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The list of insurance offerings available for small businesses rivals the menu at your local coffee shop. Yet we all know that frappuccinos are just a fancy way to get the same caffeine that comes in a regular cup of joe.
It’s normal to wonder if the same is true of insurance—do you really need all the bells and whistles, or does a standard general liability insurance policy cover most of the risk you take on as a small business owner?
In this short guide, we’ll compare business insurance policies: general liability vs. errors and omissions (E&O) insurance. That way, you can determine what kind of insurance your business really needs.
What is general liability insurance?
As the name suggests, general liability insurance covers the general risks that most businesses face in the course of normal operation.
Could someone slip and fall in your place of business? Could you accidentally damage a client’s property? If so, you probably need general liability insurance. In fact, because these risks are so common, most commercial spaces (like an office you are leasing) require that their tenants have a general liability policy.
General liability coverage, also called commercial general liability insurance, is also required for some kinds of licensing.
Whether you’re required to get it or not, your general liability insurance can provide an investigation and defense and pay damages resulting from the following types of claims:
- Third-party, non-employee bodily injury – Say you’re a home baker selling muffins at the farmer’s market. Should a customer have an allergic reaction to one of your baked goods, they could sue you.
- Third-party property damage – Imagine you’re a pressure washer charged with cleaning a deck. Should a customer accuse you of damaging the wood in the process, you could be held liable for the cost of the repair or replacement.
- Personal and advertising injury – Perhaps you’re a pet sitter who takes inspiration from another professional’s ads. Should they feel you took too much inspiration, they could sue you for plagiarism, and you may be responsible for your legal fees when the case goes to court.
Unfortunately, someone doesn’t have to have a good case to sue you. But regardless, without general liability coverage, you could find yourself stuck paying expensive attorney’s fees and court costs while you defend your business. This alone could be enough to deplete your savings and end your run as an entrepreneur.
That’s why general liability insurance is a necessity for most small business owners. However, while this type of policy covers “general” liability, it doesn’t cover all liability.
What is errors & omission insurance?
Errors & omission insurance (E&O), is another popular policy that provides coverage for potential client claims. It can also be called professional liability insurance.
E&O coverage can help protect you from claims of errors, mistakes, and negligence related to your professional services.
What does this include? Let’s look at some examples.
Imagine you’re an event organizer who advises your clients to try a new venue for their annual silent auction. Ticket sales plummet compared to past years, and they say it’s your mistake. Should they sue you for their financial loss, you may be responsible for your own legal costs.
Say you’re a tutor who misses a few sessions with a client studying for a licensing exam. They fail, and they sue for negligence, claiming you’re responsible for their financial loss since now they can’t work.
Without business insurance coverage, their liability claim could hurt your business.
Have you ever missed a deadline? Produced subpar work? Given less-than-stellar advice? Maybe not. But even the most dedicated professionals can make mistakes. That’s why attorneys, doctors, medical professionals, and government contractors are often required to carry E&O policies. Check to see if state laws, professional affiliations, or contracts with clients require an errors and omissions insurance policy.
Do you need both types of insurance?
Both general liability and errors and omissions insurance are important policies that small business owners should seriously consider. Let’s review why.
- General liability insurance can provide coverage for third-party claims of bodily injury, property damage, and personal and advertising injury, and some related expenses.
- An errors and omissions insurance policy can provide coverage for claims of professional errors and negligence.
- You may be legally required to take out either kind of policy – check the regulations for your state and professional licensing.
- Look for opportunities to package these policies together.
- Don’t forget to cover your liability with other relevant insurance policies.
What other types of business insurance do you need?
When considering general liability vs. E&O, there are several differences, but there’s one thing they have in common: these two policies only protect you from client and third-party claims.
In reality, shopping for business insurance is less like ordering your preferred coffee beverage, and more like selecting a well-rounded breakfast combo that will give you energy and keep you full for longer, just in case something unexpected (like having to skip lunch) happens.
Depending on your business’s specific needs, you may want to consider adding the following types of policies to the menu:
- Workers’ compensation insurance – Most businesses with one or more employees are required to take out a policy to provide coverage for workers who are injured or become ill as a result of their work. This can vary by state.
- Commercial property insurance – While general liability insurance can provide coverage if a client’s property is damaged, it doesn’t protect your property. For that, you need commercial property insurance.
- Cyber liability insurance – The aforementioned policies usually don’t apply to data. Data is vulnerable to costly security breaches, and this kind of insurance can help cover the funds needed to recoup your clients’ data or pay for damages they sustained in the event of a breach you caused.
Protect your business
If you can’t already tell, we seek to demystify insurance here at Thimble. Our flexible insurance for small business owners lets you combine general liability insurance and E&O insurance to cover more of your needs with a single, combined policy.
Our business insurance is available on-demand—you can choose from hourly, daily, or monthly policies. Make changes on the Thimble app to extend or pause your coverage when you’re on-the-go.
Better yet, getting covered is easy. Just click “Get a Quote,” fly through a few questions, enter your ZIP code and desired coverage and term limits, and we’ll generate an immediate quote. One more click and you’ll be insured in less than 60 seconds.