If you own a business, you'll need several types of business insurance to be properly protected against all the common and unexpected risks of the trade. Two major forms of coverage most businesses need are general liability and workers' comp insurance. These policies can help your business cover expenses related to employee injuries or illnesses, as well as third-party injuries and property damage. Without this coverage, your business could face costly lawsuits that it might not be able to recover from.
Fortunately, a local independent insurance agent can help you find the right general liability and workers' comp insurance. They'll get you set up with the ideal policies for your unique business. But first, here's a comprehensive guide to general liability insurance vs. workers' comp, including the key differences between them and what to know about each.
Key Takeaways - General Liability Insurance vs. Workers' Comp
- Many businesses need both general liability insurance and workers' compensation to protect against different types of costly risks.
- General liability can protect against third-party claims of bodily injury or property damage, while workers' comp can protect against employee claims of work-related injury or illness.
- Workers' comp is often required by law for most businesses with employees, while general liability is sometimes required for leases and other contracts.
- Businesses that fail to get either of these types of coverage are vulnerable to employee or third-party lawsuits and other potential financial losses.
- Working with an independent insurance agent is strongly recommended, as they can help your business get set up with the proper amount of each of these types of coverage in one convenient policy.
What Is the Difference Between General Liability Insurance and Workers' Compensation Insurance?
Both workers' comp and general liability insurance protect your business against potential lawsuits and related expenses, but in different ways.
What is general liability insurance?
General liability coverage protects your business against the cost of third-party property damage or bodily injury, and possible lawsuits they may file against your business. This coverage can reimburse third parties like customers, delivery people, and other guests at your business for medical expenses after an injury or to repair or replace damaged or destroyed personal property.
It can also reimburse the business for attorney, defense, court, and settlement or judgment expenses in a lawsuit. Further, general liability can cover claims of advertising injury to third parties. This coverage is often required for contracts, leases, and licensing deals.
What is workers' compensation insurance?
Workers' comp coverage can reimburse a business's employees for costs stemming from work-related injury or illness. It can also provide compensation in the form of death benefits for surviving family members if an employee is killed on the job.
For an injury or illness to be covered, the employee must have sustained it due to job tasks or the work environment. Workers' comp can provide partial wage replacements for affected employees who must take time off work to recover from their workplace injury or illness and also pay for their medical bills or other necessary treatments, as well as rehabilitation costs to get them back to work.
Having workers' comp also exempts a business from employee lawsuits or lawsuits filed by their family members for covered work-related incidents. This means employees cannot sue a business that provides workers' compensation insurance for their work-related injury or illness. Workers' comp insurance is also mandatory in most states for businesses with employees, but there are exceptions.
What Does General Liability Insurance Cover?
A general liability insurance policy covers costs related to third-party bodily injury and personal property damage caused by a business. It can cover any type of third party, including customers, delivery workers who aren't employed by the business, visitors, and guests.
General liability coverage can reimburse the third party for medical expenses in the event of an injury and pay to repair or replace their damaged or destroyed property. Many types of incidents are covered, including slip-and-fall accidents, which are common on business premises.
General liability insurance can also often cover incidents of advertising injury or harm done to others caused by a business's marketing or advertisements. This can include claims related to copyright infringement, slander, or libel. Liability coverage can reimburse third parties for expenses related to advertising injuries and also cover the business's legal defense if it is sued for the incident.
Who Needs General Liability Insurance?
Most businesses can benefit from having general liability insurance. While this coverage isn't typically required by law, in some cases, a business may be required to have it. For example, certain customers may request proof of insurance coverage from your business before they agree to work with you.
Further, certain workers, such as general contractors and real estate agents, are often required to get general liability coverage before they can get their necessary certifications or licenses to work. Additionally, a business's landlord might require it to have general liability coverage before it's allowed to rent property.
What's Not Covered by General Liability Insurance?
General liability insurance comes with its own set of exclusions, just like any other type of coverage, such as intentional harm to others. Don't expect your general liability policy to cover any of the following:
- Employee bodily injury or property damage
- Commercial property damage
- Professional errors or omissions
- Employee lawsuits
- Intentional or malicious acts against others
Make sure to read your business's general liability policy in depth to determine its specific coverage exclusions. This can help you avoid filing unnecessary claims and seek additional coverage to bridge any gaps.
How Much Does General Liability Insurance Cost?
Many businesses pay an average of $42 per month or about $504 per year for general liability insurance. However, the cost of your policy can vary widely depending on your industry and more. General liability coverage costs can be influenced by the following factors:
- Business location
- Business industry
- Operations and exposures
- Prior claims history
An independent insurance agent can help you find exact quotes for general liability and workers' comp insurance costs in your town.
