All small businesses need liability coverage. It can be daunting to figure out the types of coverage your small business needs. The types of coverage you need often depends on the type of business or service you offer. However, almost all small businesses need general liability coverage, and many small businesses need professional liability coverage as well. Most could benefit from having both.
WHAT IS GENERAL LIABILITY COVERAGE?
General liability insurance covers small businesses when someone not connected to the company experiences physical damage, damage to their reputation, or physical injury. Some examples of general liability claims are:
- Slip and falls – the floor is wet inside your showroom and someone slips, falls, and breaks an arm
- Property damage – your delivery driver backs into the corner of a client’s garage while making a delivery
- Copyright infringement – someone accuses you of using their copyrighted photos in your advertising.
When a claim is made against your small business, general liability insurance covers court costs, any settlements or judgments made against your company, legal fees, medical payments, and attorney expenses.
The cost of general liability insurance covers will depend on the type of business. For example, construction companies and contractors face more risk than other small businesses. It is important to note that general liability insurance does not cover employee injuries. Worker’s Compensation policies are needed for employee claims. General liability insurance covers claims from those that do not work at your company.
WHAT IS PROFESSIONAL LIABILITY COVERAGE?
Professional liability insurance protects you and your small business if a client claims that he or she has suffered a financial loss due to the services you offer. Professional liability coverage does not cover claims of physical harm. Instead, it covers any claim that a client lost money due to your business practices. Some examples of professional liability claims and the businesses that need them are:
- Accountants – my tax return was filled out incorrectly and now I have to pay a large amount of tax debt
- Bookkeeper – the bookkeeper made a clerical error that resulted in my monthly pay being reduced
- Home Inspectors – the home inspector failed to discover a major fault with the HVAC system and replacing it has cost me thousands of dollars.
It is particularly important for service providers to purchase professional liability insurance, but all small business owners could benefit from the coverage.
WHAT ARE THE MAIN DIFFERENCES BETWEEN GENERAL AND PROFESSIONAL LIABILITY COVERAGE?
General liability insurance covers:
- Anyone who does not work at your small business
- Physical harm
- Property damage
- Advertising mistakes
- Reputational Harm
Professional liability insurance covers:
- Financial loss due to your services
- Errors and omissions
- Malpractice claims
- Incomplete or substandard work
- Failure to abide by a contract
DO I NEED BOTH GENERAL LIABILITY INSURANCE AND PROFESSIONAL LIABILITY INSURANCE?
All small businesses should purchase general liability insurance. If your business is open to the public and you have clients and visitors on your property, general liability coverage is a must. Any business that offers a service needs professional liability insurance as well. From the businesses that clean gutters to those that offer photo sessions to those that design websites, all service-oriented small businesses need professional liability insurance. To have the most complete coverage, and protect you and your business from litigation, it is best to purchase both general and professional liability insurance.
WHERE DO I START?
The best way to know the types of insurance your business needs and the cost associated with those policies is to speak to an insurance professional. The Scott Richards Agency can walk you through the process and help you choose the best protection for your small business. Visit www.saveoninsurance.com, email us at doug@saveoninsurance, or give us a call (205) 988-4346 to get started today.