General Liability vs. Professional Liability Insurance

A common question among small business owners is, “What’s the difference between general liability and professional liability insurance?” Understanding how they compare and contrast will help you make the best decisions when matching your small business liability risks to individual coverages. You may find you need both.

How They're the Same

  • Protect against business liabilities – A single lawsuit could damage a business beyond repair. General liability and professional liability help alleviate the financial burden these incidents cause so your business feels minimal impact following a claim.
  • Meet contractual requirements – Some employers or clients may require you to carry a specific amount of general liability or professional liability coverage before you can work for them.

How They're Different

The difference between general liability and professional liability is the types of risk they cover.

  • General liability protects against physical injury to people or damage to property arising from your daily operations. For example, a customer who falls through a board on their newly built deck could sue the hired contractor for faulty workmanship and bodily injury.
  • Professional liability covers negligence related to professional services or advice. It’s generally related to financial loss rather than physical injury or damages. For example, a consultant could face a lawsuit for providing bad advice that resulted in financial loss to their client. No one was injured and no property was damaged, like in a general liability claim. This coverage is sometimes referred to as errors and omissions insurance (E&O).

What Does General Liability Insurance Cover?

Typically, general liability insurance covers:

Bodily Injury and Property Damage Liability

General liability covers business-related incidents that result in bodily injury to a third party. This can include a customer slipping and falling on your premises or an employee accidentally dropping a toolbox on someone’s foot. Of course, this coverage only applies to non-employee injuries.

Additionally, general liability protects any third-party property damage resulting from your business operations. For example, a landscaper’s policy may cover a stone that kicks up from their lawn mower and breaks a client’s window.

Woman had an accident and hurt her legs

Products-Completed Operations

General liability insurance coverage includes liability protection for both products and completed operations exposures. Products are any goods that you manufacture, sell, or distribute in your business. If a product causes physical injury or illness, such as a customer becoming sick from undercooked food, a business can find protection under this coverage.

Alternatively, completed operations protect against faulty services or work performed by a business. A project must be fully complete for coverage to apply. For instance, a customer hires a plumber to install a shower drain as part of a bathroom renovation, but the plumber didn’t seal the drain properly and the bathroom flooded days later. The plumber’s general liability policy can cover up to his liability limits for his faulty workmanship since the incident occurred after he left the premises.

Boy covering his mouth

Personal and Advertising Injury

Not all injuries are physical. Any written or verbal communications that cause harm can also be covered under your general liability policy. This encompasses libel, slander, malicious mischief, and copyright infringement, to name a few. For example, a small business retailer suffers a decrease in business after a local competitor starts a rumor about their bad customer service. The small business owner can sue the competitor for personal and advertising injury for damaging their reputation and profitability.

Advertising Injury

Medical Payments

Medical payments cover any non-employee medical or funeral-related expenses for which your business is responsible. Of course, your coverage depends on your selected limits. For example, a shelf falls on a customer while they’re grocery shopping. Their medical expenses total $10,000, but the grocer’s liability insurance covers only $5,000 toward medical payments. In this case, the store would be responsible for paying the remaining $5,000 out of pocket.

Money and Stethoscope

Damage to Premises Rented to You

General liability coverage typically includes coverage for any damages to non-owned land, buildings, or structures. The insured, or their business, must be legally liable for the damages for coverage to apply. For instance, a local restaurant rents a property that catches fire due to a negligent employee leaving a frying pan unattended. General liability might cover the damages since the business caused the fire. In contrast, this coverage wouldn’t apply if a lightning strike started the fire.

Burnt Building

What General Liability Doesn’t Cover

You might have additional insurance needs that aren’t covered by general liability insurance. There are many other products available to protect your business. Here’s a short list:

  • Owned commercial property – Protected along with other equipment and goods under a business owner’s policy (BOP).
  • Employee injuries – Coverage for your employees is required by most states and is only available under workers’ compensation.
  • Professional mistakes – If your business provides a service or advice, you’ll want to consider professional liability insurance.
  • Commercial vehicles – Vehicles used for business are protected under a commercial auto policy. A personal auto policy won’t cover work-related incidents.

What Does Professional Liability Insurance Cover?

Professional liability insurance covers claims of actual or alleged negligence that arise from providing professional services, like giving incorrect advice, an omission, or failing to deliver a service. This coverage includes damages and defense costs up to your policy limits, regardless of whether a mistake was made.

For example, a client claims an accountant filed their taxes incorrectly and caused them to lose a lot of money. The accountant’s professional liability insurance could help cover the legal and settlement costs.

Questioned Policy

Many professional liability policies are written on a claims-made basis, which means that coverage is only afforded to claims filed during the policy period. A retroactive date may be added to cover incidents that occur before a policy’s coverage begins.

Professional liability insurance coverage can protect against claims that arise from services provided in the past and for work performed anywhere in the world.

Who Needs Professional Liability Insurance?

Any business that sells a professional service or gives advice should consider professional liability insurance to protect against lawsuits that arise from their mistakes.

Some states legally require that certain professionals, such as lawyers, have it before they can do business. Clients might also require that a business carry a certain amount of professional liability as part of their business contracts.

Group Diverse of People

A variety of business professionals need professional liability insurance, including:

  • Consultants
  • Attorneys
  • Engineers
  • Architects
  • Real estate agents
  • Insurance agents
  • Accountants
  • Home inspectors

Progressive Liability Insurance Local Agent

Progressive Liability Insurance, offered through John Perry Insurance, is an excellent choice for businesses in Clewiston, Fort Myers, Labelle, and Okeechobee, Florida. With comprehensive coverage, competitive pricing, and the personalized support of a local agent, you can feel confident that your business is well protected from potential risks. Contact John Perry Insurance today to discuss your business insurance needs and learn more about how Progressive General Liability Insurance can provide the protection your business requires

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