Workers’ Compensation vs General Liability

Are you a start-up small business owner looking for inputs whether to buy a Workers’ Compensation insurance only, or a General Liability (also known as Business insurance) only, or both?

Allow us to lead you to understanding each product and how it will benefit you as the owner, your business, and your employees.

What is Workers’ Compensation?

Workers’ Compensation, formerly known as workman’s compensation, is a liability regulated by state laws to help the employees pay for their medical bills when they meet an accident or occupational disease, regardless of who is at fault. In the event that the employee becomes disabled from the work-related injury, the Workers’ Compensation insurance will also render partial or permanent disability benefits.

Aside from the medical benefits, this insurance also replaces the lost wages in case it will take time for the employee to return to work. On condition that the employee passes away because of the workplace accident, the family of the deceased employee will receive funeral and financial support.

Workers’ Compensation Laws

Workers’ Compensation Acts differ from state to state. Some state requires every small business owner to have a Workers’ Compensation and Unemployment benefits. Some require additional insurance, such as Disability insurance.

Each state may have different requirements in purchasing a Workers’ Compensation insurance. There are states that require small business owners to buy this coverage who have at least one employee, but some states would require the business to have at least five employees before they can carry a Workers’ Compensation insurance.

Also, each state has different statutes in exempting certain types of employees from being covered by Workers’ Compensation insurance. The most common type is an independent contractor.

To know the specific laws about this indemnity in every state, visit the page of U.S. Department of Labor’s State Workers’ Compensation Officials.

What is General Liability?

What business owners need to understand about General Liability is that, it is also called as the business liability or commercial liability. Third-party claims are the focus of this type of insurance.

List of claims a General Liability covers:

  • damage caused by the business to someone else’s property or belongings
  • medical costs for bodily injuries of visitors
  • advertising injury such as stolen ideas, invasion of privacy, libel, slander, and copyright infringement from ads run by the business
  • cost of legal services including evidence, witness and judgment fees

Carrying a General Liability for business owners is not mandated by state laws. However, employers are highly encouraged to acquire one to protect their business assets.

Which insurance should I purchase?

If you’re a start-up small business owner, this thought might be running in your mind right now: “Should I get just one insurance, or both General Liability and Workers’ Compensation insurance?”

To help clarify things for you, a General Liability insurance, in general, protects your business, products, and services. A Workers’ Compensation insurance protects your employees. A Workers’ Compensation is limited to your employees only, but the General Liability extends protection to third parties who might get involved in your business at some point.

Therefore, to have a better financial security and business credibility, it’s best to have both.


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