What's the Difference Between General and Professional Liability Insurance?

When it comes to business insurance, you should consider using a combination of plans to reinforce your coverage.

No matter what type of business you own, you'll likely need to purchase one or both of these policies. So what insurance is right for your business?

General liability insurance

A general liability insurance policy is a must for nearly any small business owner, no matter what type of business you own. A general liability insurance policy will protect you and your business from third-party claims that could otherwise cripple your operations.

For example, if a customer walks into your store and slips on a banana peel, any claim filed against your business would likely be covered by a general liability insurance policy. Similarly, if the action of any of your employees leads to injury or damage of a customer, your general liability insurance policy would kick in to cover your business.

In a broad sense, a general liability insurance policy will protect your business against claims of bodily injury or property damage sustained by a third-party. Typically, this policy will cover legal fees to defend a claim and will pay out when claim settlements are negotiated (instead of a trial) or after a trial has been completed. Additionally, your policy will usually cover any damages awarded to the third-party (either damages related to bodily injury or property damage).

It’s important to understand, though, that a general liability insurance policy may have exclusions or exceptions for specific circumstances. Be sure you understand your policy and what it covers.

Professional liability insurance

Typically, if your business is required to maintain professional liability insurance, it will be outlined by your state when you apply for a business license. Additionally, the specific type of professional liability insurance may change depending on your profession. While not an exhaustive list, the following groups of professionals are usually required (or are eligible) to obtain professional liability insurance:

  • Doctors
  • Lawyers
  • Accountants
  • Contractors
  • Engineers
  • Therapists (physical and mental/emotional)
  • Real estate professionals
  • Brokers (or any investment or financial planning related field)

Rather than protecting against third-party claims that are physical in nature, a professional liability insurance policy will protect your small business from third-party claims that are based on the services your business provides.

Specifically, this type of insurance protects your business against negligence (or errors and omissions) when delivering professional services, as well as the cost a third-party may incur because of that potential negligence (or error/omission).

For example, imagine an accountant making an error on a client’s taxes, costing him thousands of dollars, or an attorney making an error when drafting a lease agreement that leads to a drastic increase in the lease payment. Any legal action against these professionals because of their negligence (or falling below an acceptable level of professional responsibility/performance), would be covered by a professional liability insurance policy.

Which type of insurance is best for your business?

Regardless of whether your business is already functioning well or you’re working on a new business idea, you need to have business liability insurance—general, professional or both. If you’re unsure of where to start or which type of insurance best suits your business, speak with a trusted insurance agent to review what you may or may not need. If you already have an insurance policy, review it annually to make sure it still covers your business appropriately.

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The information provided is not intended to be legal, tax, or financial advice. BB&T hopes you find this information useful but we cannot guarantee that it is accurate, up to date, or appropriate for your situation. You should consult with a qualified attorney or financial advisor to understand how the law applies to your particular circumstances or for financial information specific to your personal or business situation.

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