General Liability and Workers' Compensation often appear next to each other on leases, customer contracts, and insurance checklists, which can make them sound interchangeable. But they’re not. General Liability Insurance protects your business against claims that you caused bodily injury or property damage to someone outside your company. Workers' Compensation Insurance covers employees who experience work-related injuries or illnesses.
The difference becomes important as your company grows. Hiring employees can introduce Workers' Compensation requirements under state law, while a new lease or customer contract may require General Liability coverage.
You may eventually need both policies, but for different reasons. Understanding what each covers, when it’s required, and how much coverage you need can help you avoid gaps and meet requirements as they arise.
Key Takeaways
- General Liability Insurance primarily covers third-party claims involving bodily injury, property damage, and certain personal and advertising injuries.
- Workers' Compensation Insurance covers employees who experience work-related injuries or illnesses, subject to the policy and applicable state law.
- Workers' Compensation requirements vary by state and can depend on factors like your number and type of employees.
- General Liability generally isn't required by law, but it may be required by a lease, customer contract, or other business agreement.
- If you use a professional employer organization (PEO), Workers' Compensation may be provided through that arrangement. Confirm what coverage you already have before purchasing a separate policy.
What Is General Liability Insurance?
General Liability Insurance primarily protects your business against third-party claims involving bodily injury, property damage, and personal and advertising injury.
For example, it may respond if a customer is injured at your office, your business damages someone else’s property, or you face certain claims related to your advertising. It can also cover legal defense costs and settlements for covered claims, subject to your policy’s terms and limits.
General Liability is considered third-party coverage because it generally responds when someone outside your company claims your business caused them harm. It doesn’t typically cover damage to your own equipment or other assets. That’s where coverage like Business Property Insurance comes in.
For many startups, General Liability first becomes relevant because someone else requires it. A landlord may require coverage as part of a commercial lease, while an enterprise customer may specify minimum limits in a contract. Depending on the agreement, you may also be asked to name another party as an additional insured.
Your actual exposure matters too. A remote software company and a hardware startup may have very different liability risks even if both are asked to carry the same limits. Companies that manufacture, sell, or distribute physical products, for example, may have greater exposure to claims that a product caused bodily injury or property damage through the products-completed operations portion of General Liability coverage.
Learn more about what General Liability Insurance covers.
What Is Workers' Compensation Insurance?
Workers' Compensation Insurance provides benefits to employees who experience work-related injuries or illnesses. Depending on applicable state law, those benefits can include medical expenses, a portion of lost wages, rehabilitation costs, and benefits related to disability or death.
For example, Workers' Compensation may apply if an employee is injured in a workplace accident or develops a condition related to their work over time. Unlike General Liability, which primarily covers claims from third parties, Workers' Compensation is designed specifically around work-related injuries and illnesses affecting employees.
Workers' Compensation generally operates as a no-fault system. An eligible employee can receive benefits for a covered work-related injury or illness without having to prove that their employer caused it. Workers' Compensation laws can also limit an employee's ability to sue their employer for covered workplace injuries, although the rules and exceptions vary by state.
That state-by-state variation is important. Workers' Compensation requirements are established by state law, and the point at which an employer must obtain coverage can depend on factors like where employees work, how many employees the company has, and the type of work they perform. Some states also have different rules for certain owners, officers, contractors, or industries.
For a growing company, the practical takeaway is simple: check the Workers' Compensation requirements where your employees work as you hire and expand into new states. Don't assume that the rules in one state apply everywhere your team operates.
Learn more about what Workers' Compensation Insurance covers.
Do You Need General Liability If Your Team Is Fully Remote?
Being fully remote can reduce some of the physical risks associated with operating an office, but it doesn’t necessarily eliminate the need for General Liability Insurance.
For remote companies, the immediate reason to purchase coverage is contractual. An enterprise customer may require General Liability before signing an agreement, even if your team never works from a physical office. If you later lease a space, your landlord may require coverage too.
Your business model also matters. A software company with limited physical interaction may have different General Liability exposures than a company that manufactures or sells physical products, sends employees to customer locations, or regularly interacts with the public.
Rather than using remote status alone to decide whether you need coverage, consider your third-party liability exposures and any requirements in your customer contracts or other business agreements. If you do carry General Liability, make sure your limits satisfy those requirements and remain appropriate as the business grows.
Does General Liability Cover Workers' Compensation Claims?
Generally, no. General Liability and Workers' Compensation are designed to cover different types of claims.
General Liability primarily covers claims that your business caused bodily injury or property damage to a third party. Workers' Compensation provides benefits to employees for covered work-related injuries and illnesses. For example, if a customer is injured while visiting your office, that may be a General Liability claim. If an employee is injured while performing their job, that would generally fall under Workers' Compensation.
The two coverages are complementary, not substitutes for one another. As your company grows, you may need both to address different liability exposures and insurance requirements.
General Liability vs. Employer's Liability: What's the Difference?
Despite the similar names, General Liability and Employer's Liability cover different risks.
General Liability primarily covers claims involving bodily injury or property damage to third parties. Employer's Liability, by contrast, is associated with workplace injuries and can respond to certain employee-related liability claims that fall outside the benefits provided by Workers' Compensation.
Employer's Liability is commonly included alongside Workers' Compensation coverage rather than purchased as a separate General Liability policy. The exact structure can vary depending on the policy and state.
