Business insurance plays a crucial role in safeguarding your business against financial woes that may come in your way. But how do you know which policy is apt to address the risks you face? For instance, you know that both errors & omissions (E&O) insurance and general liability insurance protect your business against lawsuits. But which policy covers what? How can you differentiate both the policies?
Here are a few pointers to help you understand the difference between both the insurance policies=
What is Errors & Omissions Insurance Policy?
Also called professional indemnity insurance, errors and omissions insurance policy offers coverage which is mainly focused on the lawsuits that stem from your professional services. The errors & omissions insurance policy is important because it protects you from, third-party lawsuits alleging you that you have:
- Given negligent professional services
- Failed to meet contractual promises
- Given incomplete or shoddy work
- Committed mistakes or omissions
These claims are too expensive to handle. Further, you don’t need to be at fault to be sued either. All it requires one unhappy customer to drag you in the court to recoup the losses which he/she might have incurred because of your work. Good professional indemnity insurance ensures that you don’t need to incur expenses, irrespective of the fact that whether the claim holds water or not.
What is General Liability Insurance?
As the name itself suggests, a general liability insurance policy offers coverage to your business from a wide range of ‘general’ lawsuits which any business could face. In a nutshell, here the cover would kick in as soon as the third-party (i.e. anyone who is not the part of your business) files a case against you over:
- Bodily injury which they incurred on your commercial premises
- Loss or damage caused to your property
While the purpose of both the policies is to offer you financial coverage, here’s how they fundamentally differ:
- They cover different risks: You can’t rely on your professional indemnity insurance to cover you if your client or customer accidentally slips on your property and sues you for negligence. Here, only general liability insurance can help you. Similarly, you can’t rely on your general liability insurance to step in if someone sued you for professional negligence—it is the territory of errors and omissions insurance policy.
- They provide different layers of protection: A general liability insurance offers generalized liability coverage for property damage and lawsuits. However, E&O insurance policy only covers lawsuits that arise over financial losses which someone might have experienced due to your work.
When Should You opt for Both the Policies, i.e., Errors and Omissions Insurance and General Liability Insurance?
Both policies cover liabilities that can be faced by any small business owner. Therefore, it is essential to purchasing both the insurance policies if you impart professional service and at least one of the following is true:
- You visit the client’s site or handle property
- You make and/or sell products or services
- People other than your employees, i.e., your clients, customers, delivery person, etc. visit your work premises
Further, you might come across such instances when you would think of avoiding both the policies. However, it is a risky step that you would take. The world is uncertain, and you never know when someone could fall in your premises or meet with an accident in your building or accuse you of not meeting the terms & conditions of your business contract.
Read more: Five types of organizations which must have professional indemnity insurance
Your business faces certain risks and here, general liability insurance and errors & omissions insurance policy help you by shielding you from them. However, if you choose one policy over another, you might leave your business vulnerable. In certain cases, you may put your personal assets at stake. That alone makes it sensible to buy both the policies.
Get General Liability and E&O Insurance Quotes Online
Your business is the result of your hard work and determination. Let general liability insurance and E&O policies work hard to protect it. Contact SecureNow, a leading corporate insurance advisor, to get policy quotes today.
Image Credit: Brashears Insurance