Confusing general liability insurance with professional liability insurance is a common occurrence. Not everyone needs both kinds of insurance or one kind of insurance or the other. We’ll tell you what general liability insurance and professional liability insurance are, the difference between them, and who might need which kind!
How Professional Liability Insurance And General Liability Insurance Are Different
What is general liability insurance? General liability insurance in the US first started as Employer’s Insurance on November 1, 1886 in Milwaukee, Wisconsin when a policy was issued to The Gender and Paeschke Manufacturing Company. Since then, general liability insurance has grown to be the most common type of business insurance. Often, it is the minimum required business insurance by contracts and leases.
General liability insurance protects your business from claims that it caused damage to another person, another business, or another person’s property. This could include bodily injury to someone else, property damage to someone else’s property or belongings, and even personal injury to someone else in the form of libel and slander. Claims of this type can get expensive quickly, and are unfortunately common for small businesses.
Any small business that works with clients, customers, or the public should consider buying a general liability insurance policy. That’s especially true if you handle a client’s belongings like a computer repair person, or you take customers through someone else’s property like a real estate agent. Some states even mandate general liability coverage for some industries like construction!
What is professional liability insurance? Professional liability insurance gets tricky not only because it can be confused for general liability insurance, but it also goes under the names of errors and omissions or E&O. You’ll see insurance companies refer to it either way! Regardless, the basic coverage details are the same.
Typically, a professional liability insurance policy covers professional negligence, inaccurate professional advice, and work mistakes. Mistakes happen, and many customers and clients will respond with a lawsuit or claim. Breach of contract is also typically covered by an E&O policy, as are financial damages caused by an oversight on your business’s part.
While most businesses would benefit from having a professional liability policy in place, there are a few fields where it is strongly recommended. For example, an accountant could easily make an error that would cause a client a loss. A graphic designer under tremendous pressure could miss a deadline, causing a job to miss its print date. A lawyer could miss some crucial evidence. A resulting lawsuit could destroy a business. Professional liability insurance covers related legal costs.
How does professional liability insurance differ from general liability insurance? The differences are becoming more clear, but basically general liability insurance and professional liability insurance cover different kinds of risks. You can think of it this way: general liability coverage mostly pertains to physical damages, while professional liability coverage pertains to financial damages.
General liability policies cover third party personal injury like a person slipping and falling on a wet floor of your business, property damage like a fire spreading from your business to the business next door, and advertising injury like accidental copyright infringement on your part. See? Mostly physical. Professional liability insurance tends to cover alleged professional failures that can result in high financial loss. That financial loss would pass to your business most likely through a similarly expensive lawsuit—if you didn’t have professional liability insurance, the effect could be devastating to your business.
The bottom line is that general liability is common and benefits all business types. It is even required often! Whereas professional liability is only required in specific cases and tends to mostly benefit businesses and people who provide consulting, advice, or expertise to their clients. We hope this makes the differences clear. We recommend that you contact an insurance professional to determine your business’s insurance needs!
