If you have a general liability policy in place and are wondering if you need professional liability (AKA errors and omissions) as well, you are not alone.
If you operate a business that offers professional services, a professional liability policy is just as necessary, if not more so.
Professional liability vs general liability
It’s important not to confuse a general liability policy with a professional liability policy. While general liability policies cover against bodily injury, property damage, advertising or personal injury, professional liability policies are generally designed to cover the financial loss incurred by a third party due to a professional error or omission on your business’s part. (See the professional liability definition in the provided link for some exceptions.)
Some common general liability claims scenarios:
- A client comes to discuss business and trips and falls while on your premises injuring him/herself.
- Your office rents space in an office building and someone in your office negligently discards a cigarette butt into a trash can which starts a fire that escalates and causes fire damage to the rented premises.
Some common professional liability claims scenarios:
- An accountant makes errors on a tax return which results in a financial loss to a client.
- A lawyer mistakenly advises a client to take an action which causes a financial loss.
Why professional liability coverage is so important
Depending on how your company operates it is possible for a service business to have only a small general liability risk. For example, a business comprised of remote employees with no physical location or a home-based professional that never or rarely meets clients in his home office has a very limited general liability risk.
Although professional liability coverage may seem like obvious coverage to have, there are many professionals who do not have the proper coverage. We’ve come across accounting firms in business for many years that were not protected with this coverage. They were under the impression that their general liability policy was all they needed and was covering all of the claim types they’d be exposed to.
Whether you’re setting up a new business or have been operating for years without it, professional liability insurance is something you can not afford to be without. The application process is simple, and for minimal premium a small company can lock in coverage with top carriers at excellent terms.
Every business is unique, a competent insurance broker can advise you on coverage options that will protect your business from claims that may arise.
Questions and comments are welcome. Please either leave them in the comments section below or contact me directly.
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