2026-04-17 · business, liability

Updated: 2026-09-01

By InsuraFAQ Editorial Team · Reviewed for accuracy

General Liability vs. Workers’ Comp: Key Differences

At a glance

Start with who was harmed: an employee’s work-related injury points to workers compensation; a customer, visitor, vendor, or other third party’s injury or property-damage claim points to general liability. The U.S. Small Business Administration describes general liability as protection for third-party injury and property-damage claims, while the U.S. Department of Labor explains that workers compensation is a state-administered system for job-related injuries and illnesses. SBA business-insurance guidance | DOL workers-compensation overview

Neither policy is a substitute for the other. Whether workers comp is required, who counts as an employee, and available benefits vary by state and business type; contracts or leases can also require general liability. Confirm the rule and your policy wording with your state workers-compensation authority and insurer before relying on a coverage decision.

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.
• Many businesses with employees carry both policies because they protect against different risks; the coverage and any legal requirement depend on the business and state.
• Workers comp rules, employee thresholds, and exemptions vary by state. General liability is usually a contract, lease, or lender requirement rather than a general state-law requirement.
• A business owners policy bundles general liability with property coverage but does not include workers comp.

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

Use this decision check

Common scenarios

• A customer slips in your shop. General liability commonly handles the customer’s injury claim and related defense costs. Workers compensation does not replace that third-party coverage.
• An employee strains their back lifting inventory. Workers compensation commonly handles job-related medical and wage-replacement benefits. General liability generally excludes an employee’s work injury.
• Your crew damages a client’s equipment. General liability commonly responds to third-party property-damage claims. Neither policy is a substitute for commercial property coverage for damage to property your business owns.

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.

How much does general liability insurance cost for a small business?

A general liability policy for a low-risk small business typically runs $400 to $1,500 per year (roughly $33 to $125 per month) for common limits of $1 million per occurrence and $2 million aggregate. Higher-risk trades (contractors, restaurants, salons with sharp instruments) sit near the top of that range or above, while home-based consultants and desk-work service businesses sit near the bottom. Bundling general liability with commercial property inside a business owner’s policy is usually 10% to 15% cheaper than buying each policy separately. Your actual premium depends on revenue, industry classification, location, prior claims history, and the specific limits and deductibles you choose.

How much does workers compensation insurance cost?

Workers compensation premiums are quoted per $100 of payroll and the rate varies sharply by state and by job classification code, but for most small businesses the total premium works out to roughly $0.75 to $2.50 per $100 of payroll for low-risk office and clerical roles and $5 to $15 per $100 of payroll for higher-risk trades (roofing, construction, landscaping, manufacturing). A five-person clerical office with $250,000 of annual payroll therefore typically pays $1,900 to $6,300 per year, while a five-person roofing crew with the same payroll can pay $12,500 to $37,500 or more. Your actual rate depends on your state’s rating bureau (or NCCI, in most states), your specific classification codes, your experience modification factor (based on prior claims), and whether you are in a competitive or monopolistic-state market.

Which states require workers compensation insurance?

Almost every state requires workers compensation insurance for businesses with employees — the specific threshold (one employee, three employees, five employees, or a payroll-based cutoff) varies by state. Texas is the primary exception: private employers there may elect to opt out of the state workers comp system entirely, though non-subscribing employers lose the exclusive-remedy protection and can be sued directly by injured employees. A few states run monopolistic state funds — North Dakota, Ohio, Washington, and Wyoming — where private carriers cannot write workers comp and coverage must be purchased through the state fund. Independent contractors, sole proprietors with no employees, and (in most states) certain agricultural or domestic workers are commonly excluded from the mandate. Check your state’s labor department or workers comp board for the exact employee-count threshold and excluded worker classes that apply to your business.

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”
• National Association of Insurance Commissioners, “Business Insurance”
• Insurance Information Institute, “Business Insurance”
• U.S. Department of Labor, “Workers’ Compensation”