General vs. Professional Liability Insurance for Your Business
As a business owner, it can be a challenge to figure out what types of liability insurance you need. After all, the right policies depend on the types of risks your company faces.
General liability insurance and professional liability insurance can both protect businesses in case of lawsuits. But they cover different types of risks. You might need one over the other, or you might need both.
So how can you make sure your business is protected? Keep reading as we break down the different types of liability insurance, from who needs them and what they cover to how much they cost.
The Basics of Commercial Liability Insurance Coverage
No matter the size of your business, it’s inevitable that your business is going to face liability risks, but the type of liability may change based on what you do. For example, if you’re an accountant or consultant, you know that any errors in your advice or services can cause financial or indirect loss for your client. On the other hand, if a customer injures themself while at your place of business, or while using a product you built or designed, you’ll also be held liable. Both of these examples can lead to a lawsuit—and that’s where general liability insurance and professional liability insurance enter the picture.
The main difference between general liability and professional liability is in the types of risks they each cover. As mentioned above, general liability covers physical risks, such as bodily injuries and property damage. Professional liability covers more abstract risks, such as errors and omissions in the services your business provides.
Next, let’s dig a little deeper into the differences between the two.
What Does General Liability Insurance Cover?
If you or your employees are accused of causing bodily injury, property damage, or reputational harm—whether to a customer or someone else who isn’t affiliated with your business—general liability insurance will keep you protected. This type of coverage is also known as commercial general liability insurance (CGL).
Without GLI, your business would have to cover these costly claims out of pocket—and not many businesses have the resources to do that.
Here are the specifics of what GLI covers/ how it protects your business (by covering the following claims):
- Third-party bodily injury: If a customer suffers a slip-and-fall or other injury at your business, your policy will take care of the resulting medical bills so you don’t have to.
- Third-party property damage: If you or your employees work at a client’s house, your business faces a risk of causing property damage. Property damage liability coverage can help cover repair or replacement costs if your business damages someone else’s belongings—for example, in the event that an employee backs into a customer’s car while making a delivery.
It’s important to remember that while general liability insurance will cover injuries for people who aren’t affiliated with your business, it won’t cover injuries for your employees. To protect your employees, you’ll need worker’s compensation insurance, which can help pay for their medical expenses and ongoing care costs.
Who Needs General Liability Insurance?
Businesses aren’t legally required to have carry general liability coverage, but there are a number of circumstances where your business may be required to have it. For example, you may need proof of coverage before obtaining a license, signing a client contract, or renting a commercial space.
Wondering if general liability insurance is right for you? Here are situations where you’d benefit from coverage:
- Your business has a location that is open to the public or clients or vendors
- You use third-party locations for business activities
- You need insurance coverage in order to be considered for work contracts
- You have temporary employees
- You handle client property
- You rent or own commercial property
How Much Does General Liability Insurance Cost for Business?
General liability insurance typically costs $50 a month or less. However, just as with other insurance types, the cost of general liability insurance coverage typically depends on many factors, including:
- Size of your business- The larger your business, the more coverage you’ll need—which may impact how much you’ll pay each month.
- Your industry- Certain industries, such as construction, face more risks and therefore tend to pay more.
- Your business location- If you’re in an area with a higher risk of damage from disaster (such as floods or storms) or theft, you may face a higher rate.
- Years of experience- Older businesses typically pay a lower rate than newer ones.
What Does Professional Liability Insurance Cover?
Professional liability insurance, known in many industries as errors and omissions insurance, helps protect your business if your client claims financial damages from the professional service that you provide. This includes things like negligence and copyright infringement—damages caused by things you did and/or things that you should have done. Many business owners choose to pair it with general liability insurance for more complete coverage.
Professional liability insurance policies can help cover your legal defense costs for claims such as:
- Inadequate or inaccurate work
- Bad advice
- Missed deadlines or incomplete work
Curious if professional liability insurance is right for you? You should consider professional liability insurance if your business provides:
- A professional service
- Regular professional advice to clients
- Contractual service to your clients
Who Needs Professional Liability Insurance?
Certain states that require businesses to have professional liability insurance, including:
- New Jersey
- Rhode Island
Regardless of the state, some industries require their professionals to have professional liability coverage. For example, professionals in the healthcare field may be required by law to carry medical malpractice insurance. This type of professional liability insurance specifically protects doctors, dentists, and other medical professionals against claims that they made a mistake that led to a patient’s injury or death.
You may also need professional liability coverage if your clients require it when you sign a contract. They’ll want the peace of mind that they’re protected if your business fails to deliver on promises or breaks the terms of your contract. Regardless of whether you’re required to have it by law, it’s important to get the protection you need with professional liability insurance, especially if you work with clients or customers.
Regardless of where you live or the industry you work in, you should strongly consider carrying a professional liability insurance policy if any of the following apply to your business:
- You offer professional services directly to customers
- You have to sign a contract that requires you to carry coverage
- You regularly give advice to your clients
Safeguard Your Business With Liability Insurance
Liability insurance coverage gives you peace of mind for your business—and choosing one doesn’t have to be expensive or stressful. We make shopping for insurance simple, with our fast and affordable affordable commercial business insurance quotes. Best of all, we offer the lowest coverage rates in the industry. Get your quote and join the rest of the business owners who are saving on their insurance every month!