At a crossroads as to whether your company needs general liability or professional liability insurance, or perhaps both? The answer depends on the specific type of business you operate.
Are you concerned about causing physical or reputational harm to someone else? Do you need protection from lawsuits as a result of providing professional services that cause someone else to lose money?
All to say, the value of general liability vs. professional liability insurance boils down to the types of risks your business faces—and any relevant coverage requirements. In certain cases, professional liability coverage may be required by law, depending on your state and industry. And while it’s never a legal requirement, general liability coverage is frequently required to secure a contract with a client or commercial lessor.
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What is general liability insurance?
General liability insurance is a foundational business insurance coverage type that can cover various expenses that may arise if you’re held liable for causing another person, business, or entity to experience some kind of covered loss. The coverage it offers can apply across a wide range of common business risks, and general liability insurance is recommended for virtually every company as a result.
What’s covered
General liability insurance mainly covers third-party medical treatments or property repairs and first-party legal expenses if you’re held liable for causing bodily injury, property damage, or personal and advertising injury to another party. Depending on your insurer and policy details, other situations may be covered as well. See below for a breakdown of the various coverage options that may be available through your commercial general liability insurance:
- Bodily injury: General liability insurance covers medical treatments if someone is injured on your business premises or otherwise because of your commercial operations. It can also cover your legal fees if an injured customer sues you. For example, you may be covered if a client visits your office, trips over a bunched-up rug, and hits their head on a desk.
- Property damage: You can file a claim on your general liability insurance if you’re held liable for damaging or destroying someone’s property. For example, if an employee at your food truck drops a customer’s phone while trying to scan a mobile payment app, your insurer may pay to repair or replace the phone.
- Personal and advertising injury: Your legal expenses will be covered if you’re sued over a personal or advertising injury claim, such as libel, slander, copyright infringement, or trademark violations. For example, this coverage may apply if you publish a promotional video that includes copyrighted music without first securing the proper license.
- Products-completed operations: Bodily injury and property damage coverage may extend beyond the walls of your business and apply to products you sell or projects your business has completed. For example, you may be covered if you build a deck for a homeowner and they get injured when part of the deck caves in.
- Product recall: If a product you sell must be recalled due to some sort of defect or other safety hazard, your general liability insurance may cover relevant expenses, such as the costs of notifying affected customers and disposing of defective products. Keep in mind that product recall coverage may not be automatically included in your general liability insurance and may instead require an added endorsement.
- Contractual liability: In some cases, your general liability insurance may cover your legal fees if you’re sued over something that you assumed liability for by signing a contract.
- Electronic data liability: Another nonphysical risk your general liability insurance may cover is electronic data loss. Your policy may cover your legal costs if you face a lawsuit because you damaged a computer or some other electronic system owned by another person or entity, resulting in the loss of digital data stored in it.
- Supplemental payments: Depending on your policy details, your general liability insurance may cover some secondary expenses related to liability claims, such as interest on court-ordered damages or reimbursement for lost wages if you must miss work to participate in the investigation of a claim.
What isn’t covered
Despite the broad coverage it provides, your general liability insurance policy won’t cover the following losses or expenses:
- Errors and omissions in the performance of professional services
- Commercial vehicle accidents
- Workplace injuries
- Damage to commercial property
- Cyber liability claims
- Losses that exceed your policy’s coverage limits
- Intentional criminal actions
What is professional liability insurance?
Professional liability insurance—or errors and omissions (E&O) insurance—is a commercial insurance product that covers accusations of failures or mistakes in the provision of professional services. In the event of a covered claim, professional liability coverage can take care of various lawsuit-related expenses, including court-ordered judgments, settlements, attorney fees, subpoena costs, and lost revenue while you attend depositions or trials.
What’s covered
Your professional liability insurance may cover your legal expenses if you’re sued for any of the following reasons:
- Errors and omissions: One of the core purposes of professional liability insurance is to provide coverage anytime you’re accused of causing a client to experience a financial loss by making a mistake or failing to take proper actions. For example, this coverage may apply if you’re hired to produce an advertising campaign but forget to submit the finished materials on time.
- Negligence: If a negligent oversight in the performance of your professional duties causes some harm to another person, your errors and omissions insurance may step in. For example, it could cover an architect who overlooks a major flaw when designing a building that eventually results in part of the building collapsing.
