The 2025 guide to general contractor insurance requirements explains the policies every contractor should carry. These policies protect your business, clients, and job sites. The main insurance coverages are general liability, workers' compensation insurance, commercial auto, builder’s risk, and professional liability insurance.
They cover risks like property damage, injuries, and medical costs. Insurance helps contractors and business owners stay compliant and financially safe. Every contractor needs proof of coverage before starting work.
We call this proof a certificate of insurance. Requirements change by state and project type. The sections below explain each policy and its limits.
As a residential general contractor, A2Z Construction brings expertise in compliance and safety to every project.
Key Takeaways
- General contractor insurance needs include general liability, workers’ compensation, commercial auto, builder’s risk, and professional liability. These coverages protect contractors, clients, and job sites.
- Most states, like New Jersey and New York, need proof of coverage. Contractors must show a certificate of insurance before they can work or get licenses.
- Coverage limits usually start at