Workers Comp vs. General Liability: What's the Difference?

Two of the most important small business policies — and two of the most confused. Here's the complete breakdown. Updated October 2026.

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The one-sentence difference:

Workers comp covers your employees when they get hurt on the job. General liability covers everyone else — customers, clients, visitors, and the public — when your business causes them harm.

Side-by-Side Comparison

Coverage FeatureWorkers CompensationGeneral Liability
Who it protectsYour employeesThird parties (customers, public)
Employee on-the-job injury✅ Covered❌ Not covered
Customer slip & fall at your business❌ Not covered✅ Covered
Property damage to client's property❌ Not covered✅ Covered
Medical bills for injured employee✅ Covered (no-fault)❌ Not covered
Lost wages for injured employee✅ Covered❌ Not covered
Advertising injury / defamation❌ Not covered✅ Covered
Legally required?Yes (most states, 1+ employees)No (but usually contractually required)
Typical annual cost$800–$20,000+ (payroll-based)$400–$2,500+ (revenue-based)

Real-World Claim Scenarios

👷 Workers Comp Claims

  • →A plumber cuts their hand on a pipe fitting during a job
  • →A restaurant employee slips on a wet floor in the kitchen
  • →A delivery driver is in a car accident while on a work route
  • →A warehouse worker develops a repetitive stress injury from lifting
  • →A landscaper is exposed to pesticide chemicals and requires medical treatment

🛡️ General Liability Claims

  • →A customer slips on a wet floor in your retail store
  • →A contractor accidentally damages a client's flooring during a renovation
  • →A restaurant guest gets food poisoning from a menu item
  • →A landscaper's mower throws a rock and damages a neighbor's window
  • →A cleaning crew knocks over and breaks a client's valuable sculpture

How Workers Comp Pricing Works

Workers comp premiums are calculated on total payroll, not revenue. The formula is: Payroll ÷ 100 × Class Code Rate × Experience Modifier = Annual Premium

IndustryClass CodeTypical Rate per $100 Payroll$300K payroll = WC Cost
Office / Clerical8810$0.15–$0.35$450–$1,050
Retail Store8017$0.60–$1.20$1,800–$3,600
Restaurant9083$1.50–$3.00$4,500–$9,000
Landscaping0042$3.00–$6.00$9,000–$18,000
Roofing5551$10.00–$25.00$30,000–$75,000
Electrical5190$2.50–$6.00$7,500–$18,000

Bottom Line: You Need Both

Workers comp and general liability are not competing alternatives — they cover fundamentally different risks and work together as the core of any complete small business insurance program. Once you have employees, you legally need workers comp. GL protects you from customer and client claims that workers comp will never cover. ERGO NEXT can quote both simultaneously — get your complete coverage package in one place.

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Frequently Asked Questions

What is the main difference between workers comp and general liability?+
Workers comp covers injuries and illnesses that happen TO your employees as a result of their work. General liability covers injuries or damage that happen TO third parties (customers, visitors, the general public) as a result of your business activities. A customer who slips in your store is a GL claim. An employee who slips in your store is a workers comp claim. The injured party determines which policy responds.
Do I need both workers comp and general liability?+
In most cases, yes — if you have employees. Workers comp is legally required in most states once you have at least 1–5 employees (threshold varies by state). General liability is not legally mandated in most states but is required by most commercial leases, client contracts, and professional licensing boards. Even businesses without employees typically need GL — because customers, visitors, and the public still create liability exposure. Workers comp and GL cover completely different risks and work together, not as alternatives.
Is workers comp or general liability more expensive?+
Workers comp is almost always more expensive than general liability for businesses with employees, because it covers medical bills, lost wages, and rehabilitation for injured workers — which can run tens of thousands of dollars per claim. GL covers third-party claims, which are less frequent on average. A small construction company with 5 workers might pay $8,000–$20,000/year for workers comp but only $1,500–$4,000/year for GL. For solo operators with no employees, GL is their primary coverage and workers comp may not be required.
Can an employee sue me if I have workers comp?+
Workers comp is a no-fault system — in exchange for providing workers comp coverage, employers receive protection from most employee lawsuits for workplace injuries. In most states, an employee who is covered by workers comp cannot sue the employer for a workplace injury (with exceptions for intentional harm, gross negligence, or specific state laws). This workers comp "exclusive remedy" is one of its most valuable features for employers.
What if I have contractors instead of employees?+
1099 contractors and independent contractors are generally NOT covered by your workers comp policy — they are responsible for their own coverage. However, if a contractor is misclassified (legally should be an employee) or if your client contract requires WC coverage for all workers on a project, you may face audit exposure. Always verify that contractors you hire carry their own GL and workers comp — a Certificate of Insurance from each sub is the industry standard.