The differences between employers' liability insurance and general liability insurance policies might appear muddled because of their overlapping coverages. They undoubtedly have several similarities. However, their terms have varying legal implications, although both policies ultimately protect your business against bodily injury claims.
If you can't tell whether your business needs these policies, keep reading! We will explain how liability insurance covers the costly legal costs, lost wages, and medical expenses associated with any work-related injury or illness. Neglecting the mandated responsibilities will not only bankrupt your business, but even seemingly mundane mishaps can already put you in jail.
Before we enumerate the differences between general liability insurance and employers' liability insurance, let's see the similarities first. Generally, both policies protect you from bodily injury claims. You can rely on them to cover the legal and medical expenses associated throughout the process—from filing injury claims to deciding on a fair settlement.
How do they differ? Employers liability insurance classifies under workers' compensation insurance. Essentially, employers liability insurance protects your business's welfare if an employee suffers a work-related injury or illness. This coverage focuses on keeping your business safe and free of unnecessary liabilities, while workers' compensation pays for the injured claimant's recovery.
On the other hand, general liability addresses the different risks associated with business operations. It protects you against third-party claims involving bodily injuries, property damage, and advertising injuries stemming from the products or services that your offer.
More simply put: employers' liability insurance covers injury claims from your employees. Alternatively, general liability encompasses all lawsuits filed by third-party individuals visiting your establishment or patronizing your business.
Injured employees revoke the right to sue their employers if they accept the workers' compensation settlement offered. The injured will receive financial support until they fully recover. Some policies even continue providing benefits during the employee's first week or two back at work.
While most injured employees would happily accept workers' compensation benefits, disgruntled individuals might push through with a lawsuit. In these cases, you can rely on the employers' liability portion of your workers' comp policy. It should cover all legal expenses involved throughout the process—unless you have insufficient limits, of course.
While having both employers' and general liability insurance yields several advantages, expect their combined policies to have steep premiums. General liability would already set you back by at least $500 to $700 per annum.
As such, SMBs working with a tight budget can start with workers' comp. Once your business picks up and starts entertaining more customers or clients on-site, you can consider getting a robust general liability plan.
Injured employees have two options. First, they could agree to revoke their rights to sue in exchange for sufficient workers' compensation benefits. Second, they could reject the benefits and sue their employer instead. Workers' comp will provide financial support in the first scenario we stated, while employers' liability covers legal expenses if the injured files a lawsuit.
Most states require businesses with at least one employee to carry workers' compensation and employers liability insurance policies. However, the government has no universal law on liability limits. Business owners have the freedom to decide how much their policy would payout in the event that an injured worker sues them for work-related injuries.
While keeping limits to a minimum significantly decreases your premiums, doing so also stunts coverages. In the worst case, you might even end up underinsured. To ensure that you have sufficient protection, consider the following factors when calculating policy limitations:
If your business sustains multiple injured workers on several different occasions, you will have to file multiple claims as well. Alternatively, one claim can cover multiple injuries arising from a single incident.
While this clause makes it convenient for employers who need to mitigate the damages of a massive workplace accident, covering multiple medical bills with insurance also quickly depletes your limits. As such, increase your policy terms so that they cover more than just one injured employee. Otherwise, the court will force you to pay excess dues out of pocket.
Pro Tip: Businesses that cramp multiple workers or laborers inside tight, hazardous spaces should expect workplace accidents to injure several employees. Apart from getting sufficient insurance, strive to address the operational risks sooner.
Understand the industry risks that your employees face, then assess the likelihood of these risks from happening. Bear in mind that multiple employees can also get injured from a single incident. You will likely end up with a custom club specifically made to combat the risks your employees face during daily operations.
Your insurance needs will increase along as you expand your business. For instance, statistics show that companies accumulate a total of $1,100 worth of lost wages per injured employee. Since your potential losses increase one grand every time you hire a new worker, you would have to boost your workers' compensation policy accordingly.
To ensure that your business always has sufficient coverage, we encourage reviewing your workers' compensation policy—along with your general liability insurance plan—at least once a year. Take note of all changes in your business's size, operations, and risks involved. Otherwise, you will run the risk of operating underinsured. Remember: larger companies require more insurance.
Still don't have workers' comp? Assured Standard shares that most states require employers to carry one nowadays. You can refer to our resources for an extensive guide on applying for workers' comp insurance!
Malplacement Liability is another coverage included in your professional liability policy limits. This protection relates specifically to your responsibilities for arranging and qualifying suitable work for eligible healthcare providers. It is invaluable protection for supervisors, charge nurses, administrators of care services programs.
Employers' liability insurance is the one business policy that never has an excess. Although in some cases you can choose your own, the decision usually falls to what the insurer decides after all their losses from settlements and processing claims have been accounted for.
If you're the sole director of your limited company, have 50% or more ownership in the shares and are without any employees on staff, then this type of insurance is not required. However, it may be wise to consider getting professional liability coverage for yourself.
Yes. As a landlord, you'll need to keep track of your own payroll. This means providing for the needs and wants of staff such as cleaners, handymen, clerical staff, or gardeners—even if they're on short-term contracts.
General liability insurance policies typically cover you and your company for claims involving bodily injuries or property damage resulting from the products, services, or operations. It may also help protect you if held liable for damages to a landlord's property.
Overall, employer and general liability coverages protect your business from bodily injury claims resulting from your business's products, services, or daily operations. The latter focuses on third-party claims, while employer liability covers employee injuries.
While you do not legally need both workers' compensation and general liability, we encourage investing in these two policies as you expand your business expands. Bolstering your insurance plans with complementing coverage pairings would drastically reduce your susceptibility to lawsuits involving various bodily injuries.
Is your business likely to get sued for poor professional services resulting in financial losses? Don't worry because Assured Standard can help! Check out our guide on using professional liability insurance to combat claims on third-party claims involving negligence, omission or errors during business operations.