What insurance do I need as a contractor?

The policies most contractors carry

General liability is the starting point, because licensing boards, clients and general contractors all ask for it. The rest depends on whether you have employees, vehicles, tools and contracts that require more. Insureon’s medians for its construction customers give a reference price for each policy.

Treat these as reference points, not quotes. Your price depends on your trade, payroll, state, vehicles, limits and claims history.

What your state license may require

Many states tie a contractor license or registration to proof of liability insurance, and some add a bond. These are minimums for getting licensed, not recommendations, and they vary by license class.

Paperwork rules matter as much as the limits. Washington requires your exact business name on the bond and insurance, with L&I listed as certificate holder. Oregon wants the certificate uploaded with your application, a statement that products and completed operations coverage is included and an insurer acceptable in Oregon. Check your state licensing board and any city license for your trade before you buy.

When workers’ comp is required

Workers’ comp is set by each state, and construction often gets stricter rules. In Florida, a construction business must carry it once it has one employee, and the owner counts, although an exempt corporate officer or LLC member does not. Outside construction, Florida’s threshold is four employees.

Oregon requires workers’ comp if your business has employees, and the Construction Contractors Board says commercial contractors must have it. Texas is the exception: despite what some contractor guides say, it is not required in every state. Texas private employers can choose not to carry it, but they must file a non-subscriber notice, and those with at least five employees must report qualifying injuries. The Texas Department of Insurance notes that a policy limits your liability if an injured employee sues, except for gross negligence resulting in a death.

Even where it is optional, general contractors commonly ask subcontractors for a workers’ comp certificate or a state exemption before work starts, because an uninsured sub’s workers can end up on the general contractor’s own policy at audit.

What general contractors and clients ask for

Contracts, not laws, usually set the limits you actually buy. Insureon reports that 92% of the contractors and construction businesses buying general liability through it choose $1 million per occurrence and $2 million aggregate. A typical subcontract or commercial client agreement also asks for some or all of the following:

Read the insurance section before you sign. Some endorsements cost extra and some insurers won’t add certain wording, which can delay your start date.

• A certificate of insurance issued to the client before you start work.
• Additional insured status for the general contractor and project owner, often including completed operations.
• A waiver of subrogation on general liability, auto and workers’ comp.
• Primary and non-contributory wording, so your policy pays before theirs.
• Products and completed operations coverage, which responds to claims after the job is finished.
• Umbrella limits on top of your primary policies for larger commercial or public projects.

Coverage contractors often miss

Most claim surprises come from assuming a policy covers something it was never built for:

• Work trucks on a personal auto policy. Personal policies often exclude or limit business use, especially for business-owned vehicles or employee drivers.
• Tools on job sites. Homeowners policies are not built for business equipment away from home; inland marine coverage follows tools to job sites and in transit.
• Employees driving their own cars for work. Hired and non-owned auto covers your business’s liability.
• The building you are working on. Builder’s risk covers losses such as fire or vandalism to a structure while it is under construction; general liability does not.
• Design and estimating mistakes. General liability typically excludes professional services, so design-build work may need professional liability.
• Bonds treated as insurance. A license or performance bond protects your customer or the state, and the surety can ask you to repay any claim it pays.

How to get covered without overpaying

Buy to your real requirements, then close the gaps that could put you out of business. These steps keep the total reasonable:

• List every requirement first: your state license minimums, any city license and the insurance clauses in your largest contracts.
• Bundle general liability and property in a business owner’s policy if you qualify.
• Describe your work accurately. A wrong trade classification can bring an audit bill or a denied claim.
• Estimate payroll accurately and collect certificates from every sub so you are not charged for them at audit.
• Ask for blanket additional insured and waiver of subrogation endorsements if you sign many contracts, instead of adding each client one at a time.
• Choose higher deductibles on tools and vehicles you could replace yourself.
• Compare several insurers for the same limits. A broker such as Florin can compare quotes from several insurers for your trade.