One of the most common questions we hear is about the difference between general and professional liability insurance. Is one better than the other? When it comes to general liability vs. professional liability, what exactly separates them, and which do you need? While each business owner makes their own calculations, here are some general pointers to keep in mind:
General and professional liability insurance both:
- 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," meaning if you go outside that territory you're not covered.
General Liability vs. Professional Liability:
- Professional liability is usually written on a "claims made" basis, while general liability is usually written on an "occurrence" basis. We're going to break those terms down for you: for professional liability on a "claims made" basis, damages must be made within the active policy period or it's not covered. Professional liability is written like this because damages often arise from an accident with an unclear starting point. For example, if a plumber fails to capture a crucial error that leads to damage, it is ambiguous when the "accident" occurred. Did the accident occur when they first saw the error and failed to identify or address it, or at any number of checks down the road that also missed the error?
- Professional liability covers all damages arising connecting to your providing, or not providing, professional services, including financial damages unrelated to property damage or bodily injury.
- Professional liability coverage and exclusions are generally more specific to each class of business, because it provides broader coverage. While many white collar professionals may face similar risks of "slip and fall" incidents, for example, they may each face particularly unique, largely financial, liability risks when conducting their business. For construction professionals, this is particularly relevant. 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. On the other hand, for a personal trainer, the professional liability claims might be more limited.
As you can see, the question of general liability vs. professional liability is a bit hard to understand but can also be broken down to make it easier to figure out.
Are these always separate policies?
Nope! In fact, 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 be especially sure that you're getting a policy that's specific to your work, so that you can know you're covered in case of a claim.
If you're buying a small business insurance
policy from a company, you'll want to clarify exactly what your policy covers, and what it doesn't. The best way to move forward with confidence is by knowing that even if something happens that you don't anticipate, your business is covered. Because any entrepreneur knows that while your category might be "small business," your business is your career, and your salary and your future--and that's anything but small.