General vs. Professional Liability: Which Insurance Do You Need?
Small business insurance is confusing. If a client slips in your office, one policy pays. If you give that same client bad advice that costs them money, a completely different policy pays. Confusing General Liability (GL) with Professional Liability (PL) is a costly mistake. Here is the definitive guide to knowing which policy covers “physical damage” and which covers “expensive mistakes.”
1. The Rule: “Body vs. Brain”
The easiest way to distinguish them is by the source of the damage.
Professional Liability (Brain/Abstract): Did the client lose money because of your advice, negligence, or failure to deliver?
Note: PL is often called “Errors & Omissions” (E&O) in real estate and tech.
2. Side-by-Side Comparison (Checklist)
Different professions face different risks.
| Feature | General Liability (GL) | Professional Liability (PL/E&O) |
|---|---|---|
| Triggers | Slip & Fall, Dog Bite, Fire, Libel/Slander. | Negligence, Missed Deadlines, Copyright Infringement. |
| Who Needs It? | Contractors, Retail Stores, Restaurants. | Consultants, Lawyers, Accountants, Web Designers. |
| Example | You spill coffee on a client’s laptop. (Property Damage). | You write code that deletes the client’s database. (Error). |
3. Timeline: The “Coverage Gap” Scenario
Imagine you are a Web Designer. You visit a client to launch their site. Two things go wrong. Here is how your insurance reacts.
| Event | Policy Needed | Result Without It |
|---|---|---|
| Event A (Trip & Fall) |
GL | |
| Event B (Site Crash) |
PL (E&O) | |
| Conclusion | Bundle |
4. Strategy: The “Tail Coverage”
What happens when you retire?
- The Problem: PL policies are usually “Claims-Made.” This means the policy must be active when the claim is filed, not just when the work was done.
- The Risk: You retire in 2026. A client sues you in 2027 for work done in 2025. If you canceled your policy, you have no coverage.
- The Fix: Buy “Tail Coverage” (Extended Reporting Period) when you close your business to cover future claims from past work.
5. Warning: The “Employee” Exclusion
Neither of these policies covers your staff.
⛔ Not Workers’ Comp
If your employee slips and falls in your office:
- General Liability: Denied. (Only covers third parties/clients).
- Professional Liability: Denied. (Only covers services).
- Requirement: You generally MUST have Workers’ Compensation insurance to cover employee injuries. It is a legal requirement in most states if you have even one employee.