2026-04-17 · business, liability

General Liability vs Workers Compensation

Key Takeaways

• General liability insurance covers claims from third parties (customers, vendors, visitors). Workers compensation covers your own employees when they are hurt on the job.
• Most businesses with employees need both policies because they protect against completely different risks.
• Workers comp is legally required in nearly every state once you hire employees. General liability is not legally mandated but is often required by contracts, leases, and lenders.
• A business owners policy bundles general liability with property coverage but does not include workers comp.

Introduction

General liability and workers compensation are two of the most common business insurance policies, yet they serve entirely different purposes. General liability protects your business when a third party, such as a customer or vendor, is injured or suffers property damage because of your operations. Workers compensation protects your employees when they are injured or become ill because of their work. Understanding the difference helps you buy the right coverage and avoid costly gaps.

Quick Comparison

What General Liability Insurance Covers

General liability (GL) insurance pays for claims when a third party is harmed by your business operations. Core coverages include:

• Third-party bodily injury. A customer slips on a wet floor in your store and breaks a wrist.
• Third-party property damage. A technician accidentally damages a client’s equipment during a service call.
• Personal and advertising injury. A competitor alleges your ad campaign copied their slogan.
• Legal defense costs. Attorney fees, court costs, and settlements or judgments, even if the claim turns out to be groundless.

GL does not cover injuries to your own employees, damage to your own property, or professional errors. For a deeper look, see the full general liability insurance guide.

What Workers Compensation Covers

Workers compensation (workers comp) pays benefits to employees who suffer job-related injuries or illnesses. Key benefits include:

• Medical expenses. Doctor visits, hospital stays, surgery, prescriptions, and rehabilitation.
• Lost wages. Partial wage replacement while the employee recovers and cannot work.
• Disability benefits. Ongoing payments if the injury causes temporary or permanent disability.
• Death benefits. Financial support for the employee’s dependents if a workplace injury or illness is fatal.

Workers comp also protects employers by generally shielding them from employee lawsuits over covered injuries. For full details, see the workers compensation insurance guide.

Key Differences

• Who is protected. GL protects third parties. Workers comp protects employees.
• What triggers a claim. GL claims arise when someone outside your business is injured or their property is damaged. Workers comp claims arise when an employee is hurt or becomes sick because of their job.
• Legal requirements. Workers comp is mandatory in nearly every state once you reach the employee threshold. GL is rarely required by statute but is often required by contracts.
• Cost structure. GL premiums are based on revenue, industry, and claims history. Workers comp premiums are based on payroll, job classifications, and your experience modification rate.
• How claims are filed. Injured third parties file GL claims against your business. Injured employees file workers comp claims through your insurer, typically without needing to sue.

Do You Need Both?

Most businesses with employees need both general liability and workers compensation. Here is how to think about it:

• Solo freelancer or sole proprietor with no employees. General liability is usually sufficient. You may also want professional liability if you provide advice or services.
• Employer with staff. You almost certainly need both. GL alone will not pay for an employee’s on-the-job injury. Workers comp alone will not cover a customer who trips over equipment at your job site.
• Contractor working on client sites. Clients typically require proof of GL. If you have employees or subcontractors, most states also require workers comp. Even some solo contractors purchase workers comp voluntarily to protect themselves.

Carrying only one policy when you need both can leave you exposed to lawsuits, fines, and out-of-pocket costs that could threaten your business.

How a Business Owners Policy Fits In

A business owners policy (BOP) bundles general liability with commercial property insurance into a single, often discounted package. A BOP is a convenient starting point for small businesses, but it does not include workers compensation. If you have employees, you still need to purchase workers comp separately.

A BOP also does not include commercial auto coverage or professional liability. Think of a BOP as a foundation, not a complete insurance program.

State Requirements

Workers compensation is required in nearly every state once your business has employees. The exact threshold varies. Some states require coverage as soon as you hire your first employee. Others set the threshold at three, four, or five employees. Texas and a small number of states make workers comp optional for most private employers, but even there, going without coverage carries significant risk. Check your state’s department of insurance or workers compensation board for current rules.

General liability is not required by any state statute for most businesses. However, it is frequently required as a practical matter. Commercial landlords, general contractors, clients, and lenders often require proof of GL before they will sign a lease, award a contract, or approve a loan.

Frequently Asked Questions

Does general liability cover employee injuries? No. General liability covers injuries to third parties such as customers and visitors. Employee injuries are covered by workers compensation.

Can I get workers comp if I am self-employed? Yes, in most states. Self-employed individuals and sole proprietors can purchase workers compensation voluntarily to cover their own work-related injuries.

What happens if I do not carry required workers comp? Penalties vary by state but can include fines, stop-work orders, personal liability for employee medical bills, and even criminal charges.

Does workers comp cover independent contractors? Generally, no. Workers comp covers employees. However, if a worker is misclassified as a contractor when they are legally an employee, you may still be liable. Proper classification matters.

Is general liability the same as professional liability? No. General liability covers bodily injury and property damage. Professional liability (errors and omissions) covers financial losses caused by professional mistakes, bad advice, or failure to deliver services.

Next Steps

1. Count your employees and check your state’s workers compensation requirements.
2. Review any contracts or leases that require proof of general liability.
3. Get quotes for both policies. Many insurers offer bundled pricing. See our guide on how to compare insurance quotes for tips.
4. Consider a business owners policy if you also need commercial property coverage.
5. If you provide professional services, look into professional liability coverage as well.

Sources

• U.S. Small Business Administration, “Get business insurance,” sba.gov
• National Federation of Independent Business, “Workers’ Compensation Insurance,” nfib.com
• Insurance Information Institute, “Workers compensation insurance,” iii.org
• National Association of Insurance Commissioners, “Workers’ Compensation,” naic.org