Is Employer Liability Insurance the Same as General Liability Insurance?
No, general liability insurance and employer liability insurance are not the same. General liability insurance protects your business against the cost of third-party bodily injury or personal property damage claims. It doesn't cover employee negligence.
Employer liability insurance protects business owners from the cost of claims filed by injured workers. If a business is sued by an employee or their family after a workplace injury, illness, or death, this coverage can reimburse it for the cost of an attorney and other settlement expenses.
Similar to workers' comp, claims stemming from injury or illness caused by job duties or the work environment are covered. The injury or illness can be caused by a single incident on the job or due to repetitive tasks like lifting. This coverage can also cover claims related to injury stemming from insufficient training.
What Does Workers' Compensation Insurance Cover?
Workers' comp insurance protects employees against incidents of job-related illness or injury. It is a key component of small business insurance and standard business insurance. This coverage is often legally required for most businesses with one or more employees.
Requirements for workers' comp vary by state, and certain types of businesses may be exempt from needing coverage, such as those in the agricultural field. Workers' comp covers the following:
- Medical expenses: Workers' comp can reimburse employees for doctor's visits, hospital stays, physical therapy, prescription medications, and other medical costs.
- Lost wages: Workers' comp can provide partial wage replacements, often up to two-thirds of their typical pay, during the necessary time off work for recovery.
- Death benefits: Workers' comp can provide death benefits to surviving family members, like spouses, if an employee dies due to their job.
- Disability and permanent injury: Workers' comp can provide ongoing coverage and long-term benefits for permanent injuries and disability benefits in certain cases.
- Retraining expenses: Workers' comp can fund an employee's training for another position if their injury, illness, or disability prevents them from taking the same job.
An independent insurance agent can help you find the right workers' comp policy for your business.
Who Needs Workers' Comp Insurance?
Whether you need workers' comp will depend on your state's laws and regulations. Most states require workers' comp coverage for most businesses that have employees. However, these requirements vary by state.
Certain states may require all businesses with at least two full-time employees to provide coverage, while others may require only businesses with at least five regular employees to have a policy. Workers' comp may not be required for the following:
- Seasonal employees
- Certain niches or industries, such as agriculture
- Children who work for their family business
- Independent contractors or 1099 workers
- Sole proprietors
- Business partners
It's important to comply with your state's workers' comp laws to avoid potential penalties such as fines, jail time, or a forced suspension of operations. Be sure to research your state's specific workers' comp requirements to determine if you need a policy.
What's Not Covered by Workers' Comp?
Workers' comp provides a lot of critical coverage for businesses, but it doesn't cover non-work-related employee injuries or illnesses. Additionally, workers' comp typically excludes the following:
- Non-employee or third-party injury and illnesses
- Self-inflicted injuries and illnesses
- Employee injury or illness not caused by job duties or the workplace
Review your business's specific workers' comp insurance policy to be certain of what's covered and what's excluded.
How Much Does Workers' Comp Cost?
Many businesses pay an average of $45 per month or about $540 per year for workers' comp coverage. The cost of your business's policy can vary depending on the number of employees you have, your industry, and more. Some factors that can influence the cost of workers' comp premiums include the following:
- Business niche
- Number of employees
- Experience modification factor
- Job duties and risks
- Business location
- Prior claims history
The cost of workers' comp can also depend on the insurance company you go through. An independent insurance agent can help you find affordable workers' compensation near you.
What's the Difference Between Workers' Comp and Employer Liability Insurance?
Small business owners who offer workers' comp are exempt from many employee lawsuits related to cases of workplace injury and illness. However, employer liability insurance can cover certain claims that workers' comp doesn't. These can include incidents of an employee's family member contracting a disease that came from the worker's job.
If an employee sues a business for a claim workers' comp doesn't cover, employer liability insurance can reimburse the business for court and settlement expenses related to the lawsuit. Workers' comp doesn't cover a business's legal defense costs. Essentially, both of these insurance policies protect a business against the costs of employee injury and illness and related lawsuits, but in different ways.
What Is the Difference Between Workers' Comp 3A and 3C?
Workers comp 3A covers states where the business is explicitly listed on the policy, while 3C extends coverage to other states where the business may operate. Section 3A lists an employer's primary states in which they do business when coverage becomes active. Section 3C lists any states in which the employer may start to conduct business after coverage goes into effect.
Do Businesses Need Both Workers' Comp and General Liability Insurance?
