Key Takeaways

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General liability insurance covers physical risks like customer injuries on your premises or property damage from your operations, while professional liability insurance protects against mistakes in your professional services.

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Most businesses need general liability insurance, while only those providing professional advice or services for a fee need professional liability. Businesses offering physical services and professional advice need both types of coverage.

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Professional liability insurance costs more than general liability. Sole proprietors pay around $80 monthly for professional liability versus $28 for general liability, but the cost depends on the industry and risk level.

Comparing General and Professional Liability Insurance

General liability and professional liability insurance protect against different risks. General liability covers physical risks like property damage or bodily injury, while professional liability focuses on errors or omissions (often called E&O protection) in professional services.

The comparison table will help you decide if you need general liability, professional liability or both.

General Liability
Professional Liability

What it covers: Physical risks like injuries and property damage

What it covers: Mistakes in professional services and advice

Common claims: Customer slips and falls, accidental property damage

Common claims: Errors in work, missed deadlines, negligent advice, faulty recommendations

Who typically needs it: Businesses with physical locations, customer visits, employees

Who typically needs it: Service providers, consultants, professionals giving advice

Business examples: Restaurants, retail stores, contractors, landscapers

Business examples: Accountants, lawyers, consultants, architects, real estate agents

Often required by: Landlords for leases, clients for contracts, some licensing boards

Often required by: Professional licensing boards, client contracts, government contracts

What it doesn't cover: Professional mistakes, cyber issues, employment practices

What it doesn't cover: Physical injuries, property damage, criminal acts

State requirements: Some states require it for contractor licensing

State requirements: Required for lawyers in Idaho or Oregon; required for some insurance and real estate agents

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Who Needs General Liability Insurance?

Most businesses with physical operations, customer interactions or employees need general liability coverage. This insurance protects against the most common business risks resulting in expensive lawsuits.

Businesses That Benefit From General Liability

Any business with a retail location, office, employees or products should have general liability insurance. Service providers who work at client sites or interact with customers in person also need this coverage.

We analyzed claims data and found these businesses have the highest general liability risks:

  • Restaurants and food service: Customer injuries, food poisoning claims
  • Retail stores: Slip-and-fall accidents, product-related injuries
  • Contractors: Property damage, worksite injuries to non-employees
  • Fitness centers: Equipment-related injuries, premises liability
  • Event planners: Venue accidents, vendor-related incidents

What General Liability Covers

General liability insurance protects your business from three main areas:

  1. 1

    Bodily injury claims

    General liability covers medical and legal expenses when someone gets hurt on your property or because of your business operations. A customer slipping on a wet floor at your café falls into this category.

  2. 2

    Property damage claims

    When you accidentally damage someone else's property, general liability pays for repairs or replacement. It covers the repair costs if your landscaping crew damages a client's irrigation system.

  3. 3

    Personal and advertising injury claims

    This coverage protects against lawsuits for slander, libel or copyright infringement. If you accidentally use a copyrighted image in your marketing without permission, it handles the legal expenses.

Requirements and Claims Scenarios

While states require general liability in rare cases only, it becomes required for:

  • Commercial lease agreements: Most landlords require proof of coverage before you can rent business space.
  • Client contracts: Many companies won't work with vendors who don't carry general liability insurance.
  • Contractor licensing: States like Alabama, Georgia and Connecticut require general liability for contractor licenses.
  • Business permits: Some cities require general liability coverage for certain business licenses.

Examples of general liability claims include:

  • A customer breaks their ankle after slipping on ice outside your store ($35,000 average cost).
  • Your employee accidentally damages the client's expensive equipment during installation ($50,000+ potential cost).
  • Competing business sues you for using similar advertising slogans ($15,000+ in legal fees).
  • Your product caused the customer an allergic reaction ($25,000+ in medical costs).

Who Needs Professional Liability Insurance?

Any business that provides professional services, advice or expertise should consider professional liability coverage. This insurance protects against claims that your professional work caused clients financial harm.

Service Providers That Benefit From Professional Liability

Our research shows these professionals face the highest risk of professional liability claims:

  • Business consultants: Bad advice leading to financial losses
  • Accountants and tax professionals: Errors causing penalties or missed deductions
  • Real estate agents: Misrepresenting property details or missing deadlines
  • IT professionals: Software recommendations that don't work as promised
  • Architects and engineers: Design errors causing construction delays

What Does Professional Liability Cover?

Professional liability insurance protects against claims that your professional services caused financial harm:

  1. 1

    Errors and omissions

    Professional liability covers mistakes in your work that cost clients money. An accountant who makes a calculation error resulting in IRS penalties would be covered under this provision.

  2. 2

    Negligent (bad) advice

    It protects you when your recommendations don't work out as expected. For example, a business consultant whose strategy causes a client to lose market share could face a negligent advice claim.

  3. 3

    Failure to deliver services

    It covers situations where you don't complete work as promised. Missing a big deadline that costs your client a business opportunity falls under this coverage.

  4. 4

    Breach of professional duty

    It applies when clients claim you didn't meet the standard of care expected in your profession.

