General Liability vs. Workers’ Compensation Insurance
Many businesses need both general liability and workers' comp insurance policies. General liability and workers' comp insurance each protect businesses in different ways and are essential coverages for many reasons. General liability insurance protects businesses against expenses related to third-party lawsuits for claims of bodily injury or personal property damage. Workers' compensation insurance can reimburse employees of a business for injuries or illnesses related to the job or work environment.
A local independent insurance agent can equip your business with either general liability insurance, workers' compensation, or both. But first, it's helpful to learn more about each type of coverage and how it can be essential for your company. Here's an overview of general liability insurance and workers' comp and why they're necessary.
What Is General Liability Insurance?
General liability insurance is designed to protect businesses against expenses related to third-party or non-employee damages. If a third party, such as a customer, delivery worker, or other guest, files a claim against your business for bodily injury or personal property damage, your business's general liability insurance can help pay for related expenses if the claim results in a lawsuit.
General liability coverage can reimburse a business for attorney, court, and settlement expenses. So, if a customer slipped and fell on a wet floor at your business because there wasn't proper signage to warn them, they could file a lawsuit if they got seriously injured. Your business could then recoup its losses through general liability coverage. This insurance protects against business losses related to:
- Bodily injuries a third party sustains at your business
- Property damage to third parties
- Advertising injuries to third parties (i.e., slander, libel, etc.)
The average cost of general liability insurance for small businesses is about $42 per month or $504 per year. However, costs vary depending on your business's claims history, location, size, operations, and number of employees.
The amount of coverage you need impacts your business's premiums. An independent insurance agent can help your company find affordable coverage.
What Is Workers' Compensation Insurance?
Unlike general liability insurance, workers' compensation is specifically designed to protect a business's employees. A worker's comp policy can be used to reimburse employees for the cost of medication, treatment, surgery, rehabilitation, and more related to injuries or illnesses due to their jobs.
To be covered, injuries and illnesses must have been caused by the actual work environment or job duties, including injuries caused by repetitive movements required for work. Workers' comp can also pay to replace a portion of an employee's wages if they miss time at work due to their injury or illness. This type of insurance can cover:
- Medical expenses due to work-related injuries and illnesses
- Disability benefits if a work-related injury causes a disability
- Lost wages if an employee must miss work for treatment or recovery
- Death benefits for the affected family of an employee who dies due to a workplace incident
The average cost of workers' comp is about $45 per month or $540 per year. However, workers' comp costs vary by a business's number of employees, location, operations, claims history, and amount of coverage needed.
Businesses are often required by law to carry workers' compensation if they have at least one employee, but these requirements vary by state. Having workers' comp also exempts a business's employees from being able to file lawsuits for work-related incidents covered by the policy.
A workers' comp policy would be necessary for a business if, for example, an employee got a deep cut due to a sharp edge on a table at the business. Coverage could help reimburse the employee for necessary medical treatment, including possible stitches, and replace a portion of their wages if they had to miss work due to their injury.
How Are General Liability and Workers' Compensation Insurance Similar?
General liability and workers' comp insurance are similar in certain ways, considering they both provide coverage for bodily injuries and, depending on the type of business and its operations, both coverages might be mandatory. Each kind of coverage, workers' comp and general liability insurance, also protects a business from expenses related to certain types of lawsuits.
Workers' comp exempts a business's employees and their families from filing lawsuits related to workplace injuries, illnesses, and even deaths. General liability insurance reimburses a business for lawsuit expenses if a third party sues them for bodily injuries or personal property damage.
General liability and workers' comp insurance for small businesses and companies of any size may each be required. Workers' comp is often mandatory by state law if a business has at least one employee, with few exceptions.
Certain states only require coverage for businesses with four or more employees, for example, and others exempt certain industries, such as the agricultural field, from having to get coverage for any number of workers. General liability insurance, on the other hand, is often required by lenders if you take out a loan for your business property.
How Are General Liability and Workers' Compensation Insurance Different?
Both general liability and workers' comp insurance are designed to protect a business in various ways, but there's no actual overlap in what each policy covers. This creates the need for both workers' comp and general liability insurance for many businesses.
Workers' comp exempts a business from employee lawsuits and possible lawsuits from employees' family members due to workplace incidents, injuries, deaths, and illnesses. But workers' comp does not cover property damage to employees or customers, nor does it cover third-party lawsuits filed against the business for injuries or any other claim.
General liability and workers' comp insurance for small businesses differ in the kinds of lawsuits covered, primarily. A business's general liability insurance covers it against expenses related to third-party lawsuits for bodily injuries or personal property damage; not employee lawsuits.
General liability insurance does not protect a business's employees against costs related to injuries, illnesses, and other incidents, but it does protect the company from settlement costs if it loses a lawsuit filed by a customer, delivery worker, or other third party like a guest.
Who Needs General Liability Insurance?
A general liability insurance policy may not always be required for businesses, but it's a type of coverage always highly recommended for business owners. General liability coverage is an essential part of any small business insurance or standard business insurance policy and is typically included in standard policies. Depending on your business's unique operations, the need for general liability coverage may be greater than average.
Without general liability insurance, your business is vulnerable to potentially hefty lawsuit expenses if it gets sued by a customer, etc. Not having general liability insurance or enough coverage overall can lead to potential bankruptcy after just one lawsuit.
If you're concerned your business might not have adequate liability protection, speak to an independent insurance agent about possibly increasing your policy's limits or supplementing excess liability coverage with a commercial umbrella insurance policy.
Who Needs Workers’ Compensation Insurance?
Texas is the only state that doesn't mandate workers' comp insurance for most private employers. However, all states have their own regulations for coverage. While many states require businesses with at least one employee, regardless of full or part-time status, to have coverage, others only require coverage if there are three or more employees, for example.
Checking your state's workers' comp laws and requirements is critical. This can help ensure your business gets set up with the required amount of coverage and isn't underinsured.
Businesses must comply with the states' regulations for workers' comp to avoid fines, mandatory suspended operations, and other harsh penalties. Your independent insurance agent can also help clarify the requirements for workers' comp in your area.
Do I Need Both General Liability & Workers' Comp Insurance?
Both workers' comp and general liability insurance protect businesses from different kinds of claims and possible liabilities. Because of this, it's wise for many business owners to have both general liability and workers' comp insurance policies. If you own a business that has even one employee, it's highly likely that you're even required to have both kinds of coverage.
Working with an independent insurance agent is a great way to ensure you have the coverage you need, including the mandatory amount of workers' comp coverage for the number of employees you have. Independent insurance agents can also help ensure your business has an ideal amount of general liability coverage relevant to its specific operations and exposures.
Your agent can help your business get set up with the right types and coverage amounts to protect against all kinds of lawsuits. And down the road, your agent can help file claims directly for your business and even update your coverage as necessary.
https://www.thehartford.com/business-insurance/general-liability-vs-workers-compensation
https://www.insureon.com/small-business-insurance/compare/general-liability-vs-workers-compensation
https://www.nextinsurance.com/comparison/general-liability-vs-workers-compensation/
https://foundershield.com/blog/workers-compensation-state-by-state/