General Liability deals with damages to third parties, whereas Professional Liability covers errors and omissions that may occur while providing professional services. Both forms of insurance are essential for any business, regardless of industry or size.
General Liability protects your business from unexpected events, such as property damage and bodily injury claims due to customer accidents or employee negligence. Professionals like doctors, lawyers, or accountants may require Professional Liability coverage to protect their businesses from claims of negligence or malpractice.
When deciding whether you need both types of insurance, it is essential to understand the specific risks your business faces. On the other hand, a professional services business may need both policies to provide comprehensive protection.
Griffith E. Harris Insurance Services can help you identify the risks you face and provide tailored policies that fit your needs. This blog post will explain the differences between General and Professional Liability insurance and help you understand which is best for your business. Let’s get started.
General Liability | A Basic Overview
General Liability insurance protects third-party claims of bodily injury, property damage, and personal or advertising injury. This includes injuries or damages caused by your product, services, operations, or employees.
It also covers legal expenses incurred due to the defense of these claims. Some common scenarios where General Liability coverage would apply are customer slip-and-fall accidents on your premises, defective products, and libel or slander.
What Does General Liability Insurance Cover?
General Liability insurance typically covers a wide range of risks and incidents a business may face. Following are some of the most common scenarios that typically need commercial general liability insurance coverage.
Bodily Injury And Property Damage Liability
This refers to your business’s legal responsibility if a third party suffers physical injury or their property is damaged in connection with your business operations or on your premises.
Personal And Advertising Injury
If your business unintentionally infringes on another’s copyright or brand in its advertising, or if you’re accused of libel or slander, this coverage can shield you from the financial consequences.
Medical Payments
If someone is injured on your business premises or due to your business operations, this coverage can help with the cost of their medical care.
Damage To Premises Rented To You
Should your rented business space suffer damage due to fire, lightning, or explosion, this part of your General Liability insurance can assist in covering the expenses related to repairs.
Legal Defense And Judgement
This coverage includes hiring a defense attorney, court fees, and any settlements or judgments resulting from a covered lawsuit.
Products And Completed Operations
This covers any liability arising from the products you sell or your completed services. If a product or service causes harm to a customer, your general liability insurancepolicy can cover the associated costs.
Liquor Liability
If your business manufactures sells, or serves alcohol, liquor liability coverage can protect you from claims resulting from damage or injury caused by intoxicated customers.
Non-Owned And Hired Auto Liability
Commercial auto insurance protects your business if an employee has an accident while using their own (non-owned) or rented (hired) vehicle for business purposes.
Who Needs General Liability?
Any business can benefit from having General Liability insurance, regardless of industry or size. This type of coverage is essential if you have customers who visit your premises or handle any product.
Additionally, it’s important for businesses that operate in high-risk environments such as construction sites. If you are unsure whether this coverage would benefit your business, it’s best to consult a business insurance professional for advice.
Professional Liability | A Basic Overview
Professional Liability insurance, or Errors and Omissions (E&O) insurance, protects businesses from claims alleging errors or omissions while providing professional services. This coverage applies to professionals such as doctors, lawyers, accountants, architects, engineers, and consultants.
It can help pay for legal defense costs, settlements, and judgments if a client sues your business for negligence or poor performance of services.
What Does Professional Liability Insurance Cover?
General Liability insurance covers various risks and incidents that businesses may encounter. Following are some of the most common scenarios where Professional Liability coverage can provide protection:
Negligence Or Alleged Negligence
This coverage applies when a client alleges your services were negligent and resulted in harm or financial loss.
Legal Defense Costs
Professional Liability insurance can help cover the cost of defending your business in a lawsuit, from attorney’s fees to court costs.
Services Previously Performed
This can cover the cost of claims arising from services you provided in the past, typically up to the number of years specified by the policy.
Claims And Damages
If a client claims that your services led to financial loss, Professional Liability insurance can help pay compensation or damages awarded.
Personal Injury
This covers claims related to offenses such as libel, slander, or invasion of privacy while providing professional services.
Network Security & Privacy
Some policies may include coverage for data breaches or cyber incidents that occur while providing professional services.
Miscellaneous Professional Liability
This can cover claims arising from services that fall outside the traditional realm of your profession, provided they are declared in the policy.
Worldwide Coverage
Professional Liability insurance can offer worldwide coverage for businesses providing services across borders, safeguarding your business against claims for errors, omissions, or negligence made anywhere in the world.
Who Needs Professional Liability?
Professionals such as doctors, lawyers, architects, engineers, and consultants should consider obtaining Professional Liability insurance. This coverage protects your business against claims for service errors and omissions.
It can also help protect against losses from data breaches or cyber incidents during business activities. Ultimately, this coverage can provide peace of mind, allowing you to focus on delivering quality services. It is also worth noting that Professional Liability insurance may be required by law for certain professions.
General Liability vs. Professional Liability: Understanding The Difference
Considering the above discussion, it becomes clear that General Liability and Professional Liability insurance offer two types of protection. Following are the points that differentiate the two:
Nature Of Risks Covered
General Liability insurance primarily covers physical risks related to injuries or damages to third-party individuals or their property due to your business operations. This could include a customer slipping and falling at your premises or damage caused by a defective product you sold.