- Misrepresentation: Professional liability insurance provides coverage if someone takes you to court because you misrepresented your experience or the nature of the services you offer. For example, it could cover a lawyer who specializes in property law but claims to be a criminal defense attorney to secure a client.
- Violation of good faith and fair dealing: E&O insurance covers certain types of contractual breaches, including alleged attempts to undermine the terms of a contract. For example, your policy may cover you if you face legal action for entering into a contract simply to deny a competitor the opportunity to enter into the contract—without actually fulfilling the contract’s obligations yourself.
- Inaccurate advice: Consultants who are sued for giving bad or misleading advice may be able to file a claim on their professional liability policy. For example, this coverage may be necessary for a financial advisor whose client loses money after listening to their investment advice.
- Personal injury: Like general liability insurance, professional liability insurance may provide coverage if you’re accused of harming someone’s reputation by saying or publishing untrue, negative statements.
What isn’t covered
Professional liability insurance generally excludes coverage for the following:
- Third-party bodily injury or property damage claims
- Workplace injuries
- Cyber liability claims
- Harassment, wrongful termination, or other alleged violations of employee rights
- Theft of patents or trade secrets
- Intentional criminal actions
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Professional liability insurance vs. general liability insurance: Key differences
Read the upcoming sections to get a better picture of the difference between general and professional liability insurance.
Physical vs. professional risk
Professional and general liability insurance differ when it comes to the kinds of risks they typically cover. General liability insurance predominantly covers tangible, physical risks, such as bodily injury to another person or damage to their property that you’re responsible for. Conversely, professional liability insurance covers more indirect or intangible risks, such as mistakes you make that cause a client to lose money.
Who files the claim
A general liability insurance claim can be initiated by either your business or a third party—assuming they have your insurance information. For example, a customer may accuse you of causing bodily injury or property damage and file a claim with your insurer.
Meanwhile, professional liability claims are typically filed by your business in response to, say, a demand letter or a covered lawsuit against the company. For example, if a client accuses you of making an error that cost them money, you could file a claim to cover your legal expenses.
Types of lawsuits covered
Again, general liability insurance provides coverage if you’re sued for causing bodily harm, property damage, reputational harm, or copyright infringement—and it can step in to cover medical and repair costs for relevant claims before a lawsuit happens. On the other hand, errors and omissions insurance coverage only steps in if you’re sued for negligence, inaccurate advice, or a similar failure in the performance of your professional duties.
Coverage triggers
Depending on your state and insurer, your general liability coverage may be triggered as soon as you expose a third party to something harmful, once the harmful exposure is discovered, or after the third party has actually experienced some sort of loss. Conversely, most insurers offer claims-made E&O policies, meaning coverage applies when you’re sued, even if the alleged professional mistake took place before the current coverage period.
Who needs general liability insurance?
All businesses should at least consider general liability insurance, but coverage may be especially necessary for companies that regularly interact with clients or have access to their property, rely heavily on marketing and advertising, conduct business in buildings owned by third parties, or need coverage to successfully bid for contract work. Examples of industries that commonly benefit from general liability insurance include the following:
- Architecture
- Engineering
- Photography
- Hairdressing
- Fitness and personal training
- Interior design
- Information technology
- Landscaping
- Real estate
- Consulting
- Marketing and advertising
- Cleaning services
- Retail
- Contracting
- Food and beverage
- Plumbing
Who needs professional liability insurance?
In some states, professional liability insurance may be required by law for certain professions, such as lawyers and doctors. Regardless of whether it’s required, you need E&O insurance if your business model revolves around providing expert advice or other professional services rather than selling products. Here are some examples of industries that usually need professional liability insurance coverage:
- Information technology
- Consulting
- Accounting and tax preparation
- Marketing and advertising
- Graphic design
- Interior design
- Real estate
- Architecture
- Engineering
- Insurance and finance
- Software development
- Education
- Hairdressing
- Printing and publishing
- Veterinary
- Pet grooming
- Mental health counseling
- Occupational therapy
- Fitness and personal training
How much does each typically cost?
On average, small business owners can expect to pay about $500 to $1,200 per year for general liability insurance and $4,000 to $15,000 per year for professional liability insurance. Keep in mind that your exact premiums may vary based on factors like your coverage details, claims history, industry, yearly revenue, employee headcount, and location.
