General contractors need insurance in almost every case. Most states require workers’ compensation once you have employees, and nearly every property owner, developer, and lender requires general liability before you start work. Some states, including California, add their own rules on top.
Below, we cover what the law requires, which policies general contractors carry, how much coverage contracts typically ask for, what to require from subcontractors, and what changes for California contractors through 2028.
Are General Contractors Legally Required To Have Insurance?
In most cases, but which policy the law requires depends on your state and whether you have employees. Workers’ compensation is the most common legal mandate. General liability is required by some states and licensing boards, and by almost every construction contract.
State Law Usually Requires
- Workers’ compensation: required in nearly every state once you have employees. [ADD SOURCE: state rules vary; Texas is a notable exception for most private employers]
- General liability: there is no single national rule. Some licensing boards require it as a condition of your license, and others leave it to cities, counties, and contracts. Maryland, for example, now requires home improvement contractors to carry at least $500,000 in general liability.
- Commercial auto: vehicles your business owns or uses need auto liability coverage under state law.
- License bonds: many licensing boards require a surety bond. A bond is not insurance; more on that below.
Clients And Contracts Require
Even where state law is silent, contracts are not. Owners, developers, and general contractors ask for a certificate of insurance (COI) before work starts. Most also require you to name them as an additional insured and to meet minimum limits.
What Types Of Insurance Do General Contractors Need?
General contractors need general liability, workers’ compensation, and commercial auto as a foundation. Larger jobs usually add umbrella and builder’s risk coverage.
| Coverage | What it pays for | Required or recommended |
|---|---|---|
| General liability | Third-party injuries and property damage from your work | Required by most contracts and some states |
| Workers’ compensation | Employee medical bills and lost wages after job injuries | Required in most states once you have employees |
| Commercial auto | Accidents in vehicles your business owns or uses | Required for business vehicles |
| Umbrella or excess liability | Extra limits above general liability, auto, and employer’s liability | Often required on larger contracts |
| Builder’s risk | The structure and materials while under construction | Often required by owners and lenders |
| Tools and equipment (inland marine) | Tools and equipment on site or in transit | Recommended |
| Professional liability | Design or consulting errors | Recommended for design-build work |
What Is General Contractor General Liability Insurance?
General contractor general liability insurance pays for third-party claims of bodily injury, property damage, and personal injury caused by your operations or completed work, including legal defense. It does not cover your own employees’ injuries, your vehicles, or the cost to redo faulty work.
A surety bond is not insurance. A license or performance bond protects your client. If the surety pays a claim, you repay the surety.
How Much Insurance Should A General Contractor Have?
Most general contractors carry at least $1 million per occurrence in general liability, because that is the floor most contracts set. Public agencies use the same floor; the Santa Barbara County Superior Court requires $1 million per occurrence in general liability from its contractors, for example.
| Coverage | Common contract minimum |
|---|---|
| General liability | $1 million per occurrence, $2 million aggregate |
| Commercial auto | $1 million per accident |
| Employer’s liability (part of workers’ comp) | $1 million per accident or disease |
| Umbrella | Set by each contract, $5 million or more on Caltrans jobs |
These figures match what California public agencies require. Sonoma County’s contractor insurance requirements and Merced County’s contract insurance requirements both call for the general liability, auto, and employer’s liability limits shown above. Caltrans requires $5 million in umbrella coverage on construction contracts bid at $1 million or less, with higher limits on larger jobs. Set your limits to match the largest contract you plan to bid, not your smallest job.
Do Subcontractors And 1099 Contractors Need Their Own Insurance?
Yes. Subcontractors and 1099 contractors should carry their own general liability and, where state law requires it, their own workers’ compensation. A general contractor’s policy is not built to cover a sub’s own liability.
Uninsured subs can also cost the general contractor directly. If you can’t show proof that a sub carries workers’ comp, your own workers’ comp insurer can charge you premium for that sub’s workers at your annual audit, as the Missouri Department of Labor explains for general contractors.
Subcontractor Insurance Requirements To Put In Writing
- A current certificate of insurance for general liability, auto, and workers’ comp before work starts.
- An additional insured endorsement naming you, plus the owner if your contract requires it.
- A waiver of subrogation in your favor.
- Limits at least equal to what your own contract requires of you.
- Primary and noncontributory wording on the sub’s liability policy.
- Updated certificates before any policy expires.
California Contractor Insurance Requirements In 2026
California contractors with employees must carry workers’ compensation now. Five license classifications must carry it even with no employees. Every other licensee must carry it starting January 1, 2028, not 2026 as many older articles still say.
Who Needs Workers’ Comp Now, And The 2028 Deadline
| Date | What changed |
|---|---|
| Already in force | C-39 roofing contractors must carry workers’ comp, employees or not |
| January 1, 2023 | SB 216 adds C-8 concrete, C-20 HVAC, C-22 asbestos abatement, and D-49 tree service |
| September 2024 | SB 1455 moves the all-contractor deadline from 2026 to 2028 |
| July 1, 2026 | SB 291 penalties apply, starting at $10,000 per violation for sole owners who employ workers without coverage |
| January 1, 2027 | CSLB must have a process to verify exemption claims |
| January 1, 2028 | All licensees must carry workers’ comp, with or without employees |
The 2028 date comes from SB 1455, which delayed the all-contractor workers’ comp mandate, and the penalty floors come from SB 291’s minimum civil penalties for uninsured contractors.
What California Requires From Contractor LLCs
A contractor licensed as an LLC must carry at least $1 million in liability insurance when five or fewer people are listed on the license, plus $100,000 for each additional person, up to $5 million. The policy must come from a California-licensed or eligible surplus line insurer.
California also requires contractors building a single-family home for an owner who plans to live there at least a year to disclose in writing whether they carry commercial general liability insurance.
What Happens If A Contractor Works Without Coverage?
Working without required insurance can cost you your license, your contracts, and your personal assets.
- License suspension: in California, a lapse in required workers’ comp or LLC liability coverage can suspend your license.
- Penalties: fines for employing workers without workers’ comp, such as California’s SB 291 minimums.
- Personal liability: a single claim can reach a sole proprietor’s home and savings.
- Lost work: no certificate of insurance usually means no contract.
The Bottom Line On General Contractor Insurance
General contractors need insurance in almost every case. State law usually requires workers’ compensation once you hire employees, and contracts typically require general liability at $1 million per occurrence and $2 million aggregate, plus commercial auto. Subcontractors should carry their own coverage so their claims and audit charges stay off your policy. In California, every licensed contractor must carry workers’ comp by January 1, 2028. McDonough Insurance Services, a family-run insurance advisory based in California, helps contractors in about 20 states match their coverage to the contracts they bid and the rules they work under.
Frequently asked questions
How much does $1 million general liability insurance cost for a contractor?
It depends on your trade, revenue, payroll, claims history, and state.
Is a contractor bond the same as insurance?
No. A bond protects your client, and you repay the surety for any claim it pays. Insurance protects your business.
Does a general contractor’s insurance cover subcontractors?
Usually not for the sub’s own liability. Require subs to carry their own coverage and name you as an additional insured.
Does homeowners insurance cover a contractor’s mistakes?
Usually not. Damage caused by the contractor’s work is typically a claim against the contractor’s general liability policy.
What is a certificate of insurance?
A one-page summary of your policies, limits, and dates. Clients request it to confirm you are insured before work begins.
This article is general information, not legal advice. Insurance requirements vary by state and change often. Confirm your obligations with your licensing board or a licensed insurance agent.