General liability vs professional liability insurance: How to know what you need

In this Article:

• What is general liability insurance?
• What does general liability insurance cover?
• What does general liability insurance pay for?
• What is professional liability insurance?
• What does professional liability insurance cover?
• Differences between general and professional liability
• Similarities between general and professional liability
• Other types of business insurance
• How do I know what kind of insurance my business needs?

You know you need business insurance to protect against claims and lawsuits. But what kind of insurance do you need? You’ve heard about general liability insurance and professional liability insurance, but what’s the difference? And in what ways are they similar? Here’s what you need to know.

Two basic types of business insurance, general liability and professional liability, cover different types of risks. There are some other names for these types of coverage, and some other kinds of policies for specific risks. Let’s break it down and see what’s covered by Hiscox policies.

What is general liability insurance?

General liability (GL) insurance is the most fundamental kind of business insurance, and virtually every business should have it to protect themselves. Sometimes you’ll hear it called commercial general liability or CGL.

General liability insurance covers three main categories of claims: property damage, bodily injury, and personal and advertising injury. Keep in mind that GL covers third-party claims, which means that someone else is blaming you for their injury or damage

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What does general liability insurance cover?

Here are some examples of what could be covered under a general liability policy.

• Property damage. A contractor is remodeling a kitchen when one of their workers is moving equipment and breaks a large window in the home. The contractor’s general liability policy could cover the cost of replacing the customer’s window.
• Bodily injury. An IT consultant is meeting with a client to discuss a project. As the client is getting up to leave, they trip over a cable, falling and injuring their wrist. The consultant’s general liability policy could cover the customer’s medical costs, including lost wages.
• Personal injury. At a hair salon, one of the stylists is overheard making false and disparaging statements about a one-time client. The conversation gets back to the client, who sues for slander, a type of personal injury. The salon’s general liability policy could cover defense costs as well as a settlement or judgment.

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What does general liability insurance pay for?

When you have a covered claim, your general liability insurance policy can pay for medical costs and lost wages, in the case of a bodily injury claim. If the claim is for property damage, the policy can pay to repair or replace the property. For claims of personal injury or advertising injury, your general liability can pay for the financial impact of the injury.

A general liability policy can also pay your defense costs and court costs if you have to go to court or mediation. You’ll be covered for these costs even if the suit is found to be without merit, or if you prevail in court. A business of any size can be sued for almost any reason, so it’s critical to have this important protection.

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What is professional liability insurance?

Professional liability insurance, sometimes called errors and omissions (E&O) coverage, protects you against claims or lawsuits that result from professional services you provided. If you give advice to customers, you should have professional liability insurance coverage. It covers you when you allegedly did something you shouldn’t have done (an error) or didn’t do something you should have done (an omission). Professional liability insurance also covers personal injury, like libel and slander. A professional liability policy can cover you even if you haven’t made a mistake. 

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What does professional liability insurance cover?

Professional liability insurance covers claims or lawsuits that allege that your or one of your employees:

• was negligent in providing professional services
• did not uphold the terms of a contract
• made a mistake or failed to do something they should have, or
• provided incomplete or faulty work

during the performance of their professional services. Your professional liability policy may also cover bodily injury or damage to someone else’s property if it happens as a result of your professional services.

Here are some examples of how professional liability insurance protects businesses.

• Suppose a business consultant makes a recommendation to a client that they eliminate several jobs and reduce expenses to improve their profitability. The client reduces the expenses, but doesn’t eliminate any jobs, and profits decline. The client insists that the consultant gave bad advice and sues for negligence. The consultant’s professional liability insurance policy could cover their defense costs and a damage award.
   
• An architect is sued by their client for not completing a project on time, despite the client’s repeated adjustments to the scope of work. Even though the lawsuit is determined to be without merit, the architect incurs the costs of a defense attorney and time away from the business for court appearances. These costs could be covered by the architect’s professional liability insurance policy. 

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What is the difference between general liability insurance and professional liability insurance?

General liability insurance covers third-party (someone else’s) claim that you damaged their property or caused them to be injured. It covers claims that arise out of business operations.

Professional liability insurance covers a business’s costs if they are sued because they were negligent, made an error, or didn’t do something they were supposed to do. It can cover the cost of a business to defend itself against these types of charges, even if they are found to not be at fault. Professional liability covers claims that arise from professional services.

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What are the similarities between general liability insurance and professional liability insurance?

Both general and professional liability insurance provide financial protection against risks your business may face. Each policy covers different risks, but both will pay if your business is sued for certain things, or if someone claims you caused them specific kinds of financial harm.

General and/or professional liability insurance may be required in order for your firm to bid on or be awarded a contract. Many prospective clients require liability insurance coverage before they will award a project, so they know that the firm doing the job is protected if something unexpected happens.

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What about other kinds of business insurance?

There are some other kinds of business insurance you may hear about.

• A business owners policy includes general liability coverage plus coverage for the business’s property, like equipment, tools, etc.
• Cyber security insurance protects your company against the costs associated with a cyber breach.
• Worker’s compensation insurance covers medical costs and lost wages if an employee gets sick or injured on the job. It’s required in nearly all states if you have employees. 

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How do I know what kind of insurance my business needs?

💡✍ If you’re not sure what kind of insurance you need to protect your business, you can find out in 20 seconds. If you want to know how much insurance coverage for your business will cost, answer a few questions about your business and get a quote.

Have more questions about business insurance? Call 1-866-283-7545 Monday – Friday, 7am – 10pm ET and speak to a licensed Hiscox agent.

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