Is Employer Liability Insurance the Same As Workers’ Comp?

The short answer is no, employer liability insurance is not the same as workers’ compensation. General liability provides coverage for claims and lawsuits filed by members of the general public, while workers’ compensation protects a business from claims or lawsuits filed by employees. Read on to know how they work together and why your business needs both.

What General Liability Policies Do

General liability policies protect businesses against third-party claims. Liability policies respond to bodily injury and property damage claims arising as a result of the business’s operations. For example, a customer files a claim or lawsuit because she injured herself while shopping at a retail operation. The general liability policy protects the business owner if a claim goes to court and issues a check to pay for any damages if the business is found liable.

What Workers’ Compensation Does

Any business that hires employees must purchase workers’ compensation insurance. The state governs Workers’ compensation and therefore policies vary from state to state. Some states, such as New York, require coverage as soon as one employee is hired. Others, such as Arkansas, allow employers to hire three employees before having to purchase workers’ comp coverage.

Workers’ Compensation and Employer Liability Work Together

Many often purchase workers’ compensation and employer liability together because most business owners need both policies. The first part, workers’ compensation, compensates employees for any bodily injury or illness that occurs as a result of employment. Each state determines the amount paid to the injured employee according to the employee’s wage and injury. After calculating the benefit amount, the state compares it with its own schedule of benefits, which sets the minimum and maximum amount an injured employee can receive.

The second part, employer’s liability, protects the employer if the employee declines workers’ compensation benefits and sues the employer instead. The employer’s liability section of the policy defends the employer in a court of law and pays damages if the employer is liable.

Employer liability insurance and workers’ compensation are not the same, but each work together to cover different types of exposures. It’s important to know that workers’ compensation is a mandatory coverage to protect your employees. But if you want to protect yourself as an employer as well, you should purchase both workers’ compensation and general liability.