Business owners face a variety of risks every day. One lawsuit can jeopardize your financial future, so securing the right coverage matters. Many entrepreneurs, however, struggle to pinpoint the differences between professional and product liability. Confusing these two distinct coverages leaves gaps in your protection. You must identify which policy aligns with your business activities.
What Professional Liability Covers
Service providers primarily need professional liability insurance. This coverage, also known as errors and omissions (E&O) insurance, protects your business if a client claims your service, advice, or negligence caused them financial harm.
Doctors, lawyers, consultants, and real estate agents typically carry this coverage. If you make a mistake in a contract, offer incorrect advice that causes a client’s loss of income, or fail to deliver a service as promised, this policy steps in. It pays for legal defense costs and any settlements or judgments against you.
What Product Liability Covers
Companies that manufacture, distribute, or sell physical goods require product liability insurance. This coverage protects you if a product you sell causes bodily injury or property damage to a third party.
Even if you did not manufacture the item, you remain liable simply for selling it to the consumer. If a customer buys a heater that malfunctions and burns their carpet, or if someone gets sick from food you served, product liability pays for the resulting medical bills, legal fees, and property repairs.
Comparing the Key Distinctions
Understanding your business’s risks is key to choosing the right coverage. The fundamental differences between the two policies are clear. Professional liability stems from the services or advice you provide. In contrast, product liability relates to physical items you manufacture or sell.
The type of damages covered also varies. Professional liability typically covers a client’s financial losses. Product liability, however, usually covers bodily injury or damage to physical property. The trigger for a claim is another key distinction. A professional liability claim is triggered by negligence or a failure to perform a service. A product liability claim arises from a defect in a product’s design, manufacturing, or marketing.
Securing Your Business Future
Navigating the landscape of commercial insurance in California requires attention to the differences between professional and product liability. You might need both policies if you provide advice and sell products. For instance, a salon owner needs professional liability for the services they render and product liability for the shampoo they sell to customers.
Reviewing your operations ensures you cover all your bases. Do not wait for a lawsuit to discover a gap in your coverage. Contact Saferoad Insurance today to discuss your business needs and get a quote.