Picture this: A client slips on debris at your construction site, suffering a broken wrist. The same week, one of your employees falls from scaffolding and requires emergency surgery. Which insurance policy covers what? If you’re scrambling to answer that question, you’re not alone—and the confusion could cost your business thousands of dollars or even threaten its survival.
Contractor general liability insurance and workers’ compensation insurance are two distinct but equally essential pillars of protection for contractors. Yet many business owners mix them up, leaving dangerous gaps in coverage. Workplace injuries and third-party liability claims can both be financially catastrophic. Understanding the difference between these insurance types isn’t just smart business—it’s essential for staying in business.
In this guide, we’ll explain commercial general liability versus workers’ compensation insurance in plain language, show common claim scenarios, and help you build a practical insurance strategy for your contracting operation.
What Is Contractor General Liability Insurance?
Contractor general liability insurance (often called CGL) provides business liability coverage for claims that involve third parties—people who are not your employees. This includes customers, clients, vendors, visitors to the job site, or members of the public who could be affected by your work.
Core Components of General Liability Coverage
A standard contractor general liability insurance policy generally includes:
- Bodily injury protection: Medical costs, legal defense, and settlements when a third party is injured because of your business operations
- Property damage coverage: Repairs or replacement when your work damages someone else’s property
- Personal and advertising injury: Claims like libel, slander, or certain copyright infringement allegations
For contractors, this third party liability protection is often required by contracts, landlords, and licensing bodies.
What General Liability Covers (and Doesn’t)
General liability typically covers:
- Slip-and-fall injuries involving non-employees
- Accidental property damage to a customer’s home or building
- Completed operations claims (issues that show up after you finish the job)
- Legal defense costs for covered claims
- Medical payments for minor injuries (depending on policy terms)
General liability typically does not cover:
- Employee injuries or illnesses (that’s workers’ comp)
- Damage to your own tools, equipment, or property (often inland marine or property coverage)
- Auto accidents (commercial auto coverage)
- Professional errors or design mistakes (often professional liability/E&O)
- Intentional acts or illegal activity
Understanding Workers’ Compensation Insurance
Workers’ compensation insurance exists to protect employees who get hurt or sick because of their job—and it protects employers by providing a structured system for benefits and limiting lawsuits in many cases.
Why Workers’ Comp Is Usually Required
In most states, workers’ compensation is legally required when you have employees (rules vary by state). The penalties for operating without it can be severe and may include:
- State fines and penalties
- Stop-work orders
- Loss of contract eligibility
- Personal exposure if an injured worker sues
For contractors, workers’ comp is also a practical requirement—many general contractors and project owners won’t allow you on-site without proof of coverage.
What Workers’ Compensation Covers
Workers’ comp generally provides:
- Medical treatment for work-related injuries and illnesses
- Wage replacement benefits during recovery (often a portion of wages)
- Temporary and permanent disability benefits
- Vocational rehabilitation when needed
- Death benefits for surviving dependents
Workers’ compensation is typically a no-fault system: employees can receive benefits even if no one “caused” the accident. In return, employees are often restricted from suing the employer for workplace injuries (rules vary by state).
General Liability vs Workers’ Comp: The Key Differences
Here’s the simplest way to think about it:
- General liability protects your business from claims made by third parties.
- Workers’ comp protects your employees (and helps protect you as the employer) for work-related injuries and illnesses.
Who Is Protected?
| Coverage Aspect | General Liability | Workers’ Compensation |
|---|---|---|
| Primary Protected Party | Third parties (clients, public, vendors) | Employees |
| What It Pays For | Injury/property damage claims from others | Employee medical + wage benefits |
| How Fault Works | Liability is evaluated (fault matters) | No-fault benefits system (fault often irrelevant) |
Claim Examples That Make It Clear
General liability example: Your crew leaves tools in a walkway and a customer trips and breaks an ankle. Your general liability policy may respond because it’s a third-party injury claim.
Workers’ comp example: Your employee strains their back lifting materials and needs medical treatment plus time off work. Workers’ comp may respond because it’s a work-related injury to an employee.
Why Contractors Usually Need Both Policies
Construction and contracting work creates two types of exposure at the same time:
- Jobsite exposure to the public and clients (general liability risk)
- Injury exposure for your crew (workers’ comp risk)
One policy can’t replace the other. Having only general liability without workers’ comp can leave you exposed to state penalties and employee injury costs. Having only workers’ comp without general liability can leave you exposed to lawsuits from clients or third parties.
Subcontractors Make This Even More Important
Subcontractor relationships add complexity. If a subcontractor doesn’t carry workers’ comp when required, some states may treat their labor as your exposure. That can increase your audit or create unexpected liability. Always verify subcontractor coverage and keep current certificates of insurance on file.
Coverage Limits, Deductibles, and How Policies Are Structured
General Liability Limits
General liability policies often have limits like:
- Per-occurrence limit (for one incident)
- Aggregate limit (total for the policy term)
- Products/completed operations aggregate (claims after job completion)
Many contracts require $1M per occurrence / $2M aggregate, but larger projects may demand higher limits.
Workers’ Comp Limits
Workers’ comp employee benefits are usually set by state law, but policies often include an employers’ liability section that has selectable limits (commonly written as per accident / disease limits).
What Impacts Cost
General liability pricing often depends on your trade, revenue, claims history, job types, and contract requirements. Workers’ comp pricing depends heavily on payroll, job classification codes, and your experience modification rate (EMR), which reflects claims history compared to similar businesses.
Build a Practical Contractor Protection Plan
General liability and workers’ comp are foundational, but many contractors also need additional policies, such as:
- Commercial auto (for work vehicles)
- Inland marine (tools and equipment)
- Umbrella/excess liability (higher limits)
- Professional liability/E&O (design or consulting exposure)
- Builder’s risk (structures under construction)
The right mix depends on your trade, the size of your projects, and what your contracts require.
What to Do When an Incident Happens
Good coverage helps—but good response procedures matter too. If an incident occurs:
- Prioritize safety and provide first aid / emergency response
- Secure the scene and document conditions (photos, notes, witnesses)
- Report promptly to the appropriate carrier (general liability or workers’ comp)
- Keep records organized (training logs, job reports, subcontractor COIs)
- Avoid admitting fault or making promises before the claim is reviewed
Conclusion: Know the Difference, Protect the Business
Contractor general liability insurance and workers’ compensation coverage protect your business from different risks. General liability addresses third-party injuries and property damage claims. Workers’ comp addresses employee injuries and related costs. Contractors who understand the difference—and carry both—are far more prepared to handle real-world incidents without financial devastation.
If you’re unsure whether your current policies meet your job requirements—or if you’re bidding work that demands proof of coverage—now is the time to review your program and close any gaps.
Get Your OCMI Quote
Ready to review your coverage and protect your contracting business? Start your quote with OCMI and take the next step toward better protection and smarter compliance.
