Insurance is just one of the many things that small business owners must think about as they start, run, and expand their company. Though there are dozens of coverage types that you may consider, there are two that are commonly purchased by many professions and industries: General Liability insurance and Professional Liability insurance.
General and Professional Liability Insurance: Two ways to protect your business
There are many insurance options available to business owners. General Liability and Professional Liability are two common coverages that many businesses may consider.
The main difference between General Liability and Professional Liability policies is that they cover different types of risks. General Liability covers bodily injury and property damage suffered by customers, vendors, and other members of the public. Professional Liability covers mistakes, missed deadlines, and other events tied to the services you provide.
Now let’s look closer at both forms of coverage and how they can protect your small business.
What is General Liability Insurance?
General Liability insurance shields businesses against third-party claims of:
- Bodily injury
- Property damage
A third party can be any member of the public who interacts with your business. That includes customers, clients, vendors, and even delivery people. It does not include yourself or your employees.
General Liability coverage typically pays your legal fees and the cost of fixing the situation (up to the limits of liability).
You might see General Liability referred to as Commercial General Liability insurance or by the less formal name of “slip and fall” coverage.
What is Professional Liability Insurance?
Professional Liability insurance protects businesses against different forms of professional wrongdoing. This includes:
- Errors and omissions
- Missed deadlines
- Undelivered services
- Breaches of contract
Professional Liability claims are usually made by clients or customers who are dissatisfied with the services you provide or a product you make. Often, their claim will allege that your business or your employee caused them to lose money or otherwise suffer financially.
A Professional Liability policy typically pays your legal expenses, including settlements and judgements, that result from the professional liability claim.
Errors and Omissions (E&O) insurance is another name for these types of policies. Professional Liability and E&O insurance provide the same coverage but are generally targeted to different occupations. For example, a real estate agent is more likely to call it E&O insurance.
What are the differences between Professional Liability vs General Liability?
Though Professional Liability and General Liability insurance are similar in ways, there are a few key differences between these policies:
- Events covered – As already discussed, Professional Liability insurance covers several types of professional wrongdoing (mistakes, missed deadlines, negligence, etc.). General Liability covers the physical risks of third-party injury and property damage.
- Timing of claimed events – Professional Liability policies are typically written on a “claims made” basis. This means that the policy covers claims that are made while the policy is active or in force. General Liability policies are typically written on an “occurrence” basis. This means that the policy covers events that happened during the policy period, even if the policy is no longer active when the claim is made.
- Policy specifics by industry – As its name implies, General Liability insurance covers general liabilities that are common to most industries and businesses. There are typically very few differences between a General Liability policy written for a retail shop and one for an accountant, for example. Professional Liability policies, on the other hand, are more industry specific. They are typically tailored to a business’ unique liability risks.
General Liability vs. Professional Liability Recap
With a better understanding of General Liability and Professional Liability insurance under our belts, let’s quickly recap these policies:
|General Liability||Professional Liability|
|Covers third-party property damage and bodily injury||Covers professional wrongdoing (negligence, breaches of contract, errors, omissions, etc.)|
|Pays your legal fees and the cost of fixing the situation||Pays your legal fees, including settlements and judgements|
|“Occurrence” based policies||“Claims made” based policies|
|Policies are written to cover liabilities that are common to most businesses||Policies are written to cover specific risks associated with your industry or occupation|
|Also referred to as Commercial General Liability insurance (CGL) or “slip and fall” coverage||Also sold as Errors and Omissions insurance (E&O)|
Which coverage do I need?
Your insurance needs will depend on many factors, such as your industry and how you do business. Many business owners decide to get both General Liability and Professional Liability to protect themselves against a wide variety of potential claims.
You might consider General Liability insurance if you:
- Regularly welcome the public into your place of business (i.e., store, offices, warehouse, etc.)
- Regularly visit clients in their workplace or home
- Use third-party locations for business purposes
- Have employees who do any of the above
- Manufacture a physical product
You might consider Professional Liability insurance if you:
- Provide professional services to clients or customers
- Regularly give clients advice or recommendations based on your knowledge and expertise
- Represent your clients’ interest on their behalf
As you can probably imagine, many businesses may decide that they need both types of coverage to help protect their finances. For example, an accountant might need Professional Liability insurance to cover their work activities and General Liability insurance because clients regularly visit their office.
Cover your business with BizInsure
General and Professional Liability insurance are two common forms of coverage that business owners may consider to protect themselves against different liabilities. You may decide to buy one or both types of policies for your small business, depending on your needs.
BizInsure makes it simple for small businesses to find the coverage they need. Compare policies from top-rated insurers and buy in less than 10 minutes. You’ll even receive your proof of insurance instantly.
Compare quotes for General Liability and Professional Liability now.