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Running a small business comes with plenty of rewards — but plenty of risks too. Business insurance is one of the most important ways to mitigate those risks, but as you research what to buy, you might find yourself trying to figure out the difference between general liability vs. professional liability insurance. Both offer crucial safeguards to help alleviate costs from legal claims, but they don’t cover the same liabilities.
Knowing the difference between general liability and professional liability insurance can mean the difference between a lawsuit being a bump in the road and a lawsuit bankrupting your business. In fact, according to the Institute for Law Reform, businesses making $1 million or less can expect to face about $35 in civil liability lawsuits for every $1,000 they earn — about seven times the cost compared to big businesses. For small businesses, a lawsuit is more of a “when” than an “if.”
Securing the right small business insurance from a high-quality insurer is one way to help mitigate the financial risk that comes with lawsuits. Read on to understand the differences between general liability and professional liability insurance, what each covers, and how to buy the right policy to help protect your business.
General liability insurance (GL) is a form of business insurance that helps protect your company from financial losses stemming from third-party claims involving bodily injury, property damage, or personal injury. In simple terms: it’s a way to protect your business if a visitor (that’s the third party) gets hurt or someone’s property is damaged by you or one of your employees.
GL is often called “slip and fall” insurance because this is the insurance you’d lean on if a customer or visitor were to slip, trip, and hurt themselves on your property.
General liability insurance covers a range of legal claims, including bodily injuries, property damage, reputational harm, and advertising injuries. It can cover legal fees, medical expenses, and settlements or judgments that arise from covered claims.
Examples of these could include:
A wide range of businesses and professionals can benefit from general liability insurance, as it offers protection against financial risks stemming from legal claims. If you own or rent a physical office space, visit client properties, or advertise your business services, you may want to look into a GL policy. Some examples of people who need GL:
In a nutshell: any business that interacts with customers, clients, or the general public should consider having general liability insurance to protect against financial losses due to their product, service, employees, or place of work causing accidents and injuries to others.
Professional liability insurance is a type of coverage that protects against lawsuits that allege you’ve made a mistake or committed neglect causing harm to someone else. It protects you when a mistake you make at your job directly impacts a person or another business.
Medical malpractice insurance is one type of professional liability insurance, and possibly the most commonly known. It helps protect healthcare professionals if they make a mistake or are accused of doing something that results in bodily harm. In today’s world, many malpractice claims can name an entire healthcare team who worked with the patient, requiring everyone involved to be questioned.
Professionals in non-healthcare industries, such as accountants, consultants, independent contractors, and real estate brokers, buy a type of professional liability insurance called errors and omissions insurance as a safeguard against financial loss. This type of insurance embodies the mindset of “I hope I don’t make a mistake that hurts anyone, but if I do, I’d rather not go bankrupt.”
Employees and independent contractors in a variety of industries benefit from professional liability insurance. This coverage helps ensure small business owners like accountants, decorators, and graphic designers don’t face financial distress from a lawsuit due to an unintentional error they made.
Professional liability insurance can pay for your attorney, cover your defense costs, and handle related settlement payments. It covers a variety of claims, including negligence, misrepresentation, and failure to deliver promised services. If you mess up, professional liability insurance can usually protect you.
For a small business owner, independent contractor, or healthcare worker, professional liability insurance offers financial protection in cases where you are:
All these scenarios require legal counsel and financial resources to assist in your defense. Professional liability insurance can help foot the bill for all of them.
Specific examples include:
You should consider buy professional liability insurance when your mistakes could result in significant financial loss, pain, or suffering for a company, family, or individual. This includes any number of different professions, from dentists to financial planners. Professional liability insurance can help alleviate the financial burden and stress associated with defending you and paying any necessary settlements.
If you have clients or patients, you probably need professional liability insurance to protect yourself from claims against errors, negligence, or even bad advice. Making mistakes is human, but you don’t want one mistake to deplete your savings and reputation. And if you only have general liability insurance, it typically excludes claims of negligence, malpractice, or misrepresentation.
Here are a few professions that frequently buy professional liability insurance:
Both general liability and professional liability insurance policies address different risks. While general liability insurance covers third-party accidents that could happen in almost any setting (e.g., a client slips and falls on your property), professional liability insurance addresses errors and omissions you might accidentally make that could cause someone or a company harm. Those errors and omissions include miscalculating medication dosages or financial figures, or giving faulty advice that results in client harm.
When combined, general liability and professional liability policies can cover a broad scope of accidents and oversights that can lead to legal costs. Client contracts often require at least one of these policies. For example, general contractors usually require construction contractors to carry general liability (and workers’ compensation) insurance. Similarly, a client may insist that a marketing professional they hire carries professional liability coverage to address potential lawsuits.
For lots of businesses, combining general liability and professional liability insurance policies could be the best way to adequately protect their businesses from unexpected lawsuits. In fact, Berxi will typically allow people buying professional liability insurance to add “GL coverage” for about $150.
Having both coverages is particularly important if you work in a professional services industry and rent commercial property with a physical space clients can visit — like a medical office, accounting firm, or consultancy.
The key is understanding what each policy covers and where the risks lie for your business. It’s possible you may not need general liability insurance or professional liability insurance, but forgoing business insurance altogether when running a company opens up significant financial risks. It’s better to be safe than sorry, and being sued without proper insurance is a mistake you don’t want to make.
Whether you need general liability insurance or professional liability insurance — or both — you can buy comprehensive business insurance directly from Berxi. After shopping around for plans, you’ll find that buying directly from Berxi can save 15% or more off your general liability and professional liability insurance.
On top of the savings, Berxi is part of Berkshire Hathaway Specialty Insurance, which offers the peace of mind that you’ve got the backing of a company with financial strength ratings of A++ from AM Best and AA+ from Standard & Poor’s.
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Last updated on Jul 31, 2024.
Originally published on Jul 30, 2024.
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The views expressed in this article are those of the author and do not necessarily reflect those of Berxi™ or Berkshire Hathaway Specialty Insurance Company. This article (subject to change without notice) is for informational purposes only, and does not constitute professional advice. Click here to read our full disclaimer
The product descriptions provided here are only brief summaries and may be changed without notice. The full coverage terms and details, including limitations and exclusions, are contained in the insurance policy. If you have questions about coverage available under our plans, please review the policy or contact us at 833-242-3794 or support@berxi.com. “20% savings” is based on industry pricing averages.
Berxi™ is a part of Berkshire Hathaway Specialty Insurance (BHSI). Insurance products are distributed through Berkshire Hathaway Global Insurance Services, California License # 0K09397. BHSI is part of Berkshire Hathaway’s National Indemnity group of insurance companies, consisting of National Indemnity and its affiliates, which hold financial strength ratings of A++ from AM Best and AA+ from Standard & Poor’s. The rating scales can be found at www.ambest.com and www.standardandpoors.com, respectively.
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Berxi Editorial Team Jul 24, 2024
Amy Beardsley Aug 27, 2024
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