General liability or professional liability insurance?

You know you need business insurance to protect against claims and lawsuits. But what kind? You’ve heard about general liability insurance and professional liability insurance, but what’s the difference? It’s confusing. Here’s what you need to know.

There are two basic types of business insurance: general liability and professional liability. They 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 into what’s covered by Hiscox policies.

What is general liability insurance?

General liability (GL) insurance  is the most basic kind of business insurance, and virtually every business should have it to protect themselves. It 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. Here are some examples:

• 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 to replace the customer’s window.

• 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.

• 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 any settlement or judgment.

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 (even if you also sell a product), you should have professional liability insurance coverage. It covers you when you did something you shouldn’t have done (an error) or when you 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.

For example:

• 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 any damage award.

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.

• Short-term liability insurance is coverage you get for a specific period of time, whether it’s months, weeks, days or even hours. It can cover you for a specific project or if your business is seasonal.

• Commercial general liability is another name for general liability insurance for businesses.

For more information on all of these types of business insurance, visit the small business insurance page.

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