General liability insurance covers third-party bodily injury and property damage claims that arise from your business operations — a customer slipping in your shop, a contractor damaging a client's property. Workers' compensation insurance covers your own employees when they are injured or become ill because of work. Most businesses need both: GL protects outsiders, workers' comp protects your workforce.
Who this is for: Business owners comparing the two core commercial insurance policies before purchasing, renewing, or responding to a contract requirement.
TL;DR / Key Takeaways
- General liability and workers' comp cover completely different injured parties — GL covers third parties (customers, visitors, vendors); workers' comp covers employees only.
- Workers' comp is legally required in almost every U.S. state once you hire employees; general liability is contractually required by most landlords, clients, and general contractors.
- GL pays third-party medical bills, legal defense costs, and damages — workers' comp pays lost wages, medical treatment, and rehabilitation for injured workers.
- Neither policy covers the other's territory: a customer injury is a GL claim; a worker injury is a workers' comp claim. Misrouting a claim leads to denial.
- Both are typically required together for any contractor, retailer, or service business with staff.
What Does General Liability Cover vs. What Workers' Comp Covers?
The clearest way to separate these policies is by asking: who was hurt, and were they on your payroll?
| Feature | General Liability (GL) | Workers' Compensation |
|---|---|---|
| Who it covers | Third parties (customers, clients, bystanders, vendors) | Employees only |
| What it pays | Third-party medical bills, property damage, legal defense, settlements | Employee medical treatment, lost wages (typically 60–67% of wages), rehabilitation, death benefits |
| What triggers it | Your business operations or products cause injury or damage to a non-employee | Employee is injured or becomes ill arising out of and in the course of employment |
| Policy form | Occurrence or claims-made | Statutory (required by state law) |
| Typical occurrence limit | $1M per occurrence / $2M aggregate (standard) | Per-state statutory minimums; employer's liability part typically $100K–$1M |
| Deductible | $0–$2,500 common for small business | Varies; large employers may use SIR (self-insured retention) |
| Who requires it | Landlords, clients, general contractors (contractually) | State law (legally required) |
| Defense costs | Included within or in addition to limits, depending on policy form | Included; carrier defends contested claims |
| Example claim | A retail customer trips on a loose mat and breaks their wrist | A roofer falls from scaffolding and fractures their back |
What General Liability Does NOT Cover
- Injuries to your employees (that is workers' comp)
- Damage to your own property (that is commercial property insurance)
- Professional errors or bad advice (that is professional liability / E&O)
- Auto accidents while driving for business (that is commercial auto)
- Intentional acts or expected injury
What Workers' Comp Does NOT Cover
- Injuries to customers, visitors, or non-employees (that is GL)
- Injuries that did not arise out of or in the course of employment (personal activities)
- Certain benefits may be limited for undocumented workers in some states, though most states do extend workers' comp coverage to them [verify state]
- Injuries resulting from an employee's intoxication or willful misconduct (state rules vary)
Who Is Legally Required to Carry Workers' Comp?
Workers' comp is a state-administered system. Nearly every U.S. state mandates coverage once you have at least one employee, though the threshold and exemptions vary:
| State Category | General Rule | Notes |
|---|---|---|
| No employees | Not required | Sole proprietors with no employees may opt out in most states |
| 1+ employees (most states) | Required immediately | California, New York, Illinois, and most others require coverage at hire #1 |
| Small-employer threshold states | Required at 3–5 employees | A few states (e.g., Alabama at 5 employees, Tennessee at 5 employees) have small-employer thresholds [verify state] |
| Corporate officers/owners | Often eligible to exclude | An owner-officer can typically waive coverage on themselves; check state rules |
| 1099 contractors | Generally excluded | Carriers and states scrutinize worker classification; misclassified employees = uninsured exposure |
General liability has no statutory requirement to purchase it, but virtually every commercial lease, client services agreement, and subcontract will mandate a minimum of $1M/$2M occurrence/aggregate GL coverage before work begins.
