Professional Liability vs. General Liability Insurance: Which Covers What?

When you read about purchasing business insurance, it’s likely that the terms you will encounter most frequently are general liability insurance and professional liability insurance. The main difference between general liability versus professional liability insurance is the risks they cover. General liability business insurance covers costs if a third party, such as a customer or client, accuses your business of causing them physical injury, property damage, or reputational harm. Policies typically pay for the third party’s medical or repair bills or your legal fees, including court-awarded judgments, if they decided to sue. This is a fundamental coverage for companies of all sizes because it covers risks that any business can face, regardless of the industry or the operations. Let’s take a deeper look at professional liability vs. general liability. 

Professional liability insurance covers your legal defense if a third party claims they suffered a financial loss as a result of your mistakes or negligence. Coverage typically pays for attorney’s fees, court costs, investigator’s bills, and settlements or judgments.

These two coverages may sound similar, but they cover very different types of claims, and it is crucial to have both for a well-protected business. Let’s take a closer look at how these coverages work.

When General Liability Insurance is Needed

General liability covers some of the most common business claims. Without a policy, many business owners end up paying for unexpected lawsuits out of pocket.

Businesses should have general business liability in place if they: 

• Have customers, clients, or other parties visiting their location,
• Rent a physical location,
• Advertise their services,
• Sell, manufacture, or distribute products,
• Handle other people’s property,
• Are sole proprietors who want to protect their personal assets,
• Own a home-based business.

When Professional Liability Insurance is Needed

Typically, professional liability is reserved for those making a living through activities that require a high level of education or skill such as physicians, architects, accountants, and lawyers, but also can include business simply providing a service.

Businesses likely need professional liability when they:

• Provide professional or technical services or advice,
• Are expected to maintain professional standards,
• Are sole proprietors who want to protect their personal assets.

Covered Risks

The primary difference between general liability and professional liability is the type of risks each coverage. General liability insurance typically covers events that could happen to any business, hence the name “general” liability. Professional liability, however, covers risks specific to the services a business provides.

General liability business insurance covers your business’ responsibility for harm caused to third parties—essentially, anyone who is not your employee. If a customer, client, or other visitor suffers a physical injury, property damage, or reputational harm either at your business location or because something you or your employee did, general liability pays the associated costs.

The costs typically covered by general liability insurance include third-party medical bills, third-party repair bills, and your legal costs in a lawsuit. Most general liability policies pay these expenses whether you or your employees are the source of the claim.

Professional liability also covers harm to third parties; however, it pays for financial losses due to your negligence or professional errors and omissions. For example, a professional liability policy might be triggered if a client accuses your law firm of failing to file a brief that could have won their case.

Some of the costs of professional liability insurance pay for include lawyer’s bills, court fees, investigation costs, settlements, and judgments. Like general liability, most professional liability insurance policies cover your actions and those of your employees.

About Bozzuto & Co. Insurance Services, Inc.

Bozzuto & Company Insurance Services has provided business and personal insurance solutions to clients throughout California since its founding in 1981. Our experienced staff understands the unique needs that each person has when insuring their lives and their businesses, and we pride ourselves on our deeply personal customer service. We are happy to help you through every step of the insurance selection process. Contact us today at (800) 400-6394 to learn more about what we can do for you.