Owning a business is rewarding and has many benefits, but it also comes with risks. One of the wisest decisions you can make as a business owner is to protect yourself and your business by purchasing insurance.
Liability insurance and professional liability insurance protect you against financial losses such as compensation claims. In this helpful guide, we share the differences between the two so you can choose the right policy for your business.
What is liability insurance?
Liability insurance protects you in different ways. It will cover the expenses associated with any legal proceedings against you and, if compensation is due, pay on your behalf.
What is Professional Liability Insurance?
Professional indemnity insurance is particularly useful if the services you provide include advice and consultation. You can be challenged for negligence or for giving advice that negatively affects your client. This is where professional liability insurance comes in to protect you.
What is the difference between civil liability and professional civil liability?
Public liability and professional indemnity insurance share the same objective of protecting you and your businesses. But, what they cover you for is different, and that’s what we’ll explain next.
What is the coverage offered by the liability insurance?
Any business that comes into contact with members of the public will need to carry liability insurance. For example, you will need liability insurance if you operate in the retail space and people come to your store regularly.
Liability will help cover legal costs if there is a lawsuit and damages to pay. Say you own this retail business and a customer who ignores your wet floor warning sign slips and falls. They suffer an injury, but they decide to sue you for negligence because they are on your property. Liability insurance covers legal costs, including any compensation due for the effect of the injury on their life.
Liability insurance also covers costs related to the loss or damage to the property of a third party and, in the worst case, death.
What liability insurance does not cover:
- Work-related injuries to yourself or your employees
- If one of your employees sues you
- A mistake that caused a customer to lose money
- A client acts on your professional advice, which negatively impacts their life
What does professional liability insurance cover?
Professional indemnity insurance covers companies against a wide range of risks. Like liability insurance, professional indemnity insurance will cover compensation claims if a client sues you for inadequate services.
For example, an architect makes a mistake in a design. The building has already been built and it costs the client a lot of money and time to restore it.
Professional liability insurance will also cover other professional errors such as defamation, unintentional copyright infringement or loss of valuable documents or data. For example, a breach of your computer system leads to a leak of confidential information about your client. The customer decides to sue your company for negligence.
What does professional indemnity insurance also cover:
- Professional errors or negligence
- Inadvertent breaches of confidentiality
- Copyright issue
- Loss of documents and/or data.
What professional indemnity insurance does not cover:
- Personnel accidents occurring in the workplace
- If an employee takes legal action against a company
- Losses caused by damage to reputation
Can anyone take out liability insurance?
Any business can purchase liability insurance because it is suitable for businesses of all sizes in many different industries.
Can anyone take out professional indemnity insurance?
In some sectors, professional indemnity insurance is compulsory. For example, lawyers, financial advisers, accountants and architects must have it.
Where to find the best service providers in South Africa?
Some businesses may benefit from both types of insurance. If you’re still unsure which insurance policy would best cover your business, call Budget Insurance today. If you would like a quote for civil liability or professional liability insurance, Click here.