How Workers' Comp Premiums Are Calculated (in 5 Steps)
- Classify employees by job code. The National Council on Compensation Insurance (NCCI) assigns class codes to occupations. A roofing laborer carries a dramatically higher rate than an office worker at the same company.
- Apply the manual rate. Each class code has a published rate per $100 of payroll (e.g., roofing in many states runs $10–$30 per $100 of payroll; clerical runs $0.20–$0.50).
- Multiply by payroll. Estimated annual payroll for each class code × rate ÷ 100 = estimated premium.
- Apply the experience modification rate (EMR/e-mod). Businesses with 3+ years of loss history receive a mod. A 1.0 is average; below 1.0 means you pay less (good loss history); above 1.0 means you pay more. An e-mod of 1.25 increases premium by 25%.
- Premium audit at year-end. Workers' comp is audited annually based on actual payroll. Underestimate payroll and you'll owe additional premium; overestimate and you receive a credit.
How General Liability Premiums Are Calculated
GL rating basis depends on your business type:
- Contractors: Rated on payroll (per $1,000 of payroll)
- Retailers / restaurants: Rated on gross sales (per $1,000 of revenue)
- Manufacturers: Rated on sales or square footage
- Professional services: Often rated per professional, per location, or on revenue
Typical small-business GL cost ranges (annual, $1M/$2M limits):
| Business Type | Typical Annual GL Premium Range |
|---|---|
| Retail / small shop | $500 – $1,500 |
| Janitorial / cleaning | $700 – $2,000 |
| General contractor | $3,000 – $10,000+ |
| Roofer / specialty trades | $5,000 – $20,000+ |
| Restaurant | $1,200 – $4,000 |
| Consulting / professional services | $400 – $1,200 |
These ranges are illustrative estimates for businesses with limited prior losses. Actual premiums depend on payroll, revenue, location, claims history, and carrier underwriting.
Real-World Example: A Five-Person Electrical Contractor in Texas
Business: Sparkvolt Electric LLC, 5 employees (1 owner/officer, 4 electricians), $600,000 annual payroll, $1.2M annual revenue, based in Austin, TX.
Workers' Comp estimate: - Electrician class code (NCCI 5190) in Texas might carry a rate of roughly $3.50–$5.50 per $100 of payroll [verify current Texas rate with carrier] - $600,000 payroll × $4.50 / 100 = ~$27,000 estimated annual WC premium before e-mod - With a clean loss history (e-mod of 0.85): $27,000 × 0.85 = ~$22,950
General Liability estimate: - Electrical contractor GL rated on payroll; rate approximately $6–$12 per $1,000 payroll - $600,000 × $9 / $1,000 = ~$5,400 estimated annual GL premium for $1M/$2M limits
Total combined estimated cost: ~$28,000–$35,000/year depending on carrier, coverage options, and loss history.
Note: Texas is the only state that does not mandate private-employer workers' comp, though most general contractors and project owners require subcontractors to carry it. This example is illustrative — not a quote or guarantee.
What happens if a claim hits? - Electrician #3 cuts his hand on a panel and needs surgery ($18,000 procedure + 3 weeks lost wages): Workers' comp claim. - A homeowner's marble countertop is cracked when the team runs conduit: GL claim under the property damage coverage. - Both claims are handled by separate policies, separate adjusters, and separate reserves.
FAQ
Do I need both general liability and workers' comp? Most businesses with employees need both. General liability is typically required by clients and landlords; workers' comp is required by state law as soon as you have employees. The two policies cover completely different injuries and parties, so carrying only one leaves a significant gap.
Can a workers' comp claim be filed under general liability by mistake? Yes, and it causes coverage gaps. An employee injury must be filed under workers' comp — GL specifically excludes bodily injury to employees arising out of employment. Filing an employee injury on GL will result in a denial and may leave the employee without timely medical coverage.
What is employer's liability coverage, and how does it relate to workers' comp? Employer's liability is Part B of the workers' comp policy. It covers the employer when an employee sues outside the workers' comp system — for example, a loss of consortium claim by a spouse, or a "dual capacity" claim. Standard limits are $100,000 per occurrence, $500,000 per disease policy limit, and $100,000 per disease per employee, though higher limits are available.
