General Liability vs. Professional Liability Insurance [What Do You Need?]

By: Ben Cavallo, CIC, AAI, CISR

Together with partner Keith Signoriello, Ben Cavallo is the principal and co-owner of C&S Insurance.

If you’re a small business, you’ve probably heard about all types of business insurance — with general liability and professional liability being two of the most common. Though they’re both meant to protect your business from financial harm, they’re designed to cover different types of risks.

For example, if someone is injured on your premises, you’ll need to be covered by general liability, whereas if a client claims that the quality of your work cost them money, you’ll need to be covered by professional liability insurance.

Understanding how these complementary coverages compare and contrast will help you make the best decision about what to purchase to best protect yourself and your business and save money. You may only need to have one or the other, but it could be beneficial to have both.

How Are General Liability & Professional Liability the Same?

Both protect against what are considered business liabilities — incidents your business could be accused of being responsible for through its daily operations. General liability and professional liability help alleviate the financial burden these incidents can cause, so your business will suffer minimal impact following a claim.

Either might be needed to meet contractual requirements. Some employers or clients may require you carry a specific amount of general liability or professional liability coverage before you can work for them. Construction contractors may be required to carry general liability coverage, while a lawyer or accountant may be asked to carry professional liability by a client.

How Are They Different?

The main difference between general liability and professional liability is in the types of risks they each cover.

  • Professional liability insurance, also known as errors and omissions (E&O) insurance, is a type of coverage designed for business people who provide services or advice to clients. If your business makes a mistake, gives faulty advice, neglects something important, or just gets accused of screwing up, professional liability insurance can provide the funds needed to correct the mistake. It may also cover legal defense costs or help with a court settlement.
  • General liability insurance is designed to protect your company against third-party claims of property damage, bodily injury, or advertising injuries/reputational harm. This type of insurance will protect you if a customer breaks a hip on your wet floor or if you’re a contractor and accidentally smash a window while carrying plywood into a client’s house. This type of coverage is also known as small business liability insurance or commercial liability insurance.

What Does General Liability Cover?

The types of physical damages that general liability insurance covers arise from bodily injury, property damage, or personal or advertising injury. Examples can include:

  • A client or customer’s medical bills if they sustain an injury due to your operation or on your business property
  • Legal costs should you need to defend your business in court
  • Copyright infringement claims
  • Property damage caused by your business or employees
  • Reputational harm if someone sues you for malicious prosecution, libel, slander, wrongful eviction, or privacy violations

It’s important to remember that this coverage doesn’t include injuries to your employees. You’ll need workers’ compensation insurance to help cover any work-related injuries or illnesses.

Who Needs General Liability & What Does It Cost?

General liability insurance is a good idea for most contractors and/or small business owners. You should consider general liability insurance if you or your employees interact with customers in person, have access to clients’ property, use advertising in any way, or use third-party locations for your business.

Like any type of insurance, the cost will depend on many factors, including:

  • Type of business. If you’re in certain industries, such as construction, you face more risks and therefore will likely have to pay more for a policy.
  • Your location. Rates will vary based upon geography and where you conduct business. Are you in a rural or urban area? Does your business operate in an area that has a higher risk of natural disasters or weather-related damage?
  • Number of employees. More employees means more risk.
  • Years of experience. Businesses that have been around longer typically pay a lower rate than newer ones.
  • Claims history. More claims in the past could be an indicator of future claims.

If you’re looking to lower the cost of general liability insurance, consider:

  • Selecting a lower coverage premium and/or increasing your deductible amount
  • Implementing safety standards to lower your risk of exposure to accidents
  • Taking advantage of discounts offered through pay-in-full or bundles policies
  • Implementing a strict loss control program.

What Does Professional Liability Cover?

Professional liability insurance will protect you if you or your business gives faulty advice, neglects important information, or makes a mistake.

