As a small business owner or independent worker, selecting the right insurance coverage for your work isn’t necessarily intuitive. You know you need it, but what will provide the best protection on the job? Do you need general liability insurance, professional liability insurance, or both? The solution lies in understanding the basics. Here’s what you should know about your business insurance options before selecting coverage.
What is general liability insurance?
General liability insurance coverage is an excellent first line of defense against having to pay out of pocket for third-party claims related work-related accidents. This insurance covers a variety of potential issues, including on-the-job accidents to non-employees, and damage to property of others. It also includes coverage for personal and advertising injury, which is reputational or financial harm that comes from copyright infringement, libel (written defamation of character), slander (oral defamation of character), false imprisonment, and invasion of privacy. When you get general liability insurance, you’re safeguarding your business from unexpected expenses due to claims or legal action from third parties.This can go a long way toward safeguarding against major costs that would otherwise eat into your revenue. You can also name third parties in your policy, who could be sued because of your acts or omissions These third parties are known as Additional Insureds and are often as required as part of a contract for work. General liability insurance is also referred to as “commercial general liability” (CGL) insurance or “business liability insurance,” which is important to know as you look through your coverage options.
What general liability insurance covers
General liability policies typically include three types of coverage: bodily injury, property damage liability, and personal and advertising injury liability.
- Bodily injury refers to client or other third-party injuries that might happen within your workplace. General liability insurance would help protect your liability if they incur medical expenses as well as pain and suffering.
- Property damage liability covers you and your business if you break or damage a client’s property in the course of providing them with your professional services. This can help you pay for replacements or repairs to their property.
- Personal and advertising injury covers instances in which another business asserts that your advertisements have caused damage to their reputation, or in cases where your ads may be liable for defamation claims.
If general liability insurance alone doesn’t afford your business enough coverage, you can always pursue additional coverages that provide the right solution for you—that’s still a safer option than going without any insurance at all.
What is professional liability insurance?
Professional liability insurance can serve as a complement to your general liability insurance depending on your coverage needs. Professional liability insurance is designed to protect against claims that result from errors and omissions in the performance of professional services. In other words, professional liability insurance protects your business financially if a client alleges that the work you’ve done is unsatisfactory, incomplete, or was done improperly and it leads to a loss other than those types covered under a general liability policy. Many businesses can benefit from adding professional liability insurance to their general liability insurance coverage. This is particularly true for companies in the legal, engineering, and accounting space, although any professional services company could do well to pursue such coverage.
What’s covered by professional liability insurance
Professional liability insurance covers lots of claims, all of which relate to the providing or failure to provide professional services on time, to specifications, and in a manner that both the client and business have agreed to. Whenever a policyholder’s client alleges that any of the above were not met satisfactorily and seeks compensation, a professional liability insurance plan can help offset the costs of resolving the issue. For example, if an accounting firm makes a filing error that results in financial harm for their client, professional liability insurance will provide investigation and defense and pay owed damages to the client.
General vs. professional liability insurance
General liability insurance and professional liability insurance each cover different kinds of common business risks, offering a baseline amount of financial protection in the event of a mishap that relates to your business. Both provide investigation and legal defense, pay out damages on your behalf, and offer peace of mind for business owners. Most professional liability coverages cover only economic or financial losses suffered by third parties (the exception is in the healthcare arena), but not bodily injury or property damage (which are usually covered by commercial general liability insurance). The majority of professional liability coverages are only provided on a “claims-made” basis which means that only claims reported while the policy is in effect are covered. Most are also offered on a defense within limits basis, which stipulate that the insurer’s payment of defense costs reduces available policy limits. This is generally not the case with general liability insurance, where defense costs are usually paid in addition to policy limits.
The final details
Every insurance policy and the coverages it provides is different. Virtually every policy you will review will have endorsements that change the policy. Some will also allow you to add professional liability insurance to your general liability coverage. When purchasing any business insurance policy, always do your research to determine just what your policy covers. You can find more information about the policies arranged by Thimble in our support center.