Whether you are a business owner, contractor, or freelancer, understanding the difference between Commercial General Liability (CGL) and Professional Liability insurance is crucial. While both coverages protect your business from potential risks and lawsuits, they have unique features and coverage areas that set them apart.
In this article, we will explore the key differences between CGL and Professional Liability insurance so that you can make an informed decision about which one is right for your business.
What is Commercial General Liability (CGL)?
Commercial general liability insurance, also known as "business liability insurance" or "general liability insurance," is a type of policy that protects businesses from financial losses due to property damage, bodily injury, and advertising or personal injury claims. It covers expenses related to physical and non-physical harm caused to third parties by your business operations.
What Does CGL Cover?
CGL typically provides coverage for:
Property Damage: This includes any destruction or damage to physical property that is not owned by you, such as a client's vehicle.
Bodily Injury: Covers medical expenses, legal fees and lost wages in case someone is injured due to your business operations. For example, if a customer slips and falls on your premises.
Personal and Advertising Injury: Protects against claims of defamation, libel, slander, and copyright infringement.
What Does CGL Not Cover?
CGL does not cover:
- Employee injuries: This is covered under workers' compensation insurance.
- Professional mistakes or negligence: This type of claim falls under professional liability insurance.
- Property damage to your own business: This is covered by property insurance.
What is Professional Liability Insurance?
Professional liability insurance, also known as "errors and omissions insurance," is specifically designed to protect businesses that provide professional services from claims of negligence or mistakes in their work. This type of policy is crucial for professionals whose work involves providing advice, expertise, or recommendations to clients.
What Does Professional Liability cover?
Professional Liability insurance typically provides coverage for:
Negligence or Errors: This includes any mistakes, omissions or failure to deliver services as promised.
Legal Fees: Covers legal expenses in case of a lawsuit.
Damages: Pays for financial losses incurred by your clients due to your professional errors or negligence.
What does Professional Liability not cover?
Professional liability insurance generally does not cover:
- Intentional acts or fraud: Claims that arise from intentional acts or fraudulent behavior are not covered.
- Property damage or bodily injury: These fall under CGL insurance.
- Employee injuries: This is covered under workers' compensation insurance.
Key Differences between CGL and Professional Liability Insurance
To summarize, here are the key differences between Commercial General Liability and Professional Liability insurance:
Coverage: CGL covers property damage, bodily injury, and personal/advertising injury while professional liability covers negligence or errors in your professional services.
Targeted Industries: CGL is more suitable for trade-based businesses such as contractors, while Professional Liability is more geared towards professionals such as doctors, lawyers, and consultants.
Types of Claims Covered: CGL covers physical harm or damage to third parties, while professional liability covers financial losses or damages resulting from professional errors or negligence.
Importance for Businesses: While both types of insurance are crucial for protecting your business, the need for professional liability insurance is higher for businesses that provide professional services.
Risks Covered: CGL covers risks associated with business operations, while professional liability focuses on risks related to your professional services.
Understanding the difference between CGL and Professional Liability insurance is essential for making an informed decision about the type of coverage your business needs. By evaluating the specific risks your business faces, you can choose the right insurance policy that provides adequate protection for your business. Remember to review your policies regularly and make necessary updates as your business evolves to ensure that you have comprehensive coverage at all times. So, be proactive and protect your business with the right insurance!