Here are some examples: You own a house-painting business but paint a client’s house the wrong color. Technically, the property isn’t damaged, so you can’t file a general liability claim. You need professional liability insurance to pay for the time, labor, and cost of redoing the job correctly.

You may also see the term “malpractice insurance” in the healthcare and legal fields. This is a type of professional liability coverage, but the terms are not 100% interchangeable.

It’s important to note that professional liability won’t cover losses that are caused by intentional or fraudulent acts. It must be an honest mistake. Professional liability won’t cover losses that are typically addressed by other forms of insurance, such as third-party claims of bodily injury or property damage (general liability), employee injuries (workers’ comp), and employee claims of harassment, discrimination, and wrongful termination (EPLI).

Who Needs Professional Liability Insurance & What Does It Cost?

Some states may require certain businesses to have professional liability insurance. For instance, healthcare professionals need medical malpractice insurance, which is a type of professional liability.

You might have to carry professional liability coverage if your clients require it when you sign a 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.

Many different occupations need professional liability insurance, including:

In some cases, professional liability insurance may be required by a job contract or vendor agreement.

When it comes to cost, the amount will vary from one business and industry to another. General factors that can impact your professional liability cost include your:

  • Type of business
  • Policy coverage limits
  • Number of employees
  • Years in business
  • Location
  • Claims history

What Are the Other Types of Business Insurance?

  • Workers’ compensation: Massachusetts workers’ compensation is a state-required insurance coverage that every business owner must carry. This type of coverage protects all workers in the event they are injured at their workplace or suffer a job-related illness. Workers’ comp is required even if your employees are part-time or seasonal, relatives/family members, non-citizens, or working “under the table.”
  • Commercial auto insurance: This coverage is intended to pay for losses involving cars, trucks, vans, and other vehicles that operate in the course of doing business. In Massachusetts, as in most states, commercial auto insurance is required. You cannot drive your business vehicle (or get it registered) without maintaining required levels of protection.
  • Commercial property insurance: This type of insurance is designed to protect your place of business and its contents. While it can be purchased on its own, most often this type of coverage is bundled into a broader program, including general liability coverage for any bodily injury or damage to the property of others.
  • Business Owners Policy: This type of coverage, also known as a BOP, is a simplified bundle of at least two essential business coverages. It’s designed for small businesses in certain low-risk industries. By combining several policies into one, some businesses can meet their primary insurance needs and save money rather than buying each coverage individually. The two main types of coverage that every BOP will include, regardless of where you buy it, are commercial property insurance and general liability insurance.
  • Cyber liability/data breach insurance: There are two types of coverage: first-party coverage (for any attack related to expenses that your business incurs) and third-party coverage (mainly for IT companies and contractors who are responsible for the safe storage of data). This type of insurance may also cover social engineering/phishing-related claims.
  • Employment practices liability insurance: EPLI addresses workplace claims that include sexual harassment, discrimination (based on race, sex, age, and other protected categories), wrongful termination, breach of employment contract, wrongful discipline, illegal background checks, and more. 

Trust Your Business With C&S Insurance

You don’t want to rely on just anyone when it comes to insurance for your business. Here at C&S, we represent more than 20 different insurance carriers, which means we can shop for incredible rates and different types of coverage on your behalf. Whether you need general or professional liability insurance (or both!), we have a team of dedicated experts who are ready to answer your questions — no matter your profession or industry. Contact us today for more information or to get started on a quote!

FAQs

Q: Is general liability or professional liability required by Massachusetts law?
A: No, but failing to carry it will put you at risk for all expenses related to a claim against your business. Either might be needed before entering into a contract with a client.

Q: Does general liability have a deductible?
A: Yes. You can choose the deductible amount when you get a quote.

Q: Is general liability tax deductible?
A: Yes, as long as it’s considered part of the “cost of doing business,” it can be claimed as an expense. But it’s best to always verify this with a tax professional.

Ask the right questions before choosing a MA commercial insurance agent.
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