It’s a common question amongst business owners. What’s the difference between general liability and professional liability insurance?
General liability insurance offers protection for third-party property damage or personal/advertising injuries. Damages can be caused by either the business owner or their employees. Professional liability insurance is designed to protect against negligence, malpractice, or misrepresentation claims.
It’s important to understand how each type of coverage works, which we’ll dive into in a bit. But once you understand the difference between general liability and professional liability insurance policies, you’ll be able to make the best decision when it comes to protecting your business liability risks.
What does general liability and professional liability insurance have in common?
Both general liability and professional liability are designed to protect a business in the following ways.
Business liabilities
It only takes one lawsuit to bring a business to its knees. Median costs for a business lawsuit are more than $50,000. Insurance can help lessen the impact of litigation, both financially and professionally.
Meet contractual requirements
In some scenarios, such as when completing contract work, you may be required by the other party to carry insurance coverage before collaboration can occur.
Boost professional appearance
Even if a third party does not require you to have insurance, being able to say you do can give your brand a boost in professionalism and an advantage against the competition.
What’s the difference between general liability and professional liability insurance?
While both types of insurance help protect businesses, the manner in which they do so is different. In some situations, only general liability coverage can help. Other situations may only benefit from professional liability coverage. Here are the differences between the two.
General liability protects against litigation resulting from physical injuries or property damage as a result of business operations.
For example, if a customer slips in your restaurant after a server spilled a drink on the floor, they can sue your business for bodily injury. General liability insurance can’t stop the lawsuit, but it can help alleviate the financial burden it may cause.
General liability also protects in cases of property damage (e.g. a contractor damaging hardwood floors) and product liability (a product you sell injures a customer). General liability also protects against advertising lawsuits like copy infringement or slander.
Professional liability covers errors in relation to professional services or advice that (in most cases) leads to financial loss.
For example, if you’re a financial advisor and a former client comes back to you claiming your financial plan led to them losing money, they could sue. Again, professional liability can’t stop the lawsuit but it can help should you be found liable by the court for their financial loss.
Other examples of professions who may benefit from professional liability insurance include home inspectors, technology professionals, lawyers, consultants, and tax preparers.
Which type of coverage is right for my business?
Some businesses only need general liability coverage while others are better protected with professional liability. To make the question even more difficult to answer, some businesses require both. Ask yourself the following questions to help decide which route to take.
Do I come into direct contact with my clients?
If you have a brick and mortar location, general liability insurance is a must. This will protect against any bodily damage claims, such as slips and falls.
Do I sell a physical product?
Even if you think there’s no way a product you sell could cause injury, you need general liability insurance.
Does my work take place in other people’s homes?
If you’re a plumber, contractor, painter, or even a house cleaner, you could cause severe damage to someone’s home on accident while completing your work. General liability insurance would help cover the costs of such damages.
Does your job involve a lot of calculations or paperwork?
If you’re an accountant, financial planner, or consultant, an honest mistake could lead to a client’s financial loss. If you believe this is a risk your profession carries, professional liability is the best option for you.
Do I have employees?
Having employees doesn’t necessarily help you decide which type of coverage is best, but it should show that even if you believe you can operate without the need for insurance, you can’t control what your employees do. But both general liability and professional liability coverage protects against damage caused by employees.
What if I can’t decide?
If you’re having trouble deciding what type of insurance coverage is right for your business, speak to an insurance broker. They’ll take the time to learn about your business, your day to day operations, and provide you with the most common scenarios that would deem insurance. They can then recommend one type or both and provide you with options that are affordable and effective.
The only piece of advice that’s right for every business is this. You need some type of liability coverage! In today’s litigious happy world, your business can crumble under the weight of a lawsuit.
Don’t wait until you need coverage to look into it. Be proactive and learn more about the difference between general liability and professional liability coverage today. The future of your business depends on it.
