What insurance does a California contractor license require?

What every California contractor must have on file

Two things are required for an active license. The first is a $25,000 contractor’s bond, which must be in place before the CSLB issues, reactivates or renews an active license under Business and Professions Code section 7071.6. The CSLB says the bond protects consumers harmed by defective work or license law violations and employees owed unpaid wages, so it does not protect your business against lawsuits.

The second is proof of workers’ compensation insurance, a state certification of self-insurance or a signed exemption certifying you have no employees. Other requirements depend on how your business is organized and qualified.

Who needs workers’ comp right now

The CSLB notes that California law requires employers, including construction businesses, to carry workers’ compensation even with only one employee. Under section 7125, a no-employee exemption is not available to C-8 concrete, C-20 HVAC, C-22 asbestos abatement, C-39 roofing or D-49 tree service contractors. The CSLB also will not accept an exemption if your license is qualified by a responsible managing employee (RME).

Your insurer files the certificate with the CSLB, listing the board as certificate holder and your license number, and section 7125.6 requires the top three workers’ comp class codes by payroll to be listed. If you hire someone while an exemption is on file, the exemption stops being valid and the CSLB must receive proof of coverage within 90 days of the hire.

Coverage must be continuous. The CSLB says a lapse results in license suspension, and any work done while suspended counts as unlicensed work. An inactive license does not need a certificate or exemption while it stays inactive.

The 2028 change for contractors with no employees

Senate Bill 216 originally set January 1, 2026 as the date when all licensed contractors would need workers’ comp regardless of employees. According to a CSLB stakeholder packet, Senate Bill 1455 pushed that date to January 1, 2028 and directed the board to set up a process for verifying exemption eligibility.

The current version of section 7125, which allows the no-employee exemption, is set to be repealed on January 1, 2028. Menlo Insurance Services, in a September 2026 review of the replacement version, notes that only joint ventures with no employees would still be able to file the no-employee statement. The CSLB has discussed further adjustments, so check the board’s site before you renew in 2027.

Extra rules for LLC contractor licenses

LLCs carry the heaviest requirements. The CSLB requires liability insurance with a cumulative limit of at least $1 million when five or fewer people are listed as personnel of record, plus $100,000 for each additional person, up to $5 million (section 7071.19). The policy must come from an insurer licensed by the California Department of Insurance or an eligible surplus line insurer.

LLCs also need a $100,000 employee and worker bond on top of the $25,000 contractor’s bond, under section 7071.6.5. Their home improvement and service and repair contracts must include specific general liability insurance information.

General liability: not required, but disclosed

For sole owners, partnerships and corporations, the CSLB does not require general liability insurance, though it strongly recommends it. Under section 7159.3, home improvement contractors must give customers a written notice saying whether they carry commercial general liability insurance, with the bid and the contract. If you are insured, the notice must include your insurer’s name and phone number so the homeowner can verify coverage.

In practice, many general contractors, property managers and public agencies require general liability before you start work, often with additional insured wording. A missing policy is more likely to cost you jobs than your license.

What California contractors typically pay

Insureon publishes average premiums for general contractors who bought through its marketplace, most of them businesses with fewer than five employees. California averages are below. Specialty trades, payroll and claims history move these numbers considerably.

Insureon reports general contractors nationally pay an average of about $10 a month ($126 a year) for surety bonds, with price driven mainly by bond size. For a contractor required to carry workers’ comp with no employees, Wellington Partners, a California broker, notes the policy is often written on $0 payroll, priced at the insurer’s minimum premium and does not cover the owner unless the owner is specifically included.

How to stay compliant without overpaying

A few habits keep your license active and your premiums in check.

A broker such as Florin can compare workers’ comp and liability quotes from several insurers for your classification.

• Look up your license on the CSLB site and confirm your bond, workers’ comp status and classifications are current.
• Ask your insurer to file certificates electronically so your record updates quickly.
• Make sure the business name and license number on bonds and certificates match CSLB records exactly.
• Use the correct workers’ comp class codes; the wrong code can inflate your premium.
• If you need a no-payroll policy, compare minimum premiums from several insurers and decide whether to cover yourself.
• Confirm your subcontractors’ workers’ comp before they start, so their gaps do not show up at your audit.