The Difference Between General and Professional Liability

A psychiatrist giving consultation to a patient, meant to depict the need for professional liability insuranceAs a business owner, one of your top priorities is keeping your company protected from liability. A single lawsuit can be enough to topple a small business if not outfitted with the proper protections. However, with every industry facing its own set of risks, how do you know which insurance is right for you? Does a contractor require the same type of commercial insurance as a business consultant? To best safeguard your company, let’s review the difference between general and professional liability.

What Does General Liability Insurance Cover?

Let’s first review both types of liability insurance, starting with general liability. General liability insurance protects businesses from a person or object unconnected to the company becoming injured or damaged. The three main areas of coverage include:

  • Bodily Injury: This covers the medical expenses and legal fees of someone who is injured at your business, such as slipping on an icy sidewalk.
  • Personal Injury: This covers claims resulting from damage to a person’s reputation, such as libel or slander committed via advertising.
  • Property Damage: General liability covers the expenses resulting from damage to someone’s property, such as a valet scratching a patron’s car.

Many locations, such as leased commercial properties and venues, will require a business to show proof of property. It’s even essential for self-employed professionals, as a client may become injured while visiting your home or office for a consultation.

What Does Professional Liability Insurance Cover?

Professional liability – also known as error and omissions insurance – protects you when you’re accused of having given poor advice or not doing your job correctly. This policy helps cover damages from legal expenses and defense costs. Some examples of situations where this policy comes in handy are:

  • Clerical Errors: If a bookkeeper records an error that costs your client thousands of dollars, the ensuing legal fees and damages will be covered.
  • Poor Installation: If you’re a plumber who incorrectly installed piping that resulted in a flood, professional liability will help cover the damages.
  • Tax Filing Errors: This policy has you covered if you’re an accountant who incorrectly filed a client’s tax return that resulted in a penalty fee.

If you run the risk of legal action being taken against you as a result of wrong advice or errors, this insurance is vital for your business. This usually includes such professions as lawyers, home inspectors, tech professionals, medical professionals, and consultants.

What Is the Difference Between General and Professional Liability?

While there are some overlaps between the two policies, such as covering damage to third parties and helping you recover from financial loss, there are also some significant differences. These policies differ in the following ways:

  • Event Timing: Since the start of an error is often unclear, professional liability covers on a “claims made” basis, meaning it covers errors occurring within the active policy period. General liability, on the other hand, covers claims based on when they occur.
  • Source of Damages: General liability covers damages that result from events not necessarily connected to your business dealings, whereas professional liability covers damages resulting from a professional service you are delivering.
  • Type of Industry: Professional liability provides broader coverage, meaning policies are specified according to business type. Alternatively, general liability is applicable across most industries, with no need for policy specifications.

If your business runs into both types of risks, it’s essential to invest in both policies to ensure complete protection.

Knowing the difference between general and professional liability can help you make the best decision for your business. Mistakes are bound to happen, no matter your industry, so ensuring you have the right protection is vital. At TJ Woods Insurance, our agents will help you determine which policies you need and will outfit you with the best business insurance for your budget. If you require help safeguarding your business from liability claims, contact us today.