General liability vs. workers' comp insurance
General liability and workers' comp insurance are coverages that protect your business in different scenarios. General liability insurance safeguards against claims of injury or damage from people outside the business, like customers or vendors. Workers' compensation insurance covers employees who sustain work-related injuries or illnesses.
Does general liability cover workers' comp claims?
No, general liability and workers' compensation insurance are separate coverages that do not overlap.
General liability insurance coverage includes incidents that do not involve employees, while workers' compensation covers injuries or illnesses that happen to employees. Workers' comp pays medical fees, lost wages, and other costs associated with the injury. It also protects you if an employee sues because of a workplace accident or injury.
Am I required to have both general liability and workers' comp for my small business?
Requirements for general liability and workers' comp depend on your industry, operations, and location. While general liability can be optional for some businesses, workers' compensation is usually necessary if you have employees.
General liability requirements
General liability insurance isn't usually legally required. However, not having general liability coverage could result in your business having to pay expensive injury claims or lawsuits.
For example, suppose you run a restaurant and a customer slips on the bathroom floor and gets hurt. Without insurance, you could be fully responsible for medical expenses, lost wages, attorney fees, and other costs related to the injury.
Even though general liability insurance isn't required by law, there are many scenarios where your business might need to carry it. For instance, if you rent a building or an office suite, your lease will usually require that you have sufficient general liability coverage. Learn more about business renters insurance.
You might also be required to carry general liability if your business contracts with government entities or provides professional services that require licensing, such as real estate or accounting.
Workers' compensation requirements
Nearly every state requires workers' compensation insurance for businesses with employees. Some states, referred to as monopolistic states, require you to get workers' comp coverage through state-run programs. These state funds do not include general liability insurance.
The penalties for not carrying workers' comp for your business can vary. At a minimum, many states charge hefty fines. Complying with the law helps your business avoid unnecessary costs.
As with general liability insurance, many clients and companies require proof of workers' comp insurance before signing contracts.
Workers' comp and subcontractors
If you work with subcontractors, requiring them to carry their own workers' comp insurance is a good idea. No matter the worker's status, you'll be held responsible if someone on your team is injured on the job, and general liability would not help in that case.
Learn more about workers' comp insurance for contractors.
Do I need both general liability and workers' comp?
Most businesses need both general liability and workers' comp to ensure wide-ranging protection. Combined, these coverages shield you from liabilities related to third-party and employee claims. Additionally, having insurance coverage can provide peace of mind and financial security for your business after unexpected accidents.
