General liability vs. workers' compensation insurance

General liability insurance covers basic third-party claims for injury and property damage, while workers' compensation insurance covers costs stemming from employee injuries. In addition to the liabilities they cover, general liability and workers' comp have two other differences:

• 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' 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.

Here's a closer look at each type of coverage:

A general liability insurance policy protects your business against common third-party liability claims for many small businesses, including:

• Third-party property damage, such as a computer repair technician accidentally dropping a customer's laptop and breaking it
• Third-party bodily injury, such as a customer slipping and falling in a coffee shop and spraining their arm
• Personal injuries and advertising injuries, such as libel, slander, and copyright infringement

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

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.

Workers' compensation insurance covers your employees for work-related injuries and illnesses and is required by most states for businesses with at least one employee.

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

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 causes 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.