July 23, 2021
Blog The types of insurance a business should have can seem overwhelming.
Two important types are general liability and worker’s comp insurance. At first glance, they may seem similar. However, they actually have several important differences.
General liability insurance protects your business. Workers’ comp insurance protects your employees if they get sick or injured as a result of their job.
Find out more about the differences between general liability and workers’ compensation insurance. You’ll be better prepared to protect your business with the right coverage.
What Does General Liability Insurance Cover?
General liability insurance helps to protect your business against three main types of claims:
- Property damage to someone else’s property
- Bodily injury to people visiting your business
- Advertising injury, like trademark infringement, slander, or libel
Property damage and bodily injury could be the result of actions by you or your employees. They could also result from a defect in one of your products. Property damage includes damage that occurs during ongoing operations as well as after the work is completed.
General liability insurance covers damages that fall under these categories. It also covers your legal costs to defend yourself against claims for such damages.
If someone sues your small business for a covered reason, general liability insurance will cover your attorney’s fees, court expenses, and settlements or judgments up to the limit of your policy.
General liability insurance only covers third-party claims. It doesn’t protect you if your own property is damaged or if your employees get injured.
What Does Workers’ Comp Insurance Cover?
Workers’ compensation helps cover medical bills for your employees if they get sick or injured on the job. Workers’ comp covers expenses like:
- Medical and recovery expenses for employees with a work-related illness or injury
- Partial replacement wages when employees can’t work due to a covered injury or illness
- Disability benefits
- Dependent support payments and funeral expenses in the case of fatal occupational injuries
A sick or injured employee first files a workers’ comp claim. The insurer then decides whether or not to approve the claim. If the claim is approved and the employee accepts workers’ compensation benefits, the employee gives up the right to sue you or your business.
Workers’ comp insurance helps you and your employees. It protects you from lawsuits that could bankrupt your business. It ensures that injured employees get the benefits they need more quickly.
Requirements for General Liability vs Workers’ Comp Insurance
One difference between general liability insurance and worker’s comp is the requirements for having each type. Having both is a good idea, but general liability insurance isn’t always required.
When Is General Liability Insurance Required?
General liability insurance usually isn’t a legal requirement. However, some states require it as part of the licensing for construction contractors or developers. Other professional licenses may require general liability insurance as well.
If you sign a contract with a larger company, they may require you to have general liability insurance. Some business leases also require it.
Whether or not it’s required, general liability insurance reduces risks for your business. A claim for damages could cost hundreds of thousands of dollars.
When Is Workers’ Comp Insurance Required?
State laws regulate workers’ compensation insurance. Every state except Texas requires businesses to have workers’ comp. Laws vary, but the regulations usually depend on how many employees your business has.
Some states will let sole proprietors opt-out of coverage or self-insure. You may still need proof of individual worker’s comp insurance for work-site access, though. This often applies to artisan contractor trades.
It’s important to check the laws in your state to be sure your business is compliant. You’ll face fines and penalties if you don’t follow workers’ comp regulations. Noncompliance in states like California and New Jersey is a criminal offense.
Your state’s department of workers’ compensation can give you up-to-date information about these insurance requirements.
How to Buy General Liability and Workers’ Comp Insurance
The process to buy general liability insurance and workers’ comp differs somewhat. This is because state laws treat the two types of insurance differently.
Buying General Liability Insurance
State laws don’t mandate general liability insurance. You can buy it from a private insurance company no matter which state your business is in. You can choose a stand-alone policy or bundle it with other types of insurance.
Buying Workers’ Compensation Insurance
Depending on which state your business is in, you may have different options for buying workers’ comp insurance. Most states require businesses to have workers’ compensation insurance, so they provide options for buying the coverage.
Almost every state lets you buy workers’ comp from a private insurance company.
Some states have their own insurance funds. Businesses can buy workers’ comp directly from the state or from a private insurer who partners with the state. These policies often target high-risk industries or businesses with a history of claims.
North Dakota, Ohio, Washington, and Wyoming are monopolistic states. Businesses must buy workers’ compensation insurance from a state fund.
Cost of General Liability Insurance and Workers’ Comp
The cost of general liability insurance and workers’ compensation policies depends on similar considerations. Factors that affect how much you’ll pay for insurance include:
- The number and type of employees you have
- Total payroll
- Your industry
- The state where you’re located
- Past claims
Being in a high-risk industry or having a history of claims can raise your premiums.
A major factor in determining your general liability premiums is how well you manage the risks that affect your business. Demonstrating an effective risk management strategy can keep your insurance costs lower.
Many factors affect your premiums. The only way to know for sure how much you’ll pay for insurance is to get a quote.
Finding the Best Workers’ Comp Insurance
Workers’ comp insurance is a requirement in most states. It’s also an important way to protect your business and your employees.
Finding the best workers’ comp insurance doesn’t have to be a challenge. National Workman’s Comp Solutions (NWCS) has over 15 years of combined experience finding the best insurance solutions for many types of businesses.
Our network includes over 45 A-rated carriers and 30 PEO options, so you get the most competitive rates possible. In addition, you’ll have proof of coverage within 24 hours of enrollment.
Contact us today for a free quote. Find out why over 1,000 businesses nationwide have chosen to trust us with their workers’ comp needs.
