Key Takeaways

• General liability insurance covers basic risks such as bodily injury, property damage, and advertising mistakes, making it essential for most businesses in NJ.
• Professional liability insurance (also known as errors and omissions insurance) protects businesses against claims related to negligence, mistakes, or failure to perform professional duties.
• The key difference between the two types of insurance is the focus of coverage: general liability covers physical damage and injury, while professional liability focuses on professional advice or services.
• Both types of insurance are important for businesses in New Jersey, as they offer complementary protection and reduce the risk of financial loss due to lawsuits.

As a business owner, you can take out several different insurance policies. General and professional liability are two of the most popular policies. They offer a wide range of coverage and help protect businesses from lawsuits.

Many business owners get confused between general and professional liability in NJ. Some assume that they are the same thing. This isn’t the case—while general and professional liability have similarities, the coverage offered by each scheme is very different.

Below is an outline of the two schemes we offer at Central Jersey Insurance Associates and their differences so you can pick the right insurance type for your business.

What is General Liability Insurance?

Most businesses can benefit from taking out general liability insurance. This type of insurance can protect you against lawsuits arising from injury or damage to property and against advertising injuries.

Construction companies and tradesmen must often have this insurance scheme in place as there is a higher risk of injuries and property damage.

That said, such accidents can still occur in many other types of businesses – injuries can still commonly happen in offices, shops, restaurants, factories, and clinics. Advertising ‘injuries’ are also possible in many lines of work. Examples of advertising injuries include slander, misappropriation, and copyright infringement. Such accidents can still occur even when marketing your company honestly and transparently.

What Does General Liability Cover?

Some incidents covered by general liability include:

• Physical injury to employees and visitors
• Property damage
• Advertising injuries

What is Professional Liability Insurance?

Professional liability insurance is beneficial to any company that provides a professional service. This type of insurance tends to cover acts of negligence, such as failing to complete work, keeping up contractual promises, or making mistakes and omissions. It is most beneficial to architects, engineers, lawyers, doctors, accountants, realtors, and IT technicians.

Other businesses, however, can still benefit from this insurance—construction companies and tradesmen can still be sued for not completing work or failing to carry out promises in a contract. Professional liability insurance is sometimes called ‘errors and omissions insurance’ or ‘malpractice insurance.’ However, these are tailored to specialist types of businesses (for instance, malpractice insurance schemes tend to target medical and legal professionals mainly).

What Does Professional Liability Cover?

Some incidents covered by professional liability include:

• Failure to meet contractual promises
• Failure to complete work adequately
• General mistakes and omissions

What are the Main Differences Between General Liability vs. Professional Liability in NJ?

General liability and professional liability can benefit businesses of all sizes. Both cover unavoidable liabilities. However, the coverage offered by each scheme is different.

Some of the main differences are outlined below:

• General liability covers primarily physical damage, and professional liability covers financial mainly damage.
• General liability covers accidents in which an employee, customer, or third party feels that they have received physical damage in some form – including bodily damage, property damage, or damage to their brand/reputation.
• Professional liability tends to cover lawsuits that arise from customers feeling that they have been shortchanged somehow–usually due to the service they paid for not being correctly delivered.
• General liability tends to cover incidents that are directly your fault, and professional liability covers incidents that may not be your fault. Lawsuits involving physical damage tend to be easier to prove.

Although you may still receive a false personal injury claim, defending yourself is easier in these cases.

Lawsuits involving financial damage are sometimes harder to prove – a customer may feel they have not received the service they paid for, even if you believe everything was up to spec. Professional liability will still pay out compensation for these claims, whether or not you are at fault.

Which Type of Insurance is Right for Me?

Most businesses can benefit from both types of insurance. By taking out both schemes, you can be guaranteed comprehensive coverage against most types of lawsuits.

Of course, if you’re a small business on a budget, you may decide it’s best to take out one of these schemes for now. To help you choose the most appropriate coverage, here are a few questions you may want to ask yourself.

What are the Main Risks My Business Faces?

General liability is likely to be more suitable if there’s a greater risk of physical damage than financial damage. Tradesmen, for instance, can almost always benefit from this type of insurance.

Meanwhile, if the risk of financial damage is greater than that of physical damage, professional liability may be more suitable. Professional advisors, for instance, tend to be more exposed to this risk and should, therefore, consider this coverage.

Which Type of Insurance Do My Clients Expect Me to Have?

In some cases, clients and contractors may be less inclined to work with you unless you can prove that you carry a certain type of insurance. For instance, when working with a construction company, many may want to know that the company they are hiring has general liability.

Some clients may similarly refuse to work with professional advisors unless they can prove they carry professional liability insurance.

Why Get Coverage From Us?

We can help you get the best coverage, whether you choose general or professional liability.

We serve many small businesses across New Jersey, helping to offer protection from costly lawsuits that many businesses might not otherwise be able to afford. With rising lawsuits against companies, it’s important to have the right defense.

Now you know the main differences between general vs. professional liability in NJ. Don’t hesitate to contact us today – we’ll provide you with a quote and get you the coverage you need.

FAQs

1. Do I need general and professional liability insurance for my business in NJ?

Yes, many businesses benefit from having both types of insurance. General liability protects against physical risks, while professional liability covers mistakes or oversights in your services.

2. Are there any businesses in NJ that are not required to have liability insurance?

While liability insurance is not legally required for all businesses in New Jersey, it is strongly recommended. Certain industries, such as healthcare and legal services, may be required by law to carry professional liability insurance.

3. How much does general and professional liability insurance cost in NJ?

The cost varies depending on the business size, the type of industry, and the level of coverage needed. It’s best to consult with an insurance provider to get a tailored quote for your specific needs.