As much as 90% of businesses face litigation yearly, with lawsuits stemming from customers, partners, staff, and vendors. These cases, which can involve bodily injury, personal injury, and misrepresentation, are costly, with litigation expenses ranging from $3,000 to $150,000. Without adequate insurance, a lawsuit could potentially wipe out your business finances. That’s why understanding and choosing between general liability insurance and professional liability insurance is crucial for protecting your business.
What is General Liability Insurance?
General liability insurance covers physical and emotional damages that occur on your business property. This type of insurance is essential for any business that operates in a physical space, as it protects against common claims like slip-and-fall accidents.
For example, if a customer injures themselves on your premises, general liability insurance covers the resulting medical expenses. It also extends to injuries caused by your products. If a customer is harmed by your product and sues, general liability insurance covers your legal costs.
Even if your business doesn’t deal directly with consumers, this insurance protects you from third-party claims. However, it doesn’t cover your employees, protected under workers’ compensation insurance.
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What is Professional Liability Insurance?
Professional liability insurance is tailored for businesses that offer professional services, such as lawyers, doctors, accountants, and consultants. This insurance covers cases involving negligence, misrepresentation, and malpractice.
No matter how confident you are in your services, mistakes can happen. Even if you provide your services to the best of your ability, clients may still feel wronged and file a lawsuit. Professional liability insurance is crucial for protecting your business from such claims.
Common reasons for professional liability lawsuits include clerical errors, miscommunication, and failure to disclose important information. If these errors lead to financial loss or emotional distress for your clients, they may seek legal recourse.
What’s Covered by General Liability Insurance?
General liability insurance is appropriate for a wide range of businesses, from small startups to large corporations. Here’s what it typically covers:
- Bodily injury to a third party: Covers medical expenses if someone is injured on your property.
- Personal injury: Covers claims of libel, slander, or privacy violations, as well as any damage to a third party’s reputation or emotional well-being.
- Property damage to a third party: Covers damages caused by your business’s actions or inactions.
- Product-related injuries: Covers injuries that result from using your company’s products.
- Legal fees: Covers court costs, loss of income, settlements, and other legal expenses.
However, general liability insurance does not cover injuries to yourself or your employees.
What’s Covered by Professional Liability Insurance?
Professional liability insurance is essential if your business offers advice or services that could affect your client’s well-being. This insurance typically covers:
- Bad advice: Covers lawsuits claiming that your services included poor advice, leading to financial loss.
- Misrepresentation: Covers claims that your products or services weren’t delivered as expected or on time.
- Bad faith actions: Covers lawsuits alleging that your business acted dishonestly, withheld information, or violated a contract.
- Copyright infringement: Covers claims that your business infringed on another party’s intellectual property.
- Malpractice: Particularly relevant in the medical field, this covers lawsuits where your mistakes led to financial harm or emotional distress.
| Type of Coverage | General Liability | Professional Liability |
|---|---|---|
| Bodily Injury | ✔️ | ❌ |
| Property Damage | ✔️ | ❌ |
| Personal Injury (e.g., libel) | ✔️ | ❌ |
| Product-Related Injuries | ✔️ | ❌ |
| Errors & Omissions (E&O) | ❌ | ✔️ |
| Misrepresentation | ❌ | ✔️ |
| Bad Advice | ❌ | ✔️ |
| Malpractice | ❌ | ✔️ |
| Copyright Infringement | ❌ | ✔️ |
Who Should Take Out General Liability Insurance?
Nearly all business owners should have general liability insurance, especially if you operate in a physical space. This insurance is vital for businesses that interact closely with customers and partners in person.
Consider these scenarios where general liability insurance becomes essential:
- Leasing Office Space: If you’re signing your first office lease, general liability insurance protects you from bodily injury lawsuits on your property.
- Working with Vendors or Contractors: General liability insurance covers accidents that happen while working with third parties.
Who Should Take Out Professional Liability Insurance?
While general liability insurance offers broad coverage, professional liability insurance is more specific. It’s crucial for businesses that offer services, rather than products.
Here are some examples of businesses that should consider professional liability insurance:
- Accountants
- Lawyers
- Construction contractors
- Personal trainers and coaches
- Photographers
- Doctors
- Designers
- Business consultants
- Marketing professionals
If your services could potentially lead to financial harm, it’s wise to invest in professional liability insurance. Even if you don’t expect issues, it’s better to be covered in case of unhappy clients.
How are General Liability and Professional Liability Insurance Similar?
General and professional liability insurance protects against business liabilities, covering costs associated with lawsuits and litigation. While neither form of insurance is typically required by law, many business contracts mandate one type or the other. For instance, construction contractors often need general liability insurance to work with general contractors.
Some businesses might benefit from both types of insurance. For example, a dental practice with a physical office could use general liability insurance to cover slip-and-fall accidents and professional liability insurance to cover negligence claims.
How are General Liability and Professional Liability Insurance Different?
The primary difference between general liability and professional liability insurance lies in the types of damages they cover. General liability insurance covers physical damages, while professional liability insurance covers financial damages.
Understanding this distinction can help you decide which policies to purchase. General liability insurance might be more relevant if you run a consumer-facing business. Conversely, professional liability insurance could be more important if you offer specialized services.
How to Look For Professional Liability vs. General Liability
When shopping for business insurance, it’s essential to consider all your needs. Besides general and professional liability insurance, you might also require policies for data breaches, workers’ compensation, or commercial auto.
Navigating these options can be overwhelming, especially for small business owners. Partnering with an independent insurance agent can provide unbiased advice tailored to your business needs. Instead of navigating the complexities alone, a dedicated agent can help you explore your options and assist with claims.
Frequently Asked Questions
Professional liability insurance covers financial damages related to your services, while general liability insurance covers physical damages, such as bodily injury on your property.
It depends on your business. If you offer services and operate in a physical space, both types of insurance could be beneficial.
Costs vary based on factors like industry, business size, and coverage limits. It’s best to get quotes from several providers.
Some insurers offer combined policies, but it’s important to ensure the coverage meets your specific needs.
Without liability insurance, your business risks severe financial loss from lawsuits, which could lead to bankruptcy.
Find the Best Massachusetts Business Insurance
If you’re ready to explore your options for general or professional liability insurance, contact us today. At LoPriore Insurance Agency, we provide personalized advice and insurance quotes that fit your business needs.
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