Can I bundle general liability and professional liability insurance?
General liability and professional liability insurance can often be bundled together into a single policy. For example, business owner’s policies for small businesses automatically include general liability insurance, and professional liability coverage is often available as a BOP add-on. Meanwhile, larger businesses may have the option to bundle these coverage types together through a more highly customizable commercial package policy.
Professional liability vs. general liability: Side-by-side comparison
Here’s a review of the main differences between commercial general liability insurance and professional liability insurance:
How to decide which policy my business needs
To decide which policy your business needs, there are some common-sense factors to consider. Here’s an easy way to figure out whether your business needs professional liability and/or general liability insurance:
- Analyze the level of coverage provided by each type of policy.
- Compare the level of coverage offered with the risks you face during your normal business activities.
- Take a look at your previous insurance claims to get an idea of which types of claims you’re more likely to file again in the future.
- Check whether you’re required by law or by a contract to maintain either type of commercial insurance.
- Talk to an insurance agent for further guidance.
General liability vs. professional liability coverage at a glance
- Definitions: General liability insurance and professional liability insurance are both commercial insurance coverage types that can shield your business from financial losses if you’re accused of causing some type of harm to another person or entity. However, these two policies differ when it comes to the types of risks they cover.
- Coverage: Your general liability insurance can cover medical bills, property repairs, and legal costs if you’re held liable for causing bodily injury or property damage to someone else. Conversely, professional liability insurance covers legal fees if you’re sued over a professional failure, such as negligence, breach of contract, misrepresentation, or inaccurate advice. Both general liability and professional liability insurance may cover personal and advertising injury claims.
- Exclusions: Professional liability insurance doesn’t cover third-party bodily injury or property damage claims, while general liability insurance doesn’t cover professional errors or omissions. Neither policy covers commercial vehicle accidents, workplace injuries, damage to business-owned property, or losses caused by data breaches or other cybercrimes.
- Requirements: A type of professional liability insurance known as malpractice insurance may be required for doctors and lawyers in some states. General liability insurance isn’t required by law, but it could be required in certain circumstances, like if you’re bidding for a contract.
- Recommendations: Every business is advised to purchase general liability insurance, though coverage is especially necessary for industries with direct interactions with customers or other third parties. Meanwhile, professional liability insurance is important for businesses that provide professional services, such as accountants and consultants.
- Cost: On average, you can expect to pay around $40 to $100 per month for general liability insurance and around $300 to $1,200 per month for professional liability insurance.
- Bundling: You can often save money by bundling general liability and professional liability insurance together through a business owner’s policy (BOP) or commercial package policy (CPP), depending on the size of your business and the level of risk associated with your industry.
How to get the best deal for my business
Each individual commercial insurance company has its own unique formulas for determining risk and calculating premiums. In other words, the only way to make sure you’re getting the best possible deal on the coverage you need is to shop around. It’s generally recommended that you collect quotes from at least three insurance companies before settling on a general liability or professional liability insurance policy.
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The takeaway
Think of general liability vs. professional liability insurance like this: General liability is for physical accidents—professional liability is for professional mistakes. The coverage you need hinges on the nature of your business.
If you run a business in construction or food services, you’re more likely to need general liability. If you have an accounting firm or a legal practice, you’ll more readily need professional liability. In some cases, these coverages are required by law. Some industries, like architecture and real estate, may warrant both types of insurance.
Frequently asked questions
Does my business need both professional liability and general liability insurance?
You may need both professional liability and general liability insurance for your business if you provide professional services and have face-to-face interactions with clients or customers.
Does general liability insurance cover negligence?
Lawsuits stemming from accusations of negligence are generally covered by professional liability insurance, but your general liability insurance may step in if someone experiences bodily injury or property damage due to your negligence.
Is general liability insurance required?
General liability insurance isn’t required by law, but it may be required by contracts, commercial lease agreements, or professional licensing agencies.
Can a business owner’s policy (BOP) replace professional liability coverage?
No, a basic BOP cannot replace professional liability coverage because it doesn’t cover errors or omissions in the performance of professional services. However, you may be able to add professional liability insurance to your BOP.
Are all businesses required to carry professional liability insurance?
No, not all businesses are required to carry professional liability coverage. That said, malpractice insurance may be necessary for attorneys and physicians in certain states.