What’s the difference between general liability and professional liability insurance? We get asked this question a lot. Is one better than the other? What exactly separates general liability vs. professional liability, and which do you need?
While each business owner needs to assess what business insurance they may need, we can help them understand the differences and overlaps between coverage.
What is commercial general liability vs. professional liability?
First, let’s go over some basics of what these types of insurance are.
General liability insurance
General liability insurance is also known as "slip and fall" insurance. It protects you when someone or something not connected to your business is injured or damaged.
General liability insurance coverage protects your business from injury or damage. It covers "the three P's": physical, personal, and property:
- Physical injury: Also known as “bodily injury,” this refers to any physical harm caused to a third party.
- Personal injury: Also called “advertising injury.” This refers to claims for damage to a party’s name or reputation. It may be in the form of libel, which means written or visual defamation, or slander, which refers to verbal defamation.
- Property damage: This protects against business liability for damage to property belonging to someone else during your work.
General liability is the most common insurance for small businesses and self-employed professionals. Usually, it’s the first policy purchased by new businesses.
Professional liability insurance
Say you’re a plumber fixing a sink. An error in your installation could cost your customer a lot of money farther down the line if your error causes a flood. Or maybe you’re a hairstylist and used a dye that damages a client’s hair. Maybe you’re a personal trainer, and you gave the wrong advice due to not knowing a client’s full medical history.
Professional liability insurance helps cover damages related to legal expenses or defense costs.
General and professional liability insurance overlaps
Here’s where the types of risks cover the same ground.
- Cover damage to third parties. They do not include damage to the insured or the property of the insured.
- Cover accidental damage, not intentional damage. That means that if you attack someone, your insurance likely won't cover you.
- Restrict coverage to a "coverage territory." This means that if you go outside that territory, you're not covered.
- Help cover financial loss. If you become involved in a lawsuit, both coverage helps with legal fees and court costs.
What are the differences between general liability vs. professional liability?
Now let’s go through where the coverage diverges.
1. Timing and when events happen
Professional liability is usually written on a "claims made" basis. Meanwhile, general liability is usually written on an "occurrence" basis. Let’s break these terms down.
When something is on a "claims made" basis, damages must be made within the active policy period, or it's not covered. Professional liability works like this because sometimes the starting point of an error is unclear. When does the damage start?
For example, suppose a contractor fails to notice a crucial error that leads to damage. It may be ambiguous when the "accident" happened. Did the accident occur when the contractor failed to identify or address an error? Or did the accident happen during any number of checks down the road that also missed the error?
2. Services and quality of work vs. physical damage
Professional liability covers damages connecting to your providing — or not providing(!) — professional services. These include financial damages unrelated to property damage or bodily injury.
For example, you’re a stockbroker and make a typo, costing your client a ton of money. It happens: one unintentional error cost a Japanese brokerage $225 million.
Or you’re a web developer hired to update a retailer’s website for Black Friday. When the big day happens, the site crashes, causing your client to lose out on sales. (It happens to even big retailers.)
These examples are related to work you do as a professional rather than physical risks.
3. Industry/types of business-specific
Professional liability coverage and exclusions are generally more specific to each business class. This is because it provides broader coverage in the policy itself. General liability insurance covers the opposite. It’s applicable across more industries but provides specific coverage within the policy.
Think of it this way. Many professionals may face similar "slip and fall" incidents. But, they will each face unique, largely financial, liability risks when conducting their business. An accountant's liability will look very different from a real estate agent's or construction professional.
For instance, if you're a carpenter or general contractor, it's probably not hard to imagine making a mistake that could cost tens of thousands of dollars to fix. But, for a personal trainer, the professional liability claims might be more limited. They'd be more concerned about a customer getting hurt during a training session.
Are general liability and professional liability policies always separate?
Nope! A general liability policy can include an endorsement that changes the policy to include professional liability coverage, either partially or fully.
If that's the case, you want to ensure you're getting a policy specific to your business needs so that you can know you're covered in case of a claim. When buying a small business insurance policy, clarify exactly what it covers and what it doesn't.
General liability vs. professional liability: NEXT helps small businesses with both
The best way to move forward with confidence is by knowing that you're covered even if something happens. Your General and Professional Liability insurance should be simple, affordable, and tailored to your industry and the mistakes that might happen.
NEXT Insurance helps small business owners create customized, affordable insurance packages. Aside from general and professional liability insurance, we also offer workers’ compensation insurance, commercial auto, commercial property and business owner’s policy to cover your business.
You can buy your policy 100% online after answering a few questions and have your Certification of Insurance instantly. It takes about 10 minutes.
Get your instant insurance quote today.