Understanding the Differences Between General Liability Insurance and Professional Liability Insurance for Consultants

Does your consulting business face the unique challenges of covering different types of risks? Understanding the distinctions between General Liability Insurance (GLI) and Professional Liability Insurance (PLI) can help you make informed decisions regarding which types of insurance your consulting business needs.

The Purpose of Coverage

General Liability Insurance (GLI) provides protection against bodily injury, property damage, and personal or advertising injury claims. GLI is typically required for businesses with a physical presence or those who interact with the public. On the other hand, Professional Liability Insurance (PLI), also known as Errors and Omissions (EO) Insurance, protects against claims related to negligence, errors, or omissions in professional services or advice provided.

Types of Risks Covered

General Liability Insurance covers a wide range of risks, including:

Bodily Injury: Covers medical expenses and legal fees if someone is injured on your business property. Property Damage: Covers damage to someone else’s property caused by your business operations. Personal and Advertising Injury: Covers claims of defamation, copyright infringement, or false advertising.

Professional Liability Insurance addresses the following types of risks:

Errors or Omissions: Covers mistakes or failures to deliver promised services. Negligence: Covers claims that your professional advice or actions caused a financial loss. Legal Costs: Covers defense costs, even if the claim is found to be baseless.

Examples of Covered Scenarios

General Liability Insurance scenarios can include:

A customer slips and falls in your store and files a lawsuit for medical expenses. Your business damages a client’s property while providing on-site services. A competitor sues your business for a defamatory advertising campaign.

Professional Liability Insurance scenarios may involve:

A client sues a consultant for providing advice that led to a financial loss. A patient sues a doctor for a misdiagnosis or improper treatment. A software developer is sued for failing to deliver a functional application as agreed.

Who Needs It

General Liability Insurance is required for:

Retailers Contractors Businesses with physical locations or interactions with the public

Professional Liability Insurance is essential for:

Accountants Attorneys Consultants Architects Real estate agents

Legal and Contractual Requirements

General Liability Insurance may be required by:

Landlords Vendors Current or prospective clients

Professional Liability Insurance may be required by:

Licensing boards Professional associations Contracts with clients or in certain industries

Cost Differences

General Liability Insurance costs may vary based on the size and nature of your business, location, and level of public interaction. It is generally more affordable than Professional Liability Insurance for smaller businesses.

Professional Liability Insurance is more expensive, especially in industries where errors can lead to significant financial losses, such as medical malpractice. Costs depend on the profession, risk level, and claims history.

When making your choice, consider the nature of your business and the types of risks you are facing. Some businesses may require both types of insurance for comprehensive protection.