On the other hand, Professional Liability insurance covers intangible risks. These typically involve financial losses from your business’s professional services or advice.
For instance, if a client alleges negligence or poor performance of services leading to a financial loss, Professional Liability insurance comes into play.
Type Of Businesses Served
General Liability insurance is broadly applicable and caters to a wide range of businesses across different industries. Whether you run a retail store or a construction site, General Liability can protect your business from physical risks.
Contrariwise, Professional Liability insurance is designed for businesses that offer professional services or advice, such as law firms, accounting agencies, or consultancy firms. Professional Liability insurance is particularly vital for professions where an error or omission could lead to significant financial loss or harm to a client.
This also extends to IT consultants and software developers in the digital age, whose work can significantly influence a business’s operations and success.
Coverage Specifics
General Liability covers legal expenses relating to third-party injury, property damage, and personal or advertising injury. Specific policies also cover damages to rented premises, medical expenses, and product liabilities.
Conversely, Professional Liability insurance covers legal defense costs, judgments, or settlements resulting from negligence claims, poor service performance, or errors and omissions in the service provided. This policy also covers claims related to personal injury offenses like slander or libel and can extend to include network security and privacy breaches.
Understanding the critical differences between these insurance types can help businesses make informed decisions about risk management, selecting the right style and level of coverage for their specific needs.
Is It Necessary To Have Both General Liability And Professional Liability Insurance?
Deciding whether a business needs General Liability, Professional Liability, or both largely depends on the nature of the business and the risks it faces.
Businesses Needing Only General Liability Insurance
Businesses with a physical location where customers or clients visit or where employees could potentially cause property damage should consider General Liability insurance. This includes retailers, restaurants, and construction companies, among others.
These businesses face risks of physical harm or business property damage, which General Liability insurance can cover. Furthermore, companies involved in the manufacturing, distribution, or retail of products need General Liability insurance to cover claims related to product liability.
An example might be a consumer becoming injured due to a faulty product. Small business owners, even sole proprietorships, should also consider General Liability coverage
Businesses Needing Only Professional Liability Insurance
Professionals who provide advice, expertise, or specialized services should consider Professional Liability insurance. This category includes businesses like consulting firms, accountancy agencies, law firms, or architects and engineers, where the primary risk is a claim arising from the advice or services they provide, not physical or property risks.
Examples of businesses that typically require Professional Liability insurance include marketing agencies, IT consultants, and software development firms. These types of companies can face significant Liability if they fail to deliver results as promised.
The intricate nature of these businesses’ services means that a single mistake, oversight, or failure to meet a client’s expectations could lead to substantial financial losses or reputational damage.
Businesses Needing Both General And Professional Liability Insurance
Businesses facing physical and professional service risks should consider having General and Professional Liability insurance. For example, a medical clinic might need General Liability for an instance where a patient slips and falls in the clinic and Professional Liability to cover a claim alleging medical malpractice.
Similarly, an IT consulting firm would find value in General Liability of commercial property insurance, where the damage caused by their employees at a client’s office, and Professional Liability for claims related to the quality of their consulting work or a data breach.
It is essential for businesses to thoroughly assess their risk exposure and consult with a responsible insurance company to ensure they have the right type and level of coverage. Griffith E. Harris Insurance Services provides experienced insurance advisors to help businesses select the proper range for their needs. Reach out to us today to learn more!
General Liability And Professional Liability | Cost
The cost of General Liability and Professional Liability insurance varies depending on the type and level of coverage. The General Liability insurance cost can range from a few hundred dollars to thousands per year, depending on the coverage limits and type of business.
Professional Liability insurance cost also varies significantly, based on factors such as industry and size of business. Generally, Professionals who offer higher-risk services or work in industries with a high risk of claims tend to pay more for their Professional Liability policies.
Overall, the cost of General Liability and Professional Liability insurance is an important business consideration. It is important to understand that insurance costs are necessary, and having the right type and level of coverage in place can provide peace of mind for business owners.
Conclusion
By understanding the critical differences between General Liability and Professional Liability insurance, businesses can make informed decisions about protecting against risks and securing financial stability. Both types of coverage offer unique benefits, which are essential to consider when selecting the correct type of policy for your business’s specific needs.
It is important to remember that the cost of not having insurance coverage can be much higher than the cost of having it. Investing in the right type and level of insurance for your business can provide financial security in times of need.
Suppose you’re unsure what insurance coverage is right for your business. In that case, the experienced advisors at Griffith E. Harris Insurance Services can help assess your risk exposure and guide you on the best policy for your particular needs.
Contact us today to learn more about General Liability and Professional Liability insurance!
Frequently Asked Questions
Is Professional Liability Included In General Liability?
General liability insurance covers physical risks like bodily injuries and property damage. Professional liability insurance protects your business from abstract hazards. As such, professional Liability is not typically included in general liability insurance.
What Is Standard Professional Liability?
A professional liability policy indemnifies the insured for losses resulting from covered errors, omissions, or negligent acts in their professional business during the policy period. This policy safeguards against claims made during the same period.
