Running a business means taking on different types of risks. A customer could be injured at your business, your work could accidentally damage someone’s property, or a client could claim that your professional advice caused them a financial loss.
That’s why understanding the difference between General Liability Insurance and Professional Liability Insurance is important for business owners.
Although both types of insurance can help protect your business from liability claims, they are designed for very different situations. Choosing the right coverage depends on the type of work you perform, the people you serve, and the risks your business faces.
What Is General Liability Insurance?
General Liability Insurance is designed to protect businesses from certain third-party claims involving bodily injury, property damage, and other covered liabilities.
For example, general liability coverage may become important if:
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A customer slips and falls at your business.
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Your employee accidentally damages a customer’s property.
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Someone is injured because of a covered condition related to your business.
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Your business is accused of causing certain advertising or personal injuries.
For many businesses, General Liability Insurance is considered a basic part of a commercial insurance program.
What Is Professional Liability Insurance?
Professional Liability Insurance is designed for businesses that provide professional services, advice, or expertise.
It’s sometimes referred to as Errors and Omissions Insurance, or E&O Insurance.
This type of coverage can be particularly important when a client claims that your professional services caused them financial harm.
Examples may include claims involving:
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Errors in professional work
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Mistakes or oversights
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Failure to provide promised services
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Professional advice that allegedly causes financial losses
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Negligence related to professional services
The exact coverage varies by policy, so businesses should review the specific terms, exclusions, and limits of any professional liability policy.
General Liability vs. Professional Liability
The easiest way to understand the difference is to consider what caused the claim.
General Liability Insurance generally focuses on physical risks involving third parties, such as bodily injury or property damage.
Professional Liability Insurance generally focuses on claims alleging that your professional services, advice, or expertise caused a financial loss.
For example:
General Liability: A client visits your office, slips on the floor, and suffers an injury.
Professional Liability: A client claims that an error in your professional work caused them a financial loss.
These are very different risks, which is why one type of insurance generally shouldn’t be viewed as a replacement for the other.
Which Businesses Need General Liability Insurance?
General Liability Insurance can be useful for a wide variety of businesses, including:
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Contractors
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Restaurants
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Retail stores
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Salons
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Manufacturers
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Property owners
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Service businesses
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Small businesses with customer-facing locations
If customers, vendors, or other third parties interact with your business, liability risks may exist.
For contractors, for example, general liability can be particularly important because their work may involve construction sites, tools, equipment, and customers’ property.
Which Businesses Need Professional Liability Insurance?
Professional liability is generally more relevant to businesses where clients rely on specialized knowledge, advice, or professional services.
Examples can include:
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Consultants
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Accountants
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Architects
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Engineers
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Marketing professionals
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Technology professionals
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Designers
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Other professional service providers
Some clients or contracts may also require a business to carry Professional Liability Insurance before services begin.
Can a Business Need Both?
Yes.
Some businesses may benefit from carrying both General Liability Insurance and Professional Liability Insurance because they protect against different types of risks.
For example, imagine a consulting company that operates from an office.
A client could potentially slip and become injured while visiting the office. That’s a general liability exposure.
The same client could also claim that incorrect professional advice caused a financial loss. That’s a professional liability exposure.
Having both types of coverage can help address these different risks, subject to the terms and conditions of the policies.
Don’t Assume One Policy Covers Everything
One of the most common insurance mistakes business owners make is assuming that a general liability policy automatically covers every type of liability claim.
It doesn’t.
Likewise, professional liability isn’t designed to replace every other type of business insurance.
Depending on your business, you may also need:
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Cyber Liability Insurance
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Business Income Coverage
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Commercial Umbrella Insurance
The right combination depends on your industry and how your business operates.
Consider Your Contracts
Business contracts can also influence your insurance needs.
A client or general contractor may require you to carry specific coverage or minimum liability limits before allowing you to begin work.
Before signing a contract, review any insurance requirements carefully and discuss them with your insurance professional.
Making sure your policy meets contractual requirements ahead of time can help prevent delays and potential problems later.
Continue Learning About Business Insurance
Understanding liability coverage is just one part of managing the risks that come with owning a business. Different industries have different exposures, and learning about the various types of commercial insurance can help you make more informed decisions.
Continue reading one of our other business insurance guides to learn more about coverage options and ways to protect the business you’ve worked hard to build.
Review Your Coverage as Your Business Changes
Your liability exposures can change as your business grows.
Consider reviewing your insurance if you:
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Add new services
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Hire employees
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Take on larger clients
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Sign new contracts
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Expand into new locations
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Purchase business property
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Begin working with new industries
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Increase your annual revenue
A regular insurance review can help ensure your coverage continues to reflect what your business actually does.
Work With an Independent Insurance Agency
Choosing between General Liability Insurance and Professional Liability Insurance isn’t always straightforward.
An independent insurance agency can review your business operations and compare coverage options from multiple insurance carriers.
Instead of simply choosing the cheapest policy, you can evaluate coverage limits, deductibles, exclusions, and endorsements to determine what makes sense for your business.
This can be particularly helpful for small businesses that may not have an internal risk management team or insurance specialist.
Final Thoughts
General Liability Insurance and Professional Liability Insurance protect against different types of risks.
General liability generally focuses on claims involving third-party bodily injury, property damage, and certain other liabilities. Professional liability generally focuses on claims alleging that professional services, advice, errors, or omissions caused a client’s financial loss.
Depending on your business, you may need one, the other, or potentially both.
The most important step is understanding what risks your business actually faces and making sure your insurance coverage is designed around those risks.
If you’re ready to review your business insurance, get a commercial insurance quote to compare liability coverage options and find protection that fits your South Dakota business.