Does general liability cover subcontractors' injuries on my job site? GL can cover third-party bodily injury claims by subcontractors who are truly independent, but if a court or state finds that the subcontractors are actually employees, the claim may be reclassified as a workers' comp claim — and your GL may not respond. Requiring all subs to carry their own workers' comp (and getting certificates) protects you.
Is workers' comp required for part-time or seasonal employees? In most states, yes — the requirement applies regardless of hours worked. Part-time, seasonal, and temporary employees are generally covered employees for workers' comp purposes. [verify state]
What does workers' comp NOT cover that surprises employers? Workers' comp does not cover injuries sustained while an employee is commuting to or from work (the "coming and going" rule), injuries from purely personal activities during work hours, or injuries resulting from the employee's own intoxication or willful misconduct in most states.
Can I get a combined GL + workers' comp policy? Yes. Small businesses with fewer than 50 employees can often purchase a Business Owner's Policy (BOP) for GL and then add workers' comp through the same carrier or a separate policy. Contractors and higher-hazard businesses usually need standalone policies. A Morrow advisor can package both through the same carrier when available to simplify billing and renewals.
How does an additional insured on GL relate to workers' comp? They are separate. A general contractor can be added as an additional insured on a subcontractor's GL policy — this gives the GC protection if the sub's work causes a third-party injury. It does not extend workers' comp coverage to the GC's employees; those remain covered under their own workers' comp policy.
Why Morrow
- Independent agency, multiple carriers. Morrow shops your GL and workers' comp across multiple admitted carriers simultaneously — including specialists for higher-hazard trades — so you get competitive pricing and appropriate coverage, not whatever one captive carrier offers.
- Trade-specific underwriting knowledge. Whether you're a roofing contractor managing a 1.3 e-mod or a cleaning company with a high-frequency slip-and-fall history, Morrow knows which carriers will write your class code and how to position your account favorably.
- Fast COI and certificate turnaround. Need a certificate of insurance naming a general contractor as additional insured before 8 AM tomorrow? Morrow's team handles certificate requests same-day for active clients — no waiting three days for a carrier service center.
- Experience mod (e-mod) review. Morrow reviews your workers' comp e-mod calculation for errors. NCCI data shows that a meaningful percentage of e-mods contain errors — a corrected mod can reduce your premium immediately. [Morrow to confirm specific offering details]
- Claims advocacy. When a workers' comp or GL claim is filed, Morrow stays involved — monitoring the claim, communicating with the adjuster, and advocating for timely resolution to protect your loss history and future premiums.
Get a Quote
Ready to compare GL and workers' comp options for your business? Morrow will shop both coverages across multiple carriers and deliver a side-by-side comparison.
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Related Pages
- Commercial Insurance Overview — The parent guide to all commercial P&C coverages
- General Liability Insurance — Full deep-dive on GL coverage, limits, and costs
- Workers' Compensation Insurance — How workers' comp works, state requirements, and e-mod management
- Business Owner's Policy (BOP) — Bundled GL + property for eligible small businesses
- GL vs Professional Liability — What GL misses for service businesses and why E&O matters
- Workers' Comp Cost Guide — Detailed breakdown of rates by class code and trade
Written by Jordan Reyes, CPCU, CIC — Commercial Lines Practice Lead, Morrow (Afthonea Inc, DBA Morrow). Jordan has 12+ years placing commercial P&C coverage for contractors and service businesses across the U.S.
Published: June 2026 | Last updated: June 2026
Sources: - National Council on Compensation Insurance (NCCI) — class code and e-mod methodology: ncci.com - Insurance Information Institute (III) — general liability and workers' comp overviews: iii.org - U.S. Department of Labor, Office of Workers' Compensation Programs: dol.gov/agencies/owcp - OSHA — employer recordkeeping and work-related injury definitions: osha.gov - State Departments of Insurance (verify requirements by state at your state DOI website) - ISO Commercial Lines Manual — GL coverage form definitions (CG 00 01)