Professional Liability vs General Liability Insurance Comparison
You’ve launched your business, and you’re working hard to grow it. Things are going well, and you’re beginning to think about how to best protect what you’re building from a claim where a customer is injured on your property or possibly accidental negligence on your part.
A quick Google search brings up two terms you may not be familiar with: professional liability insurance and general liability insurance.
Liability insurance is something that most small business owners only think about when they’re told they need it.
Sorting through liability insurance options can feel a little overwhelming, but it’s an important process that can ultimately protect your business’s reputation, finances and future against some of the biggest risks you face.
The good news? You’re not alone in searching for liability insurance answers. At The Huneycutt Group we’ve helped plenty of North Carolina businesses just like yours to find the right coverage.
After all, we’re a North Carolina business too.
In our guide we’ll break down the differences between general liability and professional liability insurance. We’ll help you understand what each policy covers, how they compare, and the coverage that makes the most sense for your business.
Key Takeaways:
- General liability covers physical risks like injuries and property damage accidents.
- Professional liability protects against errors, negligence, or advice-related financial losses.
Why Liability Insurance Matters for Businesses
First things first: what is liability insurance, and why is it important?
Liability insurance offers your business protection from third-party claims of injury, property damage, or legal liability arising from business operations.
In less legal, more layman’s terms, it guards your business against the financial and reputational harm caused by a couple of common issues.
- Mistakes: Professional errors, like a client suing for a project gone wrong.
- Accidents: Injuries, like a customer slipping and falling in your office.
Unfortunately business liability risks seem to be increasing. In 2023 the number of business liability policy claims jumped 28% from the year before. Small businesses face thousands of liability lawsuits every year in the US, many of which involve figures in the millions of dollars.
This isn’t meant to scare you. It’s just to say that while business liability insurance isn’t required by law in North Carolina, it is highly recommended.
The next question: what’s the difference between professional liability insurance and general liability insurance?
What is General Liability Insurance?
General liability coverage insures your business against the following types of claim.
- Third-party property damage: Damage caused to someone else’s physical property from your activities or products.
- Third-party bodily injury: Injuries to customers, visitors, and other people on your premises, or those caused by business operations.
- Advertising injury: Legal claims relating to offenses in advertising, such as defamation, copyright infringement, libel, slander, invasion of privacy, and misappropriation of advertising ideas.
- Legal costs: Covers legal defense costs in lawsuits relating to the injuries or damages your policies cover you for.
General liability insurance covers issues like customers slipping and falling, rented machinery being damaged, and faulty products causing harm.
It can be particularly important for brick-and-mortar businesses, contractors, retailers, and event organizers.
Pro tip: If you interact with customers in person, general liability coverage is a smart move.
What is Professional Liability Insurance?
Professional liability insurance policies are more focused on mistakes than accidents. Your business should have several coverage types.
- Professional negligence: Claims that your work failed to meet the standards the client expected, resulting in financial loss.
- Errors and omissions: Mistakes, oversights, or incomplete work that negatively affect a client’s project or outcome.
- Misrepresentation: When a client feels that your advice, guidance, or professional statements were misleading.
- Legal costs: The legal fees and expenses incurred while defending your business against a lawsuit.
Common issues that tend to be covered by professional liability insurance include missed deadlines that cost a client money, incorrect advice that leads to financial loss, and project design flaws.
Professional liability coverage is especially important for service-based businesses like consultants, financial advisers, healthcare professionals, architects, and tech service providers.
Pro tip: If you provide advice online as well as in person, professional liability coverage is important.
Professional Liability vs General Liability: A Side-by-Side Comparison
| Feature | General liability insurance | Professional liability insurance |
| Also called | Commercial general liability (CGL) | Errors and omissions (E&O) insurance |
| What it covers | Bodily injury, property damage, advertising injury | Errors, omissions, negligence, misrepresentation |
| Typical claims | Customer slip-and-fall, damaged client property, defamation in ads | Missed deadlines, incorrect advice, design flaws, professional mistakes |
| Who needs it | Retailers, contractors, event organizers, brick-and-mortar businesses | Consultants, architects, financial advisors, healthcare providers, tech professionals |
| Claim trigger | Physical harm or damage caused by your business operations | Financial loss caused by your professional services or advice |
| Legal defense costs | Covered for lawsuits tied to injury or damage | Covered for lawsuits tied to professional mistakes |
| Key limitation | Doesn’t cover mistakes in professional services | Doesn’t cover bodily injury or property damage |
In short: General liability insurance and professional liability insurance protect your business against very different risks, and most businesses can benefit from both types of coverage.
How to Decide What Insurance Your Business Needs
Whether you’re comparing general liability vs professional liability policies, or thinking about an investment in both, there are a few key questions that can help to reveal the coverage you might need:
- Do clients rely on your advice or expertise?
- Could a mistake in your work cause a client to lose money?
- Do customers visit your premises?
- Do you or your employees work at client sites?
- Do contracts in your industry tend to require one or both types of coverage?
Depending on the ins and outs of your business, both general and professional liability insurance could be essential.
If in doubt, it’s wise to carry both for total peace of mind, which is exactly what most North Carolina businesses do.
Liability Insurance That Works for You
If you’re looking for assistance navigating your liability coverage options, with advice tailored to your specific situation, our team at The Huneycutt Group is ready to help.
We’ll review your needs and situation, walk you through your options, and help you find the right coverage at the right price.
You’ve worked hard to build your business. It’s time to protect it. Get in touch today.
Liability Insurance FAQs
Is professional liability the same as errors and omissions insurance?
Yes, professional liability and errors and omissions (E&O) insurance are essentially the same thing, and the terms are often used interchangeably.
Do I need general liability if I already have professional liability?
Sometimes. Most businesses benefit from having both types of coverage. Professional liability covers mistakes in your work, but it won’t protect you if someone slips in your office or if you accidentally damage a client’s property. That’s where general liability comes in.
Which is more expensive: professional liability insurance or general liability insurance?
Disclaimer time: premiums for both general liability and professional liability insurance depend on factors like your industry, location, and claims history. That said, professional liability insurance can be pricier, as it covers complex risks like advice, services, and contracts. General liability insurance is usually more affordable.
Can I be required by contract to carry both types of coverage?
You sure can. Many landlords, clients, and projects require proof of both general and professional liability coverage. It’s their way of making sure you can handle any unexpected issues.
What businesses need professional liability insurance the most?
Any service-based business that offers expertise, advice, or design should have professional liability coverage. That includes consultants, financial advisers, architects, engineers, healthcare providers, and tech professionals.
