General Liability Vs. Professional Liability Coverage


Professional liability insurance and general liability insurance are necessary for different types of businesses. General liability insurance is a sufficient form of protection for businesses that do not offer professional services from licensed employees. Professional liability insurance is a smart investment for companies that offer customers professional services from certified or licensed employees.

Umbrella Coverage

General liability insurance, or umbrella coverage, protects a business from several forms of liability claims. These include damages associated with bodily injury, property damage, slander and false advertising. For example, if a customer happens to fall down and become injured while in your store, any lawsuit she may bring against your business is covered under your umbrella insurance policy. General liability insurance is a common investment for most types of businesses because it protects against a variety of potential problems.

Limits of General Liability

General liability insurance can protect a business only up to the limit of its policy. This means if the court awards a person a judgment against your business in excess of your general liability policy, you are responsible for paying the difference. Additionally, general liability insurance does not cover punitive damages levied against you by the court. Punitive damages are levied against a business as a deterrent for other businesses that may have engaged in similar inappropriate behavior. A punitive damage award can cost a business millions of dollars.

Professional Liability Coverage

Professional liability insurance is designed for industries and positions which garner a significant amount of risk in extending services to clients. Professional liability insurance differs from personal liability insurance in that it protects a policyholder only when a client incurs a financial loss resulting from the policyholder's actions. Professional liability insurance also works on a claims-made basis. This means if a person cancels his professional liability insurance and a claim is filed against him, he effectively has no coverage even though the incident may have occurred when the policy was previously active.

Professions Requiring Professional Liability

Certain professions and business are more likely to require professional liability insurance than others. This is because the services the business offers are often performed by workers with some form of certification or professional license. Construction businesses that perform in-home repairs and additions, electrical inspection companies and even attorneys should have some form of professional liability insurance. Failure to have an active policy could leave a professional open to a lawsuit from, say, a dissatisfied homeowner or a client who feels he lost too much money in a divorce settlement.

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