What type of commercial insurance do I need? Professional liability vs business owner’s policy (BOP)

When it comes to commercial insurance, there are countless types of coverage available to protect businesses of all sizes. Two of the major types are professional liability insurance and a business owner’s policy (BOP). 

If you don’t understand the difference between the two and which you actually need, you can end up either under-insured or overpaying for your business insurance.

Professional liability insurance

Professional liability insurance, also known as errors and omissions insurance, is an essential coverage for professionals who provide advice or services to others. This type of insurance is designed to protect professionals, such as doctors, lawyers, accountants, consultants, and engineers, from financial losses resulting from errors or mistakes that occur in the course of their work.

For example, if a doctor misdiagnoses a patient’s condition, the patient may sue the doctor for medical malpractice. Professional liability insurance would cover the legal fees and damages awarded in such a lawsuit. Similarly, if an architect designs a building that fails to meet safety standards and causes injury, the architect may be held liable for the damages. Professional liability insurance would cover the legal fees and damages in this scenario as well.

The coverage provided by professional liability insurance can vary depending on the policy, but it generally includes defense costs, settlements, and judgments. The limits of coverage can also vary depending on the policy, so it’s important for professionals to understand their coverage limits and consider purchasing additional coverage if necessary. Some policies also have exclusions, so it’s important to read the policy carefully and make sure that it covers the specific risks associated with your profession.

One important aspect of professional liability insurance is that it typically covers only civil liabilities and not criminal liabilities. This means that if a professional is found guilty of a crime, such as fraud or embezzlement, the insurance policy will not cover the damages.

Business owner’s policy (BOP)

On the other hand, a business owner’s policy, or BOP, is a type of insurance that provides protection for small and medium-sized businesses. A BOP typically includes liability coverage, which protects the business from third-party claims of bodily injury or property damage, as well as property insurance, which covers damage to the business’s physical assets. Additionally, BOPs can also include coverage for business interruption, which compensates the business for lost income if operations are disrupted due to a covered event, and crime insurance, which covers losses due to theft or embezzlement.

One of the major advantages of a BOP is that it typically offers a package of coverage at a lower cost than if the coverage were purchased separately. This is because BOPs bundle together several types of coverage that a business may need, such as liability and property coverage, into one policy.

The main difference between professional liability insurance and a BOP is the scope of coverage. Professional liability insurance is specifically designed to protect professionals from financial losses resulting from mistakes or errors in their work, while a BOP is a more comprehensive policy that provides broader coverage for a business, including liability and property coverage, as well as additional coverage options such as business interruption and crime.

Do I need both a BOP and professional liability insurance?

It is important for businesses and professionals to understand the differences between these types of insurance policies in order to choose the coverage that best meets their needs. Businesses may require both professional liability insurance and a BOP to fully protect their assets and operations, while professionals may only require professional liability insurance to protect their livelihood. It’s always a good idea to consult with an insurance professional to determine the appropriate coverage for your specific needs.

In conclusion, professional liability insurance and a business owner’s policy are two different types of insurance that provide important protection for businesses and professionals. While professional liability insurance is specifically designed to protect professionals from financial losses resulting from errors or mistakes in their work, a BOP is a more comprehensive policy that provides broader coverage for a business. It’s important to understand the differences between these types of insurance and to choose the coverage that best meets your needs. 

Looking for help understanding which type(s) of coverage you need?

If you’re still feeling unsure of what kind of insurance you need, don’t hesitate to reach out to our team here at Alliance Insurance. We can take a look at your business, your policies and what (if anything) needs to be done—all free of charge.