General Liability Insurance vs. Professional Liability Insurance
Small business insurance protects your business from the financial woes that may come its way. But how do you know which policy addresses the risks you face? For example, you may know that both General Liability Insurance and Professional Liability Insurance safeguard you against lawsuits. But which covers what liability? How can you tell the difference?
Here are a few pointers to help you keep these important policies straight.
What Is General Liability Insurance?
General Liability Insurance, like its name suggests, covers your business from a few “general” lawsuits that any business could face. In a nutshell, it kicks in when a third party (i.e., anyone who doesn’t work for your company) sues your business over…
- Bodily injuries they incurred on your commercial premises.
- Damage you caused their property.
- Advertising injuries (e.g., slander, libel, misappropriation, and copyright infringement).
General Liability Insurance pays for your legal expenses (lawyers’ fees, court costs, and settlements or judgments). Again, any small-business owner, no matter their industry or the size of their business, can face these claims. That’s why many consider this policy to be the keystone of a business protection plan.
What Is Professional Liability Insurance?
Professional Liability Insurance (aka “Errors and Omissions Insurance” or “Malpractice Insurance”) also lives up to its moniker. Its coverage focuses specifically on the lawsuits that stem from your professional services.
Though this policy is especially important for service providers to carry, most small-business owners can benefit from its coverage. That’s because Professional Liability Insurance shields you from third-party lawsuits alleging you…
- Provided negligent professional services.
- Failed to uphold contractual promises.
- Provided incomplete or shoddy work.
- Made mistakes or omissions.
These torts are among the most expensive a business owner can face. You don’t have to be at fault to be sued, either. All it takes is one unhappy client to name your business in a lawsuit to try to recoup the “losses” they incurred because of your work. Your Professional Liability policy ensures you won’t be on the hook for legal expenses, regardless of whether the claim holds water.
Do General Liability and Professional Liability Ever Cover the Same Claims?
In short, no. Both policies cover certain liabilities, but they don’t cover the same liabilities. Here’s how General Liability and Professional Liability Insurance are alike:
- Both policies deal with (separate) unavoidable liabilities. It’s an unfortunate fact of being a small-business owner: you have a target on your back. In fact, small-business owners bear the brunt of civil tort costs in this country. Your General Liability and Professional Liability policies work together to mitigate your expenses when accidents and oversights land you in legal trouble.
- Either policy may be required by client contracts. Construction contractors: don’t be surprised if the general contractor requires you to carry your own General Liability (and Workers’ Compensation Insurance) coverage. Similarly, big contracted projects may mean that IT consultants, for example, need Professional Liability coverage to address potential lawsuits
Contrasting General Liability and Professional Liability Insurance
Here are some key differences to keep in mind:
- General Liability and Professional Liability cover different risk exposures. Only General Liability can spare your business from lawsuits over a visitor slipping and falling on your commercial property. And only Professional Liability Insurance can shield you from the high cost of alleged professional mistakes that cause a third party financial losses.
- Physical damages vs. financial damages. Sometimes, a General Liability policy includes Products-Completed Operations Liability Insurance, a coverage that benefits construction professionals, manufacturers, retailers, and more. This coverage protects the insured from lawsuits over finished work that physically harms someone. Though this may seem to be the domain of Professional Liability, physical damage is the dividing line. Professional Liability Insurance concerns itself with lawsuits over financial losses that result from someone’s products or services.
Which Policy Makes Sense for Your Business?
In most cases, you’ll need both policies to adequately protect your business from the high cost of unexpected lawsuits. This is especially true if you work in a professional services industry and rent / own commercial property that’s open to the public.
There are few instances when you could comfortably skate by without either policy. And we don’t advise that you ever explore this route. The world is unpredictable, and you never know when someone could have an accident in your building or accuse you of not fulfilling the terms of your contract.
To explore your coverage options, fill out an online insurance application today. You’ll get an idea about the cost of General Liability and Professional Liability Insurance when the quotes arrive in your inbox in 24 hours or less.