Employers Liability Insurance vs. Workers Compensation: A Comparison

There are more than 30 million businesses in the United States that qualify as small businesses. Yet, nearly 26 million of them are nonemployer businesses. Those are one-person operations and many entrepreneurs start out there.

Yet, business growth typically means taking on employees at some point. Making that transition from nonemployer to employer status means taking on new insurance requirements. The most commonly known one is workers compensation.

You may also hear about employers liability insurance. If you’re wondering about employers liability insurance vs workers compensation, keep reading. We’ll provide you with a quick guide to the differences.

What is Worker’s Compensation Insurance?

Aside from Texas, which makes it voluntary, all of the other states require the vast majority of employers to get workers compensation insurance. Some states run worker’s comp through a state-managed fund. Most states let private insurance companies provide coverage provided it meets the standards.

Worker’s compensation rules vary but typically provide coverage for a few standard things, such as:

  • Medical treatment
  • Partial wages
  • Physical therapy
  • Disability benefits

In many states, worker’s compensation prevents employees from suing their employers after an injury. Some states still permit civil suits in cases that involve things like gross negligence.

Understand, though, that employees may still look at hiring a workers compensation lawyer if they believe the insurance company isn’t providing adequate coverage.

What is Employers Liability Insurance?

Employers liability insurance is a partial answer to the issue of lawsuits that can come out of injuries that are covered by worker’s compensation.

Let’s say an employee gets injured in a fall at work. Assuming there isn’t a sign of intentional fraud, worker’s compensation will cover the treatment and physical rehab regardless of any blame.

What it won’t cover are claims of something like negligence. Employer’s liability insurance offers a larger umbrella of protection for the employer, such as a settlement in a civil suit.

The exact coverage available will differ depending on the exact policy and even the state.

Employers Liability Insurance vs. Workers Compensation

Employers liability insurance and workers compensation can apply to the same injury, but they provide coverage for different things. Worker’s comp exists to ensure injured workers get adequate medical care more or less without concern over the how of the injury.

Employer’s liability insurance exists primarily to cover costs that go beyond the coverage of worker’s comp, such as civil claims that might come up in relation to an injury.

Employers Liability Insurance and You

The employers liability insurance vs workers compensation question really addresses two different things. Worker’s compensation is something that you must get in almost every state if you want to hire people. It’s a safeguard for employees that they’ll receive care and even wages following an injury.

Employer’s liability insurance is primarily a safeguard for employers against litigation and costs that can happen outside of the scope of worker’s compensation coverage.

Looking for more tips on protecting your employees and yourself? Check out some of the other posts over in our Business & Finance section.