Requirements and Industry-Specific Claims Examples

Professional liability is required in these situations:

  • Professional licensing boards: Real estate agents in over 10 states must show E&O coverage to get licensed.
  • Government contracts: Federal contractors often must carry professional liability insurance.
  • Client agreements: Many corporate clients require service providers to carry E&O coverage.
  • Industry regulations: Some fields mandate professional liability as part of regulatory compliance.

Here are common professional liability claims by industry:

  • Technology professionals get sued for software that doesn't perform as promised, data security failures or system integration problems that disrupt client operations.
  • Financial advisors face claims for investment recommendations that lose money, insurance products that don't provide expected coverage or inadequate retirement planning.
  • Health care providers deal with misdiagnosis claims, treatment errors, or failure to inform patients of risks and alternatives properly.
  • Legal professionals handle malpractice claims for missed deadlines, inadequate representation or conflicts of interest that harm clients.

How to Decide Which Coverage You Need

Use these questions and risk factors to determine which coverage makes sense for your situation.

  1. 1

    Do you have a physical business location where customers visit?

    If yes, you need general liability for slip-and-fall accidents, property damage and similar incidents.

  2. 2

    Do you provide professional advice or services that could cause financial harm if done incorrectly?

    If yes, you need professional liability for errors, omissions and bad advice claims.

  3. 3

    Do you work on client sites or handle their property?

    General liability covers damage you accidentally cause to client property during your work.

  4. 4

    Could a mistake in your work cost a client money?

    Professional liability covers financial losses clients have from your errors or missed deadlines.

Risk Factors to Consider

High general liability risk factors:

  • Customer visits to your location
  • Employees working at client sites
  • Using equipment that could cause injuries
  • Advertising or marketing activities
  • Selling products that could cause harm

High professional liability risk factors:

  • Providing expert advice or recommendations
  • Managing client projects with deadlines
  • Handling sensitive client data or information
  • Making decisions that affect client finances
  • Working in regulated industries

Do You Need Both Coverages?

Many businesses have risks requiring general and professional liability insurance because a single incident can trigger claims under both policies. Take an IT company installing new servers at a client's office. If a technician accidentally damages the client's equipment during installation, that's a general liability claim. But if the software configuration doesn't work properly and causes the client to lose business, that becomes a professional liability claim. In this instance, the business would want both coverages.

IT companies, architecture firms, fitness studios, financial advisors and accountants, real estate and insurance agents, and medical practices are among the businesses most likely to need both types of coverage. Any company that faces physical risks and provides professional services should consider dual coverage.

What Affects General and Professional Liability Costs?

We analyzed pricing data from major insurers and found that professional liability costs more than general liability due to higher claims and complex legal disputes.

General liability insurance is more affordable, with sole proprietors paying around $28 monthly and LLCs averaging $67 monthly. Contractors and higher-risk businesses typically pay $80 to $150 monthly.

Professional liability insurance costs more due to complex claims and higher settlement amounts. Sole proprietors pay around $80 monthly, while other professional service providers range from $120 to $250 monthly.

Note: These quotes are based on small businesses with one to five employees. Large companies with more employees, higher revenue or complex operations pay more for both types of coverage. Insurance companies typically offer 10% discounts when companies bundle both policies.

Here are the factors that affect your cost:

  • Industry risk level: Construction pays more for general liability than other low-risk industries; medical professionals pay more for professional liability
  • Business size: Larger revenue means higher insurance costs
  • Claims history: Previous claims increase rates by 20% to 40%
  • Location: Areas with many lawsuits cost more
  • Coverage limits: Most buyers choose $1 million per occurrence/$2 million aggregate

How to Shop for General and Professional Liability Insurance

Whether shopping for inexpensive general liability insurance, the best professional liability insurance or both, the steps below can help you get the right coverage for your needs.

  1. 1

    Assess your business needs

    Evaluate the specific risks associated with your industry and operations. This will help you determine the type and amount of coverage required.

  2. 2

    Research insurance providers

    Look for reputable insurance companies with experience in your industry. Compare quotes, coverage options and customer reviews to find the best fit for your business.

  3. 3

    Understand policy details

    Carefully review each policy's coverage limits, exclusions and deductibles to ensure they cover your business's specific risks and provide adequate protection.

  4. 4

    Seek professional advice

    Consult an insurance broker or advisor for tailored recommendations. They can clarify any uncertainties about coverage and suggest policies that best suit your needs.

  5. 5

    Check for discounts

    Inquire about discounts you qualify for, such as bundling policies or having a good claims history.

  6. 6

    Review and purchase the policy

    Review all terms and conditions thoroughly once you have selected the best policy. Make sure you understand the coverage details before finalizing the purchase.

FAQ: General Liability vs. Professional Liability Insurance

Still have questions about which coverage you need? These answers address the most common concerns about general and professional liability insurance.

What's the difference between general liability and professional liability insurance?

Do I need both types of insurance?

Is general liability insurance required by law?

What businesses need professional liability insurance?

Does general liability cover my employees?

Can I get both policies from the same insurance company?

Do home-based businesses need these insurances?

About Mark Fitzpatrick


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Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. With over five years of experience analyzing the insurance market, he conducts original research and creates tailored content for all types of buyers. His insights have been featured in publications like CNBC, NBC News and Mashable.

Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!

Passionate about economics and insurance, he aims to promote transparency in financial topics and empower others to make confident money decisions.


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