For growing companies, the important distinction is that Employer's Liability isn't another name for General Liability. If a contract asks you to carry Employer's Liability, review your Workers' Compensation program to confirm whether the required coverage and limits are already included.
Learn more about Workers' Compensation and Employer's Liability.
Workers' Compensation and PEOs: What to Know as You Scale
If you run payroll through a PEO like Rippling, Justworks, Gusto, or TriNet, there's a good chance your Workers' Compensation is already being handled there, since the PEO already has your real-time payroll, headcount, and job classification data on file, which makes the mandatory annual audit far simpler than managing a standalone policy separately.
There's a tradeoff worth knowing about as you grow, though. Many PEOs place Workers' Compensation on a single master policy that covers every client company in the PEO's group under one shared arrangement, rather than a dedicated policy just for you.
For an early-stage team, that's rarely a problem. Once you're scaling toward 100 to 200 employees, it's worth revisiting whether a dedicated, standalone Workers' Compensation program makes more sense than staying on a shared PEO arrangement.
The same logic applies to Employment Practices Liability coverage bundled through a PEO, a different coverage from Workers' Compensation entirely, since it responds to claims like discrimination or wrongful termination rather than physical injury: it's often thinner than a standalone policy, and worth a second look as headcount grows.
How Much Do General Liability and Workers' Compensation Cost?
General Liability for a software-only, low-exposure business can run as low as a few hundred dollars a year at the minimum end, with premium driven primarily by revenue and state, not headcount.
Across Vouch's own client base, the median General Liability premium is $285 a year, and technology and SaaS companies under $1M in revenue typically pay closer to $250 a year, well below the $810 broader small-business average The Hartford reports across its own customer base, largely because low-revenue, low-physical-exposure tech companies are cheaper to underwrite than the average small business.
Workers' Compensation is priced differently: it's based on your payroll, your state's requirements, and the risk classification of the work being performed, which is why a construction or lab-based role costs meaningfully more to insure than an office-based one. The Hartford's data puts average small-business Workers' Compensation cost at about $1,032 a year. All of these figures are directional, since actual premium depends heavily on your specific state, payroll, and risk classification.
Learn more about what drives Workers' Compensation cost.
What to Look for in a General Liability Policy as You Grow
The honest answer to "which company should I buy General Liability from" isn't a list of carrier names, it's a question of who's actually looking at your specific business rather than selling you a generic small-business template. A policy sized for a retail storefront doesn't map cleanly onto a remote SaaS company or a hardware startup shipping physical product, even though both might get quoted the same "General Liability" label.
What matters is whether your limits reflect your actual contracts and lease requirements, whether your policy accounts for the specific way your business could realistically cause harm to someone else, and whether the person who sold it to you can explain why.
That's the gap a generic quote engine tends to leave open, and it's the reason a growing company is usually better served by an advisor who understands its industry than by the cheapest checkbox policy available.
Get the Right Coverage as Your Company Grows
As your company grows, hires its first employees, signs its first lease, and lands bigger contracts, General Liability and Workers' Compensation stop being a one-time checkbox and start being something worth revisiting at each stage.
A Vouch advisor can walk through your current contracts, lease terms, and payroll setup and tell you plainly what you actually need now versus what can wait, including whether bundling General Liability into a Business Owner's Policy makes sense once you have both property and liability exposure to cover. Talk to an advisor to see where you stand.
Frequently Asked Questions
Do I need Workers' Compensation if I don't have any employees yet?
Generally, no. Workers' Compensation becomes required once you hire your first W-2 employee, so a founder-only company, or one that only uses unpaid interns working for academic credit or 1099 contractors, typically isn't required to carry it yet. That changes the day your first employee starts, so it's worth having a plan rather than being caught off guard by the requirement.
My Workers' Compensation is handled through a PEO. Do I still need a separate policy?
Usually not, at least not right away. Most PEOs handle Workers' Compensation as part of their payroll service, and since they already have your real-time headcount and payroll data, it's typically the simplest way to stay compliant early on. It's worth revisiting once you're scaling past 100 to 200 employees, since many PEOs place Workers' Compensation on a shared master policy covering every client company in the group, rather than a policy dedicated to yours alone.
Is General Liability required if my company is fully remote?
Not automatically. General Liability is priced on your revenue and location rather than whether you have an office, and for a fully remote, software-only company with no lease and no contract requirement for it, it's reasonable to hold off. The moment a landlord or a customer contract requires it, adding it is typically fast and inexpensive.
Does an umbrella policy add more Workers' Compensation or General Liability coverage?
An umbrella (or excess) policy doesn't add new categories of coverage. It sits above your existing General Liability, Workers' Compensation, or auto policies and extends their limits once a claim exceeds what the underlying policy would pay. If a contract asks for a higher limit than your base General Liability policy carries, an umbrella policy is often the more cost-effective way to get there rather than raising your base limits across the board.
Vouch Specialty Insurance Services, LLC (CA License #6004944) is a licensed insurance producer in states where it conducts business. A complete list of state licenses is available at vouch.us/legal/licenses. Insurance products are underwritten by various insurance carriers, not by Vouch. This material is for informational purposes only and does not create a binding contract or alter policy terms. Coverage availability, terms, and conditions vary by state and are subject to underwriting review and approval.
.avif)
