General Liability Insurance vs Workers' Comp: The Differences

October 27, 2022


The Normandy Team
General Liability Insurance vs Workers' Comp: The Differences

Businesses that buy insurance often don't know what type of insurance they're looking for. Research finds that 68% of insurance seekers have no clue which company to go with, let alone the type of insurance that will most benefit them. It's your job as an insurance agent to help them make the right decision based on their needs.

Most agents only sell general liability insurance. But workers' compensation is a vital coverage that your customers need. Are you actively selling both?

Here's the difference between the two types of insurance explained. Guide your clients to the best solution for their business needs by explaining the differences between products.

What Is General Liability Insurance?

General liability insurance is a type of insurance that provides protection for businesses against claims for property damage, personal injury, and others. It also covers the legal costs associated with defending the business and any damages awarded. It does not cover injuries to your employees as it is more for third-party claims.

Types of General Liability Insurance

There are several types of general liability insurance policies available. Each offers different levels of coverage. The three most common are:

Commercial General Liability Insurance

This type of policy offers the broadest protection for businesses of all sizes. Coverage includes third-party injuries, property damage, and advertising injury.

Professional Liability Insurance

This type of policy is for professionals such as doctors, lawyers, and accountants. It covers errors and omissions that result in financial loss for the client.

Product Liability Insurance

This type of policy protects businesses against claims for injuries or damages caused by a defective product.

What Is Contractor General Liability Insurance?

Contractor general liability insurance is yet another general liability insurance for business. It is a type of policy that is specifically designed for companies that provide services.

This type of coverage can help to protect you from claims related to the work that you perform, such as injuries or damage sustained by a customer while you were working on their property.

What Does General Liability Insurance Cover?

There are three main areas that general liability insurance covers. These are bodily injury, property damage, and advertising injury.

Bodily injury covers any physical harm that a third party experiences as a result of your business. This could be something as minor as a slip and fall or something more like death, disability, and other major medical expenses.

Property damage covers any damage to someone else's property caused by your business. This could be something as minor as a customer spilling coffee on their laptop in your store. It also covers theft, vandalism, or a fire that destroys an entire building.

Advertising injury covers any injuries caused by your business's advertising practices. This could be something like using someone's likeness without their permission. It also covers any false claims you make about your products or services.

It also covers slander, libel, and invasion of privacy.

Examples of general liability claims:

  • A customer falls and injures themselves on your business's premises
  • You face a lawsuit for defamation after making a negative comment about a competitor on social media
  • A vendor sues you for breach of contract
  • You face accusations of copyright infringement because you used a photo without permission
  • You print an advertisement that uses a celebrity's likeness without their permission

What Is Workers’ Compensation Insurance?

Workers' compensation insurance is insurance that employers are required to have in most states. The purpose of workers' compensation is to provide benefits to employees who are injured or become ill as a result of their job.

Workers' compensation pays medical expenses, disability benefits, death benefits, and in some cases partial replacement of lost wages. Workers' compensation insurance is typically paid for by the employer. Sometimes employees are required to pay part of the premium.

In most states, workers' compensation is mandatory, and employers who do not have coverage can be subject to fines and other penalties. Some employers choose to self-insure workers' compensation risks, but this option is only available to large businesses with strong financial ratings.

Types of Workers' Compensation Insurance

Workers' compensation insurance is also broken down into several categories. The three most common types of workers' compensation insurance are:

  1. Statutory workers' compensation insurance
  2. Voluntary workers' compensation insurance
  3. Self-insurance

Statutory workers' compensation insurance is the type of coverage required by law in most states. This type of coverage is expensive, but it provides protection for your employees in the event that they are injured on the job.

Voluntary workers' compensation insurance is not required by law. But it can be a good idea to have this type of coverage in addition to statutory workers' compensation insurance. Voluntary workers' compensation insurance is less expensive than statutory workers' compensation insurance but does not provide as much protection.

Self-insurance is an option for businesses that are large and have the financial resources to self-fund their workers' compensation coverage. Self-insurance can be a good option for businesses that have a low rate of on-the-job injuries.

Who Provides Workers' Compensation Insurance

You buy workers' compensation insurance from insurance companies that specialize in this type of coverage. These companies are referred to as workers' compensation carriers.

In some states, however, the state itself provides workers' compensation coverage. Regardless of who provides the coverage, workers' compensation insurance is essential protection for employees.

What Workers' Compensation Insurance Covers

Workers' compensation insurance covers employees who become ill as a result of their job. This could include illnesses such as exposure to harmful chemicals or injury by machines.

Workers' compensation insurance also covers employees who are injured on the job. This could include injuries such as a slip and fall or an injury from a work-related accident.

Natural disasters are also covered by workers' compensation insurance. This includes incidents such as hurricanes, tornadoes, and earthquakes. If an employee is injured or becomes ill as a result of a natural disaster, they will be eligible for workers' compensation benefits.

Workplace violence is a type of injury that is covered by workers' compensation insurance. This type of violence can include physical attacks, threats, and harassment. Any employee who is injured or becomes ill as a result of workplace violence is eligible for workers' compensation benefits.

Workers' compensation insurance covers employees who are injured while driving a company-owned vehicle. This includes accidents that occur on the way to and from work, as well as accidents that occur while the employee is performing their job duties.

How Do General Liability and Workers’ Compensation Differ?

Workers' compensation and general liability insurance coverage work hand in hand as two important types of insurance for businesses. Both types of insurance protect businesses from financial losses due to claims or lawsuits. However, there are some important differences between the two types of coverage.

Each type of insurance has its own benefits and drawbacks. Workers' compensation insurance is typically required by law in most states. This means that businesses must have this type of coverage in order to operate legally.

However, workers' compensation insurance can be expensive, and it may not cover all types of injuries.

General liability insurance is not always required by law, but it can be a good idea to have this coverage additionally. It is usually less expensive than workers' compensation insurance, but it will not provide as much protection.

Choosing the right type of insurance depends on many factors. Business owners should evaluate their needs carefully in order to make the best decision.

Why Most Businesses Need Both

To be fully protected, businesses should have both types of insurance.

Clients might think that general liability insurance and workers' compensations are one and the same. While both are important, they offer different protection for your business.

Both of these plans cover physical harm, but they target different groups of people. A physical business with both employees and customers onsite may need both. If you have no staff, you'll only need general liability insurance.

The type of coverage that you choose will depend on the size of your business and the type of work that you do.

Use This Knowledge to Convince Your Clients They Need Both

Explaining the difference between these two types of insurance can be tricky. But it's important to make sure your clients understand the importance of both policies. Providing them with a clear explanation of both general liability insurance and worker's compensation can help you to close the deal on both.

Normandy Insurance Company has been helping insurance agents grow their business for over 16 years. We offer a wide range of insurance products, including general liability, workers' compensation, and more.

At Normandy Insurance Company, we want to see our agents get ahead. Contact us to discuss adding our suite of services to your portfolio of options. You'll get the support and expertise of our underwriting team behind you.

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