General liability and workers’ compensation insurance are the two most basic insurance polices that every business should have, but they’re often confused.
Don’t make the mistake of thinking just one policy will cover your business—read on for the similarities and differences between GL and work comp.
What Is General Liability Insurance?
A general liability policy covers bodily injury and personal and advertising injury (such as libel or slander) to any third party as a result of interacting with your business, employees or business property. This could include customers, vendors, partners and other people who may come into contact with your business.
The policy also covers property damage if your business or employees damage the assets of a third-party in the line of work. For example, if your employee spills a bucket of paint in the customer’s office, your general liability policy would cover the cost of the carpet replacement.
Finally, general liability will also cover legal fees, court costs and damages for lawsuits that are covered by the policy.
General liability is not legally required, but is widely recommended as a basic insurance product for all businesses to have. It also may be required contractually by vendors or business partners. Many companies expect proof of coverage from their business partners to ensure the other party is prepared with the proper insurance should the unexpected occur.
What Is Workers’ Compensation Insurance?
A workers’ compensation policy protects both employer and employee in case the employee sustains a work-related injury. Employee protections are in the form of payment for medical bills related to the injury and lost wages as a result of being unable to work. Employer protections are in the form of limited financial coverage for legal fees and damages.
Maintaining current work comp coverage for all employees is legally required in the U.S. The specific requirements are determined by the laws in your state. For example, some very small businesses may be exempt, and high-risk businesses like construction might have stricter requirements. Always refer to your state’s requirements to make sure your business is compliant.
In most states, a work comp policy—like general liability—can be purchased in the private marketplace from an insurance carrier or independent agency. In Ohio, North Dakota, Wyoming and Washington, employers must purchase their workers’ compensation policies directly from the state. These are called monopolistic states.
Workers’ Compensation and General Liability: Similarities and Differences
Work comp and general liability are easily confused because both policies cover injury, property damage and legal fees. The difference between them is the people and situations they cover.
|General Liability||Workers' Compensation|
|Covers injuries to a third party or damage to their property||Covers injuries to employees|
|Protects third parties||Protects employees|
|Covers legal fees in suits brought by a third-party||Covers legal fees in suits brought by an injured employee|
|Not legally required, but often contractually required||Legally required|
|Not regulated||Regulated at the state level|
What Insurance Policies Does My Small Business Need?
With few exceptions, all businesses should carry general liability and workers’ compensation policies to protect their employees and their assets. Both policies are similar in that price is determined by the coverage limits you choose, number of employees, total payroll and nature of the work.
Workers’ comp costs can be controlled by maintaining a safe workplace, and shopping for a competitive quote. WorkCompOne is licensed in every state, and has a network of trusted insurance carriers to get you the best price.