General liability vs. workers' compensation insurance

General liability insurance safeguards your business against the high cost of certain unavoidable liabilities. However, this policy does not cover employee injuries. Instead, general liability covers third-party (non-employee) damages, including:

• Bodily injuries that a person sustains on your business real estate
• Damage you accidentally cause to someone’s property
• Advertising injuries (slander, libel, or trademark infringement)

When your small business is sued over one of the above incidents, general liability insurance covers your attorney's fees, court costs, and settlements or judgments up to the policy limit. Because these claims can be the result of accidents or oversights that any business may encounter, general liability is often considered an essential coverage.

Workers’ compensation insurance (also known as workman's comp or workers' comp) provides coverage when an employee suffers a work injury or illness. In fact, most states require employers to carry this coverage if they have even one employee. The laws vary depending on your industry and where you live. You can count on this coverage to help your business pay for:

• Work-injured employees’ medical and recovery expenses
• Replacement wages when employees can’t work because of a covered injury or illness
• Dependent support payments and funeral expenses when fatal occupational injuries occur
• Liability expenses when your business is sued over a work injury

If you don’t have employees, you can still carry workers’ comp to cover yourself. However, many sole proprietors with employees opt out of their own coverage to reduce their premiums.

Here’s how general liability and workers’ compensation insurance are similar:

Both policies deal with bodily injuries. General liability protects you when a client breaks an ankle on your property and sues for medical expenses. Workers’ comp steps in when your employee breaks an ankle while working and makes a claim for coverage.

Both policies may be required for construction professionals. If you work as a construction contractor, a general contractor may require you to carry your own general liability and workers’ comp coverage. General liability can cover lawsuits over your completed work if it injures a third party. And having your own workers’ comp coverage means the general contractor won’t have to cover you with their policy. Not to mention, in some states, construction workers must carry workers’ comp even if they don’t have any employees. For example, solo roofers in California must carry coverage.

Despite their similarities, workers' comp and general liability differ in fundamental ways:

Workers’ comp is regulated by state laws. It’s often the only insurance policy that employers are legally required to carry outside of commercial auto insurance. Though the laws differ depending on where you live, most regulations apply when your business has a certain number of employees. In some states, that means one full-time or part-time employee. In others, you must have several employees before the mandate kicks in. Learn more about your state’s workers’ comp laws.

General liability insurance matters regardless of your business’s size. While workers’ comp mandates usually kick in at certain employee thresholds, a small business owner should have general liability coverage even if they have no employees. That's because there’s no predicting when a visitor could slip at your business, suffer an injury, and sue you for their accident.

You likely need both general liability and workers’ comp coverage to run a strong business. One policy guards you from claims when third parties are injured on your property. The other helps your business adhere to state laws and protect your employees when their work takes a physical toll. Fill out an online insurance application to get quotes for both policies.