General Liability vs Workers’ Compensation Insurance in California: What Businesses Need to Know

If you own a business in California, you’ve probably heard the terms “general liability” and “workers’ compensation” used interchangeably. Here’s the thing: they’re not the same, and confusing the two can leave serious gaps in your coverage.

Whether you’re running a contracting company, managing a busy restaurant, or operating a massage therapy practice, understanding the difference between these two policies isn’t just helpful — it’s essential. Let’s break it down so you know what you need and why.

What Is General Liability Insurance?

General liability insurance protects your business when a third party — like a customer, client, or vendor — suffers an injury or property damage because of your operations. Think of it as your shield against the outside world.

General liability typically covers:

• Bodily injury to non-employees – A customer slips on a wet floor in your restaurant and breaks their wrist.
• Property damage – Your massage therapist accidentally knocks over and breaks a client’s expensive watch.
• Personal and advertising injury – A competitor claims your marketing materials damaged their reputation.

Here’s the key distinction: general liability does not cover your employees. It’s designed to protect you from claims made by people who don’t work for you.

Real-World Examples by Industry

Contractors: You’re remodeling a kitchen, and a piece of equipment damages the homeowner’s hardwood floors. General liability can help cover the repair costs and legal fees if they decide to sue.

Restaurants: A diner has an allergic reaction to an undisclosed ingredient and requires medical attention. Your policy may help cover their medical bills and your legal defense.

Massage Therapists: A client trips over your massage table’s power cord and injures themselves. General liability can help handle the claim.

Is General Liability Required?

In California, general liability insurance is not legally mandated for most businesses. However, many landlords, clients, and contracts require proof of coverage before you can start work. If a claim happens without coverage, you may be responsible for the costs out of pocket.

What Is Workers’ Compensation Insurance?

Workers’ compensation insurance is designed to protect your employees when they get injured or become ill because of their job. It can help cover medical expenses, rehabilitation costs, and a portion of lost wages while they recover.

Workers’ comp typically covers:

• Medical treatment for work-related injuries or illnesses
• Rehabilitation and physical therapy
• Partial wage replacement during recovery
• Death benefits for families if a fatal accident occurs

In return for this coverage, employees generally give up the right to sue you for workplace injuries. It’s a trade-off that protects both sides.

Real-World Examples by Industry

Contractors: One of your crew members falls off scaffolding and fractures their leg. Workers’ comp can cover surgery, physical therapy, and partial wage replacement.

Restaurants: A line cook suffers a severe burn from hot oil. Workers’ comp can handle medical bills and lost income during recovery.

Massage Therapists: An employee develops carpal tunnel syndrome from repetitive motion. Workers’ comp can help cover treatment and time off work.

Is Workers’ Comp Required?

In California, workers’ compensation is mandatory if you have even one employee (full-time, part-time, or temporary).

For contractors, there are additional compliance requirements that can affect licensing and job eligibility. If you’re a contractor reviewing your insurance program, start with contractors insurance and confirm your workers’ comp requirements.

Operating without required workers’ comp can lead to severe consequences, including:

• Stop-work orders that shut down operations
• Significant fines and penalties
• Potential criminal exposure depending on circumstances
• Personal liability for employee medical expenses and lost wages

Bottom line: Workers’ comp compliance is not optional in California. The risk isn’t worth it.

The Key Differences at a Glance

Here’s a quick comparison to help keep these two policies straight:

	General Liability	Workers’ Compensation
Who it protects	Third parties (customers, clients, public)	Your employees
What it covers	Bodily injury, property damage, personal injury claims	Work-related injuries, illnesses, lost wages
Legally required?	Usually no (but often contractually required)	Yes, if you have employees
Covers lawsuits from...	Customers, clients, vendors	Generally prevents employee lawsuits

Do You Need Both Policies?

For most business owners in California, the answer is yes — you likely need both.

• If a customer gets hurt at your place of business, general liability can help protect you.
• If an employee gets hurt on the job, workers’ comp can help protect you.

These are two completely different scenarios, and having only one policy can leave a major gap. A restaurant owner with workers’ comp but no general liability may be protected if an employee is injured — but not if a customer slips and falls. A contractor with general liability but no workers’ comp may handle a client’s property damage claim — but face serious exposure if an employee gets hurt on-site.

Industry-Specific Considerations

Contractors: Many jobs require proof of both policies before work begins. General contractors may also require subcontractors to carry their own coverage. If a sub doesn’t have insurance and causes damage or injury, you could be pulled into the claim.

Restaurants: Between kitchen hazards, customer foot traffic, and delivery exposures, restaurants face risks from every angle. Both policies are often considered foundational. Learn more about coverage built for restaurants on our restaurant insurance page.

Massage Therapists: If you’re a solo practitioner with no employees, you may only need general liability (and possibly professional liability). But the moment you hire staff — even part-time — workers’ comp becomes mandatory in California. Learn more about coverage for massage businesses on our massage insurance page.

How to Get the Right Coverage Without Overpaying

Many business owners benefit from working with an independent agency that can compare coverage options across multiple carriers. The right solution depends on your operations, payroll, contracts, and risk exposure.

A five-person contracting crew has different needs than a 20-table restaurant or a two-therapist massage studio. The goal is to align coverage with how you actually operate — and avoid paying for coverage you don’t need.

What a proper review can help with:

• Confirming workers’ comp compliance in California
• Aligning general liability limits with contract requirements
• Identifying coverage gaps between policies
• Updating coverage as you add employees, services, or locations

General Liability and Workers’ Compensation for California Businesses

For most California businesses, general liability and workers’ compensation are essential parts of a complete insurance program. Contractors, restaurants, massage businesses, and service companies face different risks, but nearly all need protection for both third-party claims and employee injuries. Reviewing your coverage regularly helps ensure you remain compliant and properly protected as your business grows.

Let’s Make Sure You’re Covered

Running a business in California comes with enough challenges — your insurance shouldn’t be one of them. If you’re unsure whether your current policies provide the right protection, it may be worth reviewing your coverage before renewal.

Request a quick policy review to help confirm there are no gaps and your coverage aligns with how your business operates today.