injuries or permanent disabilities. The insurance covers medical bills and other costs that may arise.
Products you sell in your business premises risk being stolen or damaged. Loss of products is paid for by general liability insurance.
Who needs general liability insurance?
Everyone who owns a small business, a large company or a turnkey contractor must have a general liability insurance. It is an insurance that covers all types of companies.
General liability insurance usually comes with a business owner policy (BOP) which is a complete insurance package for all entrepreneurs.
What is a professional liability insurance?
The professional liability insurance (also known as errors and omissions and professional non-life insurance) is coverage for companies and professionals who offer services, advice and general consulting services.
Claims may be made against you as a consultant in any field due to alleged negligence.
As a professional, clients can meet you to advise them or possible solutions to their needs. If they suffer loss or damage when they have given you advice that you have produced or while providing your services to them, you need to take some legal action.
Your professional liability insurance is the one that pays for legal fees. if there is a lawsuit, payment for property damage and for the medical costs needed to treat bodily harm.
Businesses and professionals in need of professional indemnity insurance include the following:
1. Real Estate Agents
6. Lawyers and much more
Typically, professional liability insurance will cover claims of negligence even though negligence is alleged. Since events like this are unavoidable, it is important for every business to have liability insurance.
Most customers will also be happy to work with you when you own liability insurance because it gives them peace of mind that they do not have to worry about losing because you own insurance coverage.
2 Similarities between general liability insurance and professional liability insurance
Although they are different insurance coverages, general liability and professional liability are the same on certain fronts. In fact, they were designed to act as insurance cover for companies in the following forms:
1. Debt Protection
They cover both to protect companies from debt and lawsuits. Customers can sue your company when they suffer loss or damage due to your business. These lawsuits can ruin your business and lead you to bankruptcy.
For this purpose, it is important to be protected against such incidents. Both general liability insurance and professional liability insurance mitigate the effects of the debts.
2. Contractual Requirements
In the United States of America, some government agencies and customers may not deal with you unless you have general liability insurance or professional indemnity insurance. It is expected that every business owner has insurance coverage before they start working.
Differences between general liability and professional liability insurance
On the other hand professional liability insurance compensates for financial losses or damages that a customer may suffer from alleged or actual negligence. If your professional advice caused the customer to lose money, you will be taken to court for payment or possible compensation.
For example, let's say that you are a financial adviser and that someone meets you to give him your opinion on investment and because of your advice the person invests his money in the opening. If the investment gets sour and your customer loses money, he would definitely sue you for losses. General liability covers physical losses and injuries while professional liability does not cover it and vice versa .