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What is the difference between business liability insurance and professional liability insurance?

Apr 21, 2023
4 min reading time

As a business owner, you may face various forms of liability. Imagine that during construction work at a client's home, you accidentally damage the kitchen. Or that you give a client the wrong advice, causing them financial loss. In both cases, you are liable and must therefore reimburse the costs. In the case of minor damage, the costs may be manageable, but in the case of serious injury or other damage, the costs can be considerable. That is why, as an entrepreneur, you can insure yourself against business or professional liability, for example. But what exactly is the difference between business liability insurance and professional liability insurance?

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What is a business liability insurance?

Business liability insurance compensates for damage to others or other people's belongings caused by you, your staff or your products during the course of your work. It can be material damage, personal injury or financial consequential damage. This insurance is also known as Business Liability Insurance (AVB).

Examples corporate liability

  • You are a painter and drop a pot of paint all over your client's wooden floor. This needs to be partially or completely replaced (property damage)
  • You own a store and a customer trips over a loose rug. The customer breaks a leg and has to recover for weeks, preventing him from working and losing income (personal injury and financial consequential damages)
  • You are using a rolling scaffold for your work on a house. However, it turns out that it is not properly secured and falls onto a parked car (property damage).

What is professional indemnity insurance?

Professional liability insurance compensates financial losses suffered by your client due to professional misconduct for which you are liable. In most cases, this involves wrong advice you give your client. Professional indemnity insurance is therefore mainly taken out by SME's and ZZP'ers who give advice, such as architects, engineers, consultants in business services and ICT specialists.

Examples of professional liability

  • You are an IT specialist and you make a programming error, causing your client's website to go down. This causes them to lose revenue.
  • You are an architect and make a measurement error in your plans for a new building. This delays the project, causing your client to suffer property damage.
  • You are an accountant and do the bookkeeping for your client. However, you made a mistake in the date and filed a late tax return. Your client faces a hefty fine from the Internal Revenue Service as a result.

The 3 main differences between business liability and professional liability

So business liability and professional liability are two different things. Below we list the three main differences for you.

1. The type of damage

Business liability involves damage to persons (personal injury) and/or property (property damage). There may also be financial consequential damages, such as when a client trips over a loose cable in your office, breaks a leg and is unable to work for some time as a result. Professional liability involves financial loss due to professional misconduct. Your client suffers financial loss because you gave the wrong advice.

2. The cause of damage

Business liability involves damage that you, your staff or your products have caused to a customer. For example, your client gets an allergic reaction from your product, or your intern throws a cup of coffee over a client's laptop. With professional liability, the cause of the injury is wrong advice given. This could be wrong advice from a consultant or a miscalculation by an architect, for example.

3. The type of occupation

Every business owner runs the risk of business liability. After all, an accident is in a small corner. The profession or industry is irrelevant here. Professional liability is really mainly a risk for people with a consulting profession. This could include doctors, architects, consultants and accountants, among others.

Questions? Our insurance advisors are here for you!

Do you have a question about obtaining business liability or professional liability insurance? If so, please be sure to contact us. Our insurance advisors will be happy to help you with all your questions. Together we ensure that your company is always properly insured.

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