Workers’ compensation vs. General Liability Insurance – Forbes Advisor
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Workers’ compensation insurance pays for medical bills, lost wages, and other costs if an employee is ill or injured as a result of their work.
General liability insurance, on the other hand, protects your business when claims are made against you for personal injury, property damage, and advertising damage.
Worker’s compensation insurance and general liability insurance are important types of coverage for a small business. Let’s take a closer look at each.
What is workers’ compensation insurance?
When employees are injured or become ill on the job, workers’ compensation insurance pays medical and other benefits to these workers.
Benefits include medical treatment and continuing care such as physical therapy, lost wages for disability, and death benefits if the employee dies as a result of a workplace accident. Death benefits may include burial costs and survivor benefits which are part of the deceased worker’s salary for a certain period. (The exact rules for survivor benefits vary by state.)
Worker’s compensation insurance is required of businesses in most states.
What is general liability insurance?
General liability insurance covers damage or injury that your business accidentally causes to a third party, such as a customer. It includes coverage for the following issues:
Bodily injury caused by your business activities. For example, medical expenses are covered if a customer or client is injured on your business property. If the client decides to sue your business, liability insurance also pays your defense costs.
Damage to property liability claim This could be caused by an employee accidentally damaging a customer’s smartphone, for example, or an exterior sign falling on a customer’s car. If someone’s personal property is damaged and your business is legally responsible, they can make a claim and general liability insurance will cover them.
Advertising injury means two or three different things. It could be a copyright infringement in an online ad or in your company’s marketing materials. An example would be if your business used illustrations in an advertisement without obtaining permission. Or it could mean damaging someone’s reputation. If you say something negative in a media interview about another business that is harming that business, you may be guilty of advertising damage.
If you are sued for any of these issues, liability insurance will cover your legal defense and any court settlements or judgments, up to the limit of police liability.
Differences between workers’ compensation and general liability insurance
Here are some key differences between workers’ compensation and general liability insurance:
- One is insurance protecting employees (workers’ compensation) and the other is insurance protecting a business against third party claims against it (commercial liability).
- Both can cover injuries, but for different people: Workers’ compensation covers employee injuries. General liability covers injuries that your business causes to a non-employee such as a customer.
- Workers’ compensation insurance is required in many states. General liability insurance is not required by state law, but it may be required by licensing boards, corporate clients, landlords, or financial lenders.
- You can purchase general liability insurance as part of a Business Owner’s Insurance (BOP) package. A BOP will also include business property insurance and business interruption insurance. You will need to purchase additional insurance for workers separately.
A stand-alone commercial liability insurance policy costs an average of $ 42 per month, according to Insureon. You save money by purchasing general liability insurance from a BOP, which costs an average of $ 53 per month.
Workers’ compensation costs an average of $ 1 for every $ 100 of payroll, according to The Hartford, but your own small business rate can differ significantly from that average depending on your industry, state, and past claims. workers.
If you work in an industry like accounting or finance, your business will be considered less risky than someone working in the construction industry. This will result in lower rates of workers’ compensation insurance.
The state you live in has an impact on the rate because each state has its own workers’ compensation laws.
A claim history also influences workers’ compensation premiums. If your business has had a number of workers’ compensation claims in the past, you will see an increase in insurance costs for your workers. The number of complaints and their severity are taken into account when determining the worker pay rate for a company.