As much as 90% of businesses are engaged in litigation throughout each year. Sometimes lawsuits come from customers, while others come from partners, staff, and vendors. Litigation might happen if someone feels they’re owed money. Cases might involve bodily injury, personal injury, misrepresentation, and more.
Litigation cases and lawsuits are costly. For most businesses, litigation can cost $3,000 to $150,000. If your business doesn’t have insurance, one case could wipe out your finances and put you out of business. As a business owner, consider general and professional liability insurance to stay protected.
Each type of business insurance offers different benefits. You may only need specific policies, but it isn’t wise to be left without any coverage. Learn more about professional and general liability insurance to understand which type you need.
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What is General Liability Insurance?
So what is general liability insurance for business? In general, you can think of it as coverage for physical and emotional damages. One of the most common claims that general liability insurance covers are slip and fall accidents.
If a customer comes to your store or office and hurts themselves, they can sue for the medical costs they incur after being injured. General liability insurance is what protects your business from these costs.
Beyond your business property, general liability insurance will also cover injury from products. Say a customer gets sick or injured after eating or using your product. If they take the case to court, your general liability insurance covers your legal costs.
Even if you aren’t a consumer-facing business, general liability insurance will protect you from any cases with a third party. General liability insurance excludes your employees, who are covered through workers compensation insurance.
What is Professional Liability Insurance?
Professional liability insurance is different from general business insurance. Usually, professional insurance applies to businesses that offer professional services. Examples include lawyers, doctors, accountants, and consultants.
Within professional services, professional liability insurance protects from misrepresentation, negligence, malpractice, and more. Professional liability insurance is always important for businesses that offer services.
While you might be confident in your services, there’s always room for mistakes. You could offer your services appropriately and to the best of your ability, and customers may still find a reason that they’ve been wronged.
Some of the most common reasons for professional liability lawsuits include clerical errors, miscommunication, and failure to disclose important information. If any of these cases lead to financial loss, emotional hardship, or more, your clients can file a lawsuit.
What’s Covered by General Liability Insurance?
General liability insurance is appropriate for a variety of businesses, both large and small. General liability covers the following cases:
- Bodily injury to a third party that occurs on your property. General liability insurance will cover the plaintiff’s medical expenses.
- Personal injury that includes claims of libel, slander, or privacy violations. Personal injury may also include any damages to a third party’s reputation or emotional wellbeing.
- Property damage to a third party that was caused by your business in any case of action or inaction.
- Bodily or personal injury that occurs because of your company’s product.
- Legal fees incurred through court fees, loss of income, settlements, and more.
General liability insurance doesn’t cover any bodily injury or property damage to yourself – only third parties. It also doesn’t cover your employees’ injuries.
What’s Covered by Professional Liability Insurance?
Professional liability insurance is essential if you offer services that include advice. It’s also important if your services can affect your clients’ wellbeing. Accountants, lawyers, and doctors are some of the professions that need professional liability insurance.
Through a standard policy, professional liability insurance will cover:
- Lawsuits that claim your services included bad advice. Customers could file a claim if the advice led to financial loss.
- Lawsuits that claim misrepresentation, meaning your products or services weren’t delivered as expected or on time.
- Lawsuits that claim your business acted in bad faith. These lawsuits occur when clients feel you acted dishonestly, withheld information, or violated a contract.
- Copyright infringement cases where you infringed on another party’s intellectual property.
- Lawsuits that claim malpractice occur most often in the medical field and lead to about 15% of personal injury cases. Clients or patients can sue if your mistakes or choices led to financial harm and hardship.
Who Should Take Out General Liability Insurance?
Nearly all business owners should have general liability insurance. Yet, if you’re a startup or small business, you may be able to get by without a policy while your business is still growing.
There a few key events you may face where it’s important to look into a policy. If you are signing your first office lease, general liability insurance becomes essential. While operating on your business property, you’re subject to bodily injury lawsuits.
You’ll also need general liability insurance if you begin working with vendors, contractors and partners who need contracts. Each of these types of people is covered by general liability insurance if any accidents happen while you’re working with them.
By rule of thumb, any businesses that operate in a physical space should have general liability insurance. It’s most vital for businesses that work closely with customers and partners in person.
Who Should Take Out Professional Liability Insurance?
While general liability insurance offers more universal coverage, professional liability is more specific. Professional liability policies cover businesses that offer services. It doesn’t always apply to consumer-facing companies that offer products.
Thought this list isn’t comprehensive, here are some examples of businesses that need professional liability insurance:
- Construction contractors
- Personal trainers and coaches
- Business consultants
- Marketing professionals
If you’re wondering whether to pay for professional liability insurance, consider your business’s worst-case scenarios. If your services might lead to financial harm, it’s usually a good idea to find a policy. Though you may not think it will ever happen to, accidents are common and unhappy clients can lead to debt without insurance coverage.
How are General Liability and Professional Liability Insurance Similar?
When it comes to professional liability vs. general liability insurance, there are some similarities. Both types protect against business liabilities, which means they’ll cover costs for lawsuits and litigation.
In most states, neither form of insurance is required. Yet, often, business contracts call for one type of insurance. For example, construction contractors have to carry general liability insurance to work with general contractors.
Many businesses may enjoy both insurance policies. One example would be dentists who own physical offices. In dental practices, patients come in and out throughout the day.
General liability insurance would protect the dental practice from accidents that happen on the property, such as slips and falls. Professional liability insurance would protect against patients suing for negligence or improper treatment.
How are General Liability and Professional Liability Insurance Different?
The main difference between general liability and professional liability insurance is the type of damages they protect. Financial damages are covered by professional liability insurance vs. general insurance that covers physical damage.
While keeping this main difference in mind, you can make a better decision about which policies you need. Consumer stores and large offices should get general liability insurance to protect from physical accidents. Service providers should get professional liability insurance to protect against errors or issues with their expertise.
How to Look For Professional Liability vs. General Liability
Aside from professional liability and general liability insurance, businesses may need policies for data breaches, workers’ compensation, commercial auto, and more. Navigating business insurance can easily become a lengthy process, especially if you’re a small business owner.
Partnering with an independent insurance agent is one of the best ways to navigate policies. Professionals who aren’t associated with insurance companies can give you unbiased advice that’s directly related to your business needs. Instead of trying to figure it out on your own, a dedicated agent will help show you your options and work with you when it comes to handling claims.
While comparing policies, consider your needs and the different options you have for policy terms. Some insurance policies will cover per occurrence or based on an aggregate limit.
Aggregate policies cover all claims within a set period, while per occurrence sets a limit for how much your insurance will cover for a single claim. If you have a small business, a per-occurrence limit might be better than an aggregate limit. You might not expect many claims throughout the year, so your policy will cover claims up to a certain amount.
Find the Best Massachusetts Business Insurance
If you’re ready to find a new general liability or professional liability policy, contact us today. At LoPriore Insurance Agency, we offer direct help and business insurance quotes that fit your needs.