Yes, most businesses can benefit from having both workers' comp and general liability coverage. Businesses with any employees need the protection workers' comp provides against the cost of work-related incidents and the exemption this coverage offers from related lawsuits.
Also, businesses in any industry can greatly benefit from the coverage provided by a general liability policy, regardless of whether they have employees. Any third party could sue a business for bodily injury or personal property damage. Without general liability coverage, the resulting damages and legal defense costs could result in serious financial losses, including bankruptcy.
It's critical to be aware of the coverage requirements for each of these types of insurance in your state. Coverage requirements can also vary by industry, so businesses in construction, healthcare, and retail might all have different regulations to follow. An independent insurance agent can help you get your business equipped with the required coverage from each of these policies.
How to Get Workers' Comp and General Liability Insurance in One Policy
Many businesses can get workers' comp and general liability coverage together in the same policy. Most business insurance companies offer bundled packages for commercial insurance that include both of these essential coverages. But your business might also benefit from getting a business owners policy (BOP), which includes general liability insurance, commercial property insurance, and business interruption insurance together in an affordable package.
To qualify for BOP insurance, a business typically must belong to a low-risk industry, have fewer than 100 employees, and make less than $1 million in annual revenue. Bundling your business's coverage together can have several advantages, including cost savings and simplified policy management. An independent insurance agent can help you find bundled business insurance that includes each of these key coverages.
How to Choose the Right Coverage for Your Business
When choosing general liability and workers' comp insurance, you'll first need to assess your business's risks and exposures. It's also critical to research your state's requirements and regulations for each type of coverage. If your business has any contractual obligations for coverage, you'll need to take these into account, too.
You can get workers' comp and general liability from an online marketplace or through private insurers, but the easiest way to find the right coverage is by working with an independent insurance agent. These agents have access to the best workers' comp insurance and best general liability insurance because they're free to shop and compare policies from several carriers in your area. Your agent can help you weigh your small business insurance options and get set up with a policy that bundles all the coverage you need.
Here's How an Independent Insurance Agent Can Help
When it comes to finding the right general liability insurance and workers' comp, no one's better equipped to help than a local independent insurance agent. An independent insurance agent is free to shop and compare workers' comp and liability insurance policies and rates from multiple carriers to find you the best blend of coverage and cost.
They'll help you find quality general liability and workers' comp insurance for a small business or a large corporation. And down the road, your agent can help you file workers' comp and liability insurance claims and update your coverage as your business's needs evolve.
FAQs About General Liability Insurance vs. Workers' Compensation
Do I need both workers' comp and general liability insurance?
Yes, most businesses need both workers' comp and general liability insurance. Workers' comp is usually mandatory by law for most businesses with employees, but there are exceptions. General liability insurance is critical for protecting your business against the costs of third-party lawsuits and, in certain cases, is required.
Can I use general liability insurance instead of workers' comp?
No, general liability insurance cannot be substituted for workers' comp. A workers' comp policy covers incidents of employee work-related injuries, illnesses, or fatalities. In contrast, general liability protects a business against the cost of third-party claims of bodily injuries or personal property damage, such as injuries to customers, not employees.
Is workers' comp included in general liability insurance?
No, workers' compensation is a separate coverage entirely from general liability insurance. However, an independent insurance agent can help you find a business insurance policy that includes each of these types of coverage.
What happens if I don’t have workers' comp coverage?
If you don't have workers' comp coverage and your business is legally required to have it, you may be fined or face other penalties for non-compliance. Your business would also have to cover the cost of any employee injuries or illnesses caused by the job or work environment, and it would be vulnerable to employee lawsuits for these incidents.
How much does it cost to get workers' comp and general liability together?
General liability insurance costs an average of $42 per month, while workers' comp costs an average of $45 per month for many businesses. Together, businesses can expect to pay about $87 per month for workers' comp and general liability, but you can also look for a policy that bundles these coverages for a lower premium.
Can I bundle workers' comp and general liability into one policy?
Yes, you can bundle general liability and workers' comp together in a business insurance policy. An independent insurance agent can help you do this.
Who is exempt from workers' comp insurance?
Workers' comp exemptions vary by state. Often, businesses without employees or businesses that only employ family members are exempt from this coverage, but that's not always the case. Further, certain exemptions exist for various industries, such as businesses in the agricultural field. You'll need to review the workers' comp requirements and regulations in your state to be certain.
Sources
https://www.nextinsurance.com/comparison/general-liability-vs-workers-compensation/
https://www.insureon.com/small-business-insurance/compare/general-liability-vs-workers-compensation
https://www.insureon.com/small-business-insurance/business-owners-policy/requirements
