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General liability vs. workers' compensation insurance

Both general liability insurance and workers' compensation insurance provide coverage when someone is injured at your business. Learn the benefits offered by each policy, the key differences in coverage, and why you may need them for your business.

What is general liability insurance?

A general liability insurance policy protects your business against common business risks, such as customer’s bodily injury, damage to a customer’s property, copyright infringement, and advertising injury.

Most general liability policies also include product liability coverage, or you can add this coverage as an added endorsement to your general liability policy.

A general liability insurance policy would cover the following situations:

A small business owner giving a customer their order
  • A customer has a slip and fall injury at your business.
  • Property damage that yourself or an employee cause to a customer’s home or business while visiting their property.
  • Someone sues you for libel or slander over something you post on social media, your company website, or an advertisement.
  • A rival business sues you for a claim of copyright infringement.
  • A customer claims they were injured using one of your products and files a product liability lawsuit.

What does general liability insurance pay for?

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 type of insurance.

What is workers' compensation insurance?

Workers’ compensation insurance covers your employees for work-related injuries and illnesses.

The workers’ compensation laws in most states require workers’ compensation insurance coverage for businesses with one or more employees.

Regular health insurance is unlikely to cover a personal injury or illness that happens on the job, and would instead be handled by workers’ compensation claims.

Workers’ comp coverage includes:

  • Employee medical expenses and recovery costs (such as physical therapy) for work-related injuries and illnesses.
  • An employee’s lost wages if they’re unable to work because of a work-related injury or illness.
  • Employee death benefits and dependent support payments in case of a fatal injury at work.
  • Employer’s liability expenses, such as legal fees and settlements, in case an injured employee sues your business over a workplace injury.
A worker putting away inventory in a warehouse

If you are a sole proprietor and don’t have employees, you can still carry workers’ comp insurance to cover yourself for medical costs that health insurance may not pay for.

Compare quotes for general liability insurance and workers' compensation

How are general liability insurance and workers' compensation similar?

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

Both policies deal with bodily injuries. General liability insurance protects you when a client suffers an injury on your property and sues you for medical expenses. Workers’ comp insurance steps in when your employee is injured 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. A general liability policy can cover lawsuits over your completed work if it injures a third party or caused property damage. And having your own workers’ comp coverage means the general contractor won’t have to cover you with their policy.

In some states, construction workers must carry workers’ comp insurance coverage even if they don’t have any employees. For example, solo roofers in California must carry coverage.

How are general liability and workers' compensation insurance different?

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

Workers’ comp insurance is regulated by state laws. It’s often the only business 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’ compensation laws.

General liability insurance matters regardless of your business’s size. While workers’ compensation 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.

How much do general liability and workers’ compensation insurance cost for small businesses?

A small business owner calculating their small business insurance payments

Commercial insurance can be affordable. Median costs for small business owners are:

General liability: $42 per month
Workers' comp: $45 per month

Factors that influence business insurance costs include:

  • Your industry and risks
  • Business operations
  • Number of employees
  • Policy limits and deductibles

Protect your business with essential business insurance policies

You likely need both general liability and workers’ comp coverage to run a strong business. General liability insurance guards you against claims when third parties are injured on your property. Workers' compensation insurance 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 from top-rated insurance companies.

Updated: November 11, 2022
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