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General Liability Insurance vs. Workers’ Compensation: What Every Business Owner Needs to Know

Jul 09, 2025

Business Insurance

General liability vs workers' compensation General liability vs workers' compensation

Running a business comes with excitement, challenges, and a fair share of risks. Protecting your enterprise and your people is not just smart, it’s essential. Two of the most important insurance policies for any business are general liability insurance and workers’ compensation. But what’s the difference? When do you need each one? And how do they work together to keep your business safe? Let’s break it down in a way that’s both engaging and practical.

Understanding the Basics

General Liability Insurance

General liability insurance is your business’s shield against claims of bodily injury or property damage caused to others by your operations, products, or employees. Imagine a customer slips and falls in your store, or a product you sell causes property damage to a client’s home. General liability insurance steps in to cover medical expenses, legal fees, and settlements related to these incidents.

This coverage is not just about accidents, it can also help with claims related to libel, slander, or advertising mistakes. While general liability insurance isn’t always legally required, most landlords, vendors, and clients will expect you to have it before signing contracts or renting space. It’s especially important for businesses with frequent public interaction, like restaurants, retail stores, and contractors.

Workers’ Compensation Insurance

Workers’ compensation insurance is all about protecting your employees. If an employee gets hurt or becomes ill because of their job, workers’ comp covers their medical bills, rehabilitation costs, and a portion of their lost wages. It can also provide death benefits to the family if a workplace accident is fatal.

Unlike general liability insurance, workers’ comp is usually required by law if you have employees—even just one in many states. Each state has its own rules, so it’s important to check your local regulations. For example, you can find detailed requirements on the U.S. Department of Labor’s State Workers’ Compensation Officials website.

Key Differences at a Glance

Feature

General Liability Insurance

Workers’ Compensation Insurance

Who is Protected?

Third parties (customers, vendors)

Employees

What is Covered?

Injuries, property damage, lawsuits

Work-related injuries, illnesses

Legal Requirement?

Usually not (but often expected)

Usually required for employees

Covers Legal Fees?

Yes (from third-party claims)

Yes (from employee claims)

State Regulated?

No

Yes

Why You Need Both

Most businesses benefit from having both general liability and workers’ compensation insurance. Here’s why:

  • General liability insurance protects you from the unexpected—like a customer suing you after an accident on your property.

  • Workers’ compensation insurance ensures your employees are taken care of if they’re injured at work, and it also protects you from employee lawsuits related to workplace injuries.

Having both policies means you’re covered no matter who gets hurt—your customers or your team.

Real-World Scenarios

Let’s look at two common situations:

  1. A Customer Slips in Your Store
    • General liability insurance covers the customer’s medical bills and any legal costs if they sue you.

    • Workers’ comp does not apply here, this is about third-party injury.

  2. An Employee Falls Off a Ladder While Restocking Shelves
    • Workers’ comp pays for the employee’s medical treatment and lost wages.

    • General liability insurance does not cover this, it’s only for non-employees.

Common Myths and Misunderstandings

  • Myth: “My general liability insurance covers my employees if they get hurt.”

  • Fact: General liability only covers third parties, not employees.

  • Myth: “I don’t need workers’ comp if I only have a few employees.”

  • Fact: Most states require workers’ comp even if you have just one employee.

How Club Agency Can Help

At Club Agency, we’ve been guiding businesses through the complexities of insurance since 19361. Our experts work with you to tailor the right mix of general liability insurance and workers’ compensation coverage, so you can focus on what you do best running your business.

We understand that every business is unique. Whether you’re a restaurant owner, a contractor, or a retail store, we’ll help you find policies that fit your needs and budget. Our team is always available to answer your questions and provide the mental safety you deserve.

Building a Secure and Resilient Business with Club Agency

Choosing the right insurance for your business can feel overwhelming, but understanding the difference between general liability insurance and workers’ compensation is a great first step. Both policies play a vital role in protecting your business, your employees, and your customers.

If you’re ready to explore your options or have questions about general liability insurance, contact us today at Club Agency. We’re here to help you navigate the insurance landscape and keep your business secure for years to come. You can also call us directly at (866) 784-9785.

By understanding and investing in both general liability insurance and workers’ compensation, you’re not just complying with the law, you’re building a safer, more resilient business. Club Agency is proud to be your trusted partner on this journey.

Government Resources for Further Reading:

Frequently Asked Questions (FAQs)

Here are some common questions that business owners ask about general liability insurance and workers’ compensation, with answers not directly covered in the blog:

  1. Does general liability insurance cover data breaches or cyber incidents?

    General liability insurance typically does not covers cyber incidents. You’ll need a separate cyber liability policy for that.

  2. Can I get workers’ compensation insurance for independent contractors?

    Generally, workers’ compensation covers only employees, not independent contractors. However, some states have special rules for certain types of contractors.

  3. What happens if I don’t have general liability insurance and someone sues me?

    Without general liability insurance, you could be personally responsible for paying legal fees, medical bills, and settlements out of pocket.

  4. Are there any industries exempt from workers’ compensation requirements?

    Some states have exemptions for certain types of businesses or employees, such as agricultural workers or domestic employees. Check your state’s regulations for details.

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