Insurance
A Deep Dive Into Business Owners Policy Exclusions to Avoid Surprises
January 27, 2025
| January 21, 2025
Author: KimberleeEdited by: Kimberlee and Reviewed: Kimberlee
General liability and professional liability insurance are two different types of commercial insurance policies. Each serves a specific purpose. Most businesses will at least have a general liability policy, while most service providers will also have a professional liability policy. Here’s what you need to know about both.
Both general and professional policies are types of liability policies. Liability policies protect a business from third-party losses. When someone gets hurt or has property damaged or destroyed, a business can be held liable for the damages. Liability insurance pays these costs, whether they are medical bills, repairs, or property replacement. How the damages occur will determine which type of policy will cover it.
General liability insurance pays for damages and injuries that occur. When we say these are third-party losses, we mean that the injuries or damages happen to someone who is not affiliated with the company. It leads to financial loss. They are a consumer or broad public bystander. General liability insurance is most often associated with slip and fall accidents but may also cover property damage, as well as accusations of libel and slander. It pays for the judgment or settlement as well as any legal defense necessary to defend the company.
Like general liability insurance, professional liability insurance leads to financial loss. Business owners who are service providers want a professional liability insurance policy to cover claims that occur to third-party clients who state that the small business did not perform services professionally. This is also known as an errors and omissions insurance policy. The financial loss may be injury or property damage to a client’s personal property and lead to a claim. An example would be giving the client the wrong advice when performing services. For example, a personal trainer may say that you need to do a particular exercise to rehabilitate an injury. If this advice is wrong, it may lead to further injury and require more medical attention.
As you dig into what general liability vs. professional liability covers, you will find that they both are processed in the same manner. A claim requires the small business to state to the insurance company’s claims team what happened, the injury or damage that occurred, the circumstances around the loss, and the status of the situation.
While a general liability insurance policy is recommended for almost any small business, a professional liability policy is often recommended for service providers whose advice and services are necessary for completing a job or task. For example, a retail store may be prone to slip-and-fall accidents, while an architect is subject to professional mishaps that can lead to loss.
The key difference between the two is the type of third-party loss that occurs. A general liability claim results from general operations, while a professional liability claim results from a professional error.
There are some things to consider when determining the right insurance policy(ies) for your business.
A business should assess its risks to determine which types of insurance policies to purchase. If it has a lot of foot traffic or leases an office or space, it likely needs general liability insurance. It should consider a professional liability insurance policy if it provides clients with advice and professional services.
Insurance can become expensive. A small business owner should consider his insurance budget, which will help him determine which policies to prioritize and how much coverage of each to get.
Clients may put into contracts the necessity for insurance and the type of insurance. Review client contracts and lease agreements to determine what insurance you need and how much to get. Licensed professionals may also have a legal licensing requirement to get insurance in order to have a valid license.
Shop for insurance policies with top providers to get quality coverage at the best possible price. Some providers offer bundle discounts to purchase both policies.
If you are a professional service provider, you will likely want both a general liability and a professional liability policy. By having both, you eliminate major gaps in coverage and give yourself the protection necessary to operate. Together, these two policies will cover the majority of third-party losses, helping your business remain financially solvent in the event of a significant loss.
Work with a good insurance company and a professional insurance agent or broker to get the required assistance navigating the difference between general liability vs. professional liability policies. A good agent will help you determine which policies you need and establish the amount of coverage that will protect your business from losses and claims. An agent may also be able to help you save money by getting a business owners policy that combines general liability with commercial property insurance.
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