If you have a company in the United States, you must have already come across the two insurances we are talking about today: General Liability and Workers Compensation. What are they for? Is it necessary to have both? How do you know which one your company needs?
Understand how each insurance works and how it protects your company and employees and, above all, what are the advantages of associating the two insurances.
What is General Liability Insurance?
Also known as liability insurance, General Liability protects your company’s financial health. Insurance will help you to cover costs when your company is held legally responsible for something.
However, this policy does not cover employee injuries. Instead, General Liability covers damages to third parties (non-employees), including:
- Bodily injury suffered by a person in your company
- Damage you accidentally caused to someone else’s property
- Advertising injuries (slander, defamation or trademark infringement)
If you are sued for one of these issues, the insurance will pay for your legal defense and any court settlements or judgments – up to the policy liability limit.
What is Workers Compensation?
Workers Compensation is a business insurance that financially compensates employees who have suffered work-related injuries or illnesses. Most states require employers to take out this coverage if they have at least one employee. Laws vary depending on your industry and the state where you live. This policy covers:
- Compensation to employees’ dependents in the event of death.
- Medical expenses and recovery of employees with work accidents.
- Maintenance of the employee who cannot work because of a covered injury or illness.
- Pension payments and funeral expenses in case of fatal accidents at work.
- Liability expenses if your company is sued for an accident at work.
If you don’t have employees, this coverage can still be used to cover any accident that happens to you while you are in action for your company.
General Liability vs Workers Compensation
We have already seen that the two insurances protect your operations from costs arising from accidents that may happen to your employees or people involved in the service and from damage to third party property, but what are the main differences?
- Workers Compensation protects your employees, General Liability protects your company from third-party claims about liability issues.
- Both cover injuries. Workers Comp. covers employee injuries, and Liability covers any injuries caused by your service or employee to a non-employee, such as a customer.
- Workers Compensation is regulated by law and mandatory in many states. Liability is not required by state law, but may be required by partners, customers or financial creditors.
Should I take out both insurances?
For a solid business with minimized risks, the ideal is to have both coverages, as one policy protects you from claims when third parties are injured on your property or during the performance of a service and the other helps your company to comply with the laws. states and protect their employees, who are their greatest asset.
General Liability coverage can be integrated into a commercial insurance package such as BOP, which also includes commercial property insurance, business interruption insurance, and other coverage tailored to your operations. Buying liability coverage, along with other coverages, in a commercial package will increase your security and help you save on total fees.
The Workers Compensation policy is made separately, as you can hire for specific periods and for different people, this insurance is done alone. The cost depends on your industry, state, and past workers’ compensation claims.
If you work in a more relaxed industry like accounting or marketing, your business will be seen as less risky than someone who works in construction or motorcycle deliveries. Insurance rates are always proportionate to the risks.