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When you’re a business owner, you’re busy all the time. You’re serving your clients, managing your employees, and handling all aspects of your operation, from keeping the lights on to purchasing new equipment. One of those operational aspects is making sure you have the right business insurance. We’re here to make it easy on you, so you can focus on what you do best.
With options like general liability, professional liability, workers’ comp, commercial property and more, it’s tough to know which—and how many—different types of insurance policies you need.
Take general liability and workers’ compensation, for instance. What’s the difference between these two, and do you need both? These two policies have their similarities, but they have one key difference:
General liability insurance protects your business from cost related liabilities involving third parties who are not your employees or business partners, while workers’ compensation insurance protects your business from costs related to liabilities arising out of injuries to your employees.
That’s the high-level answer, anyway. To understand more about the similarities and differences between these two types of insurance, and figure out what you need for your business, read on.
What is general liability insurance?
General liability insurance, sometimes known as commercial general liability or business liability insurance, protects your business from costs related to liability in accidents that involve third parties. These third parties could be your clients, customers, vendors, or passersby—essentially, anyone other than you or your employees.
The accidents covered by general liability insurance typically involve bodily injury, property damage, and personal and advertising injury. Here are a few examples:
- Non-employee, third-party bodily injury: A customer trips over your equipment and injures themselves. General liability insurance can provide coverage for their medical bills and legal claims that arise out of the incident.
- Third-party property damage: While working at a client’s house, one of your workers accidentally knocks over an expensive vase. General liability insurance can help cover the cost of repair or replacement of the vase.
- Personal and advertising injury: Another company claims you copied their branding, or a client sues you for using their photo on your website without their consent. General liability insurance protects you from costs arising from these claims that something you did caused damage to a third party’s reputation.
Bottom line: No matter what type of business you run, accidents happen. If they involve a third party, you want to make sure you’re protected with business liability insurance.
What is workers’ compensation insurance?
Workers’ compensation insurance, often shortened to workers’ comp by those in the know, protects your business from liability in accidents involving injury to your employees.
More specifically, workers’ comp provides benefits to your employees in case they sustain an injury or illness while on the job. Here are a few examples of accidents that could be covered by workers’ comp insurance:
- Work-related employee injury: If your employee gets hurt on the job, workers’ comp can help cover their related medical expenses (including doctor’s appointments, treatment, and ongoing care or rehabilitation). It can also help pay for lost wages during the time they’re unable to work. It also pays for rehabilitation an employee may need to get back on the job.
- Work-related illness: If your employee contracts a covered illness, such as asbestosis, during the course of their work for your company, workers’ comp can help cover their medical bills and lost wages.
- Work-related death: If one of your employees dies due to a covered accident, workers’ comp can help cover their funeral expenses as well as provide dependent support payments to their family.
- Work-related disability: If your employee sustains an injury that results in temporary or permanent disability, workers’ compensation insurance can help pay for their medical bills and lost wages.
One important caveat to remember with workers’ comp insurance is that it only provides coverage for work-related injuries and illnesses. What precisely is covered will depend on your industry and the workers’ compensation law in your state. Workers’ comp also typically does not cover pre-existing conditions, although these may be covered if a work-related injury aggravated them.
Additionally, requirements and workers’ comp exemptions can vary by state and business type. An easy rule to remember is that most states require employers to carry workers’ compensation insurance if they have one employee. If you’re a sole proprietor, you can even carry workers’ comp coverage for yourself, although you may be able to reduce your insurance premiums by opting out of the coverage for yourself.
Bottom line: If you have employees on your payroll, you need workers’ compensation insurance. More importantly, you’re required to have it in almost all states.
Key differences between general liability and workers’ comp insurance
General liability and workers’ compensation insurance are similar in that they both provide coverage for bodily injuries. One focuses on injuries to third parties like your clients and vendors (general liability), while the other focuses on injuries to your employees (workers’ comp).
Otherwise, these policies are quite different.
For one thing, workers’ comp is often required by your state. In most states, as long as you have one employee, you are legally required to carry workers’ comp insurance. There are various requirements by state, such as whether that employee must be full- or part-time, but generally it’s safe to assume that if you have an employee besides yourself on the payroll, you should get workers’ comp insurance.
General liability insurance, on the other hand, is typically not required by statute. Even so, it’s considered basic minimum coverage for any business that deals with third parties. Last we checked, that describes almost any business. You have clients, vendors, and customers you speak with. They may come to your office or you may go to theirs. At either location, someone—or something—could get damaged. When it comes to personal and advertising injury, you could find yourself hit with a copyright infringement claim from a company you’ve never even heard of.
Due to this wide exposure to risk, general liability insurance is considered table stakes for every business, even if you have no employees. You don’t know when someone could get injured at your place of business or if you’ll accidentally knock something over when you’re at your client’s house or office.
Does your small business need general liability, workers’ comp, or both?
These two questions can to help you decide:
- Do you run a business? You need general liability insurance, especially if you visit your clients on their property, have them visit you, or have employees who work at your clients’ premises.
- Do you also have employees? You need workers’ compensation insurance and general liability.
In short, most as a small business owner you need both general liability and workers’ comp insurance.
Both general liability insurance and workers’ comp insurance protect your business, just in different ways: The first from costs related to liabilities arising from third-party bodily injury or property damage, and the latter from employee claims of bodily injury. If you’re hit with a huge medical bill from a customer, or a client sues you for property damage, the costs can be so high as to put you permanently out of business. General liability insurance help covers the costs so you can avoid that fate.
Similarly, workers assume a certain amount of risk when they agree to work for your company. Workplace accidents could injure or disable them to a point where they can no longer work. When your business carries a workers’ comp policy, you help ensure they’ll get help paying for their medical bills and lost wages.
Protect your business with the right insurance
You can get started protecting your business with general liability insurance arranged by Thimble. Choose from ongoing, monthly coverage you can cancel at any time, or pay upfront for short-term coverage for a policy period as short as an hour. Whichever plan you choose, you can get your quote in 60 seconds or less (maybe even quicker, if you’re a fast typer). Just tell us what you do, where you work, and how long you need coverage, and you’ll get your instant quote. Once you purchase, you’ll get a Certificate of Insurance instantly.
Our editorial content is intended for informational purposes only and is not written by a licensed insurance agent. Terms and conditions for rate and coverage may vary by class of business and state.