Contractor insurance is usually a stack, not one policy: general liability for injury and damage you cause to others, workers’ compensation where your state requires it, commercial auto for work vehicles, cover for tools and equipment, and often a license or surety bond. Your state licensing board sets the legal minimums. In practice, the general contractor’s or property owner’s contract usually sets the limits you must carry to get the job.
The core contractor insurance stack
| Coverage | What it handles | Who typically requires it |
|---|---|---|
| General liability | Injury to third parties and damage to their property, plus defense costs | Clients, general contractors, some licensing boards |
| Workers’ compensation | Employee injuries on the job | State law in most states; often the GC’s contract |
| Commercial auto | Liability and damage for business-owned trucks and vans | State auto law; client contracts |
| Tools and equipment floater (inland marine) | Theft or damage to tools wherever they are used | Your own risk decision; lenders on financed equipment |
| Installation floater | Materials in transit and during installation | Contracts where you supply materials |
| License bond | Guarantees compliance with licensing law to the public | State or local licensing boards |
| Owners and contractors protective (OCP) | Protects the owner or GC from liability for your work | Some owners and GCs, purchased by the subcontractor |
General liability
The Insurance Information Institute’s guide for artisan contractors says that “you will almost certainly need liability insurance,” and suggests a business owner’s policy as a cost-effective way to combine property and liability cover where you qualify. The SBA’s business insurance guide describes general liability as covering financial loss from bodily injury and property damage, plus legal defense costs.
For contractors, the part of general liability that matters most is often completed operations: claims that arrive after you’ve finished and left, such as a deck that fails a year later. Ask whether your policy’s products-completed operations aggregate is the same as the GC’s contract requires. Our general liability guide explains the occurrence and aggregate limits you will see on the declarations page.
Note what general liability leaves out. The NAIC’s small business insurance guide says commercial general liability “excludes employees as they should be protected by workers’ compensation insurance.” Injuries to your own crew go to workers’ comp, not your liability policy.
Workers’ compensation: state law decides
The NAIC says “nearly all U.S. states require employers to purchase a workers’ compensation insurance policy to cover employees,” and tells you to check with your state for requirements for your type of business. The rules for contractors are often stricter than for other businesses. Two examples show how far apart states are.
California
The Contractors State License Board’s license issuance page says all contractors must present proof of workers’ compensation coverage as a condition of licensure unless exempt, and that the exemption is not available to certain classifications: C-8, C-20, C-22, C-39 and C-61/D-49. A CSLB report to the Legislature on SB 291 states that under current law, all licensed contractors must have proof of workers’ compensation insurance by January 1, 2028, even if they have no employees. If you hold a California license with an exemption on file, that date is the one to plan around.
Texas
The Texas Department of Insurance’s employer page says private employers can choose to carry workers’ compensation but it is not required in most cases. Employers without it must notify the state that they don’t have coverage and report certain injuries. Even in Texas, a general contractor’s contract can require you to carry it. Our guide on who needs workers’ comp covers how to find your own state’s rule.
Subcontractors and uninsured subs
If you hire subcontractors who don’t carry their own workers’ compensation, your insurer may treat their workers as yours at audit and charge premium for them. Collecting a current certificate of insurance from every sub before they start is the standard defense. How payroll and class codes drive that premium is covered in our guide to how workers’ comp premiums are calculated.
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Commercial auto
Triple-I’s contractor guide warns that personal auto policies may not cover vehicles used primarily in business, and that a personal policy “will not provide coverage for any vehicle owned by a business.” A pickup titled to your LLC needs a commercial auto policy. Tools stored in the truck are a separate question; auto policies are generally not written to cover them, which is where a tools floater comes in.
Tools, equipment and materials
Triple-I explains that a tools and equipment floater “covers the insured property wherever it is used,” and that an installation floater covers equipment and materials while in transit, being installed and being tested. A business owner’s policy typically covers property at your premises; it may cover little or nothing at a job site. Ask about the per-item limit, theft from an unattended vehicle, and whether rented or borrowed equipment is included.
Umbrella and excess liability
Larger jobs often require limits above what a primary general liability or auto policy provides. An umbrella or excess policy sits on top of your general liability, auto and employer’s liability limits and pays once they are used up. Triple-I’s business vehicle guide notes that a business umbrella protects your autos only if it lists the auto policy as underlying insurance. Check that every policy the contract names is scheduled underneath.
Bonds are not insurance
A license bond guarantees that you will follow licensing law; if the surety pays a claim, you are generally expected to repay it. California’s CSLB requires a contractor’s bond of $25,000 filed with the Registrar, and a bond of qualifying individual of $25,000 where it applies. The same page lists an LLC employee/worker bond and LLC liability insurance for limited liability companies, where applicable. Other states and many cities have their own bond requirements and amounts, set by their licensing agency.
Reading the general contractor’s insurance requirements
The insurance exhibit in a subcontract is usually where your real minimums come from. Look for:
- Required limits per occurrence and aggregate for general liability, and whether the aggregate must apply per project.
- An additional insured requirement, including whether it must cover completed operations.
- Primary and non-contributory wording, meaning your policy pays before the GC’s.
- A waiver of subrogation, so your insurer can’t pursue the GC after paying a claim.
- Required auto and umbrella limits.
- Workers’ compensation, even if your state lets you opt out.
- Notice of cancellation requirements.
Each of those is usually an endorsement your insurer must add. If the endorsement isn’t on the policy, a certificate saying it is won’t help you after a claim.
What contractor insurance costs
No reliable public figure exists for a typical contractor premium. General liability is commonly rated on revenue or payroll by trade class; workers’ comp on payroll and class code; auto on vehicles, drivers and territory. Roofing and structural work carry very different rates from interior painting. Our guide to what business insurance costs explains the factors.
Before you bid your next job, ask the GC for their insurance exhibit and send it to your agent with your current declarations pages; the gap list that comes back is your checklist. A licensed agent or your state contractor licensing board can confirm the requirements that apply where you work.
Sources
- Insurance Information Institute — Artisan Contractors
- Insurance Information Institute — Business Vehicle Insurance
- U.S. Small Business Administration — Get business insurance
- NAIC — Small Business Insurance
- California Contractors State License Board — Issuing My License
- California Contractors State License Board — SB 291 Report
- Texas Department of Insurance — Workers’ compensation for employers