As every business and profession carries its own set of risks and responsibilities, understanding the features of these insurance offerings is critical to making informed decisions regarding protection against unforeseen circumstances.
In this article, we shall delve into the key differences between the two and their unique roles in managing risk for your business.
Nature of Coverage and Risks
The coverage and risks addressed by general liability and professional liability vary. General liability is for a wide array of risks related to everyday life, while professional liability is very specific and geared towards professionals.
General liability insurance provides coverage against bodily injury, property damage, and personal or advertising injury claims. It safeguards businesses from accidents or mishaps occurring within their premises or as a result of their operations.
Professional liability insurance is tailored to specific professional services. It offers protection against claims of negligence, errors, or omissions related to professional advice or services. Professionals in various fields opt for this insurance to mitigate risks associated with their specific expertise and the specialized nature of their work.
Scope of Protection and Claims
General liability covers a wider scope of claims compared to professional liability. It typically covers third-party claims.
For example, if a customer sues a business for injuries sustained on their premises or due to a product, general liability insurance would come into play. A good place to start for general insurance is Bizinsure which gives instant coverage for your business.
Errors and omissions liability, on the other hand, specifically covers claims arising from professional negligence, mistakes, or failure to perform duties as per industry standards. If a client alleges financial loss due to incorrect advice or a mistake in a service, professional liability insurance steps in to handle the claim.
Policy Terms and Language
Policies for general liability are often broader in scope and encompass a wide array of risks. The language used in these policies is more general and less specialized compared to professional liability insurance.
Examples of policy terms and language under general liability include coverage limits, per-occurrence limits, medical payments, and legal defense costs.
Policies for professional liability are usually more detailed and tailored to the specific profession or industry. The terms and language are crafted to address the unique risks and challenges professionals face in their respective fields.
For example, if the cover is for a medical professional, it would include insurance policies and language related to the medical field. This includes medical negligence, misdiagnosis, late diagnosis, informed consent issues, and breach of confidentiality.
Costs and Premiums
The cost and premiums under general liability insurance are generally lower compared to professional liability insurance. This is because it covers a broader range of risks and is considered standard coverage for most businesses.
The cost is influenced by factors such as location, industry, size of the business, number of employees, level of risk, and past claims history.
Due to its specialized nature and the high degree of risk associated with professional services, premiums for professional liability insurance tend to be higher. The cost varies based on factors such as the type of profession, claims history, and coverage limits.
Claims Basis
General liability insurance is an event-based policy. This means claims under general liability insurance are typically reported and covered based on when the incident occurred or the harm was sustained. This is regardless of when the claim was filed.
In contrast, professional liability insurance operates on a “claims-made” basis. This means the policy covers claims that are both made and reported during the policy period.
Additionally, it may cover claims for incidents that occurred in the past but were reported during the policy period, provided the incident falls within the retroactive date specified in the policy.
The retroactive date is crucial as it defines the earliest date from which incidents must have occurred to be considered for coverage. Professionals need to maintain continuous coverage to ensure protection against claims, even after they have changed insurers or retired.
Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.