General liability vs. professional liability insurance

General liability insurance protects your company from basic lawsuits that any business could face. It kicks in when a third party (anyone who doesn’t work for your company) sues your business over:

• Bodily injuries they incurred on your commercial premises
• Damage you caused their property
• Advertising injuries (slander, libel, misappropriation, and copyright infringement)

General liability insurance pays for legal expenses related to third-party lawsuits. That could include attorney's fees, court costs, and settlements or judgments. Any small business owner, no matter their industry or the size of their business, can face these claims. That’s why this policy is the keystone of any business protection plan.

Professional liability insurance is also called errors and omissions insurance or malpractice insurance, depending on the industry. Its coverage focuses specifically on lawsuits that stem from professional services.

Though this policy is especially important for service providers to carry, most small business owners can benefit from its coverage. That’s because professional liability insurance shields you from third-party lawsuits alleging you:

• Provided negligent professional services
• Failed to uphold contractual promises
• Provided incomplete or substandard work
• Made mistakes or omissions

These torts are among the most expensive a business owner can face. You don’t have to be at fault to be sued, either. An unhappy client could name your business in a lawsuit in an attempt to recoup losses that may or may not be your fault. Your professional liability policy ensures you won't have to pay the legal expenses, regardless of whether the claim is valid.

Here’s how general liability and professional liability insurance are alike:

Both policies deal with (separate) unavoidable liabilities. It's an unfortunate fact of being a small business owner: you are at risk for lawsuits. In fact, small business owners bear the brunt of civil tort costs in this country. Your general liability and professional liability policies work together to mitigate your expenses when accidents and oversights land you in legal trouble.

Either policy may be required by client contracts. Construction contractors: don’t be surprised if a general contractor requires you to carry your own general liability (and workers’ compensation insurance) coverage. Similarly, some clients may ask that the professionals they work with carry professional liability coverage to address potential lawsuits.

Here are some key differences between general liability and professional liability insurance to keep in mind:

General liability and professional liability cover different risk exposures. Only general liability insurance can spare your business from lawsuits over a visitor slipping and falling on your commercial property. And only professional liability insurance can shield you from the high cost of alleged professional mistakes that cause a third party financial losses.

General liability covers physical damages, while professional liability covers financial damages. Sometimes, a general liability policy includes product liability insurance for construction professionals, manufacturers, retailers, and other business owners. This coverage protects the insured from lawsuits over finished work that physically harms someone. Though this may seem to be the domain of professional liability, physical damage is the dividing line. Professional liability insurance concerns itself with lawsuits over financial losses that result from someone’s products or services.

In most cases, you’ll need both policies to adequately protect your business from the high cost of unexpected lawsuits. This is especially true if you work in a professional services industry and rent or own commercial property that’s open to the public.

There are a few instances when you might be able to avoid having either policy, but we don’t advise that you ever explore this route. You never know when someone could have an accident in your building or accuse you of not fulfilling the terms of a contract.

To explore your coverage options and get an idea about the cost of general liability and professional liability insurance, fill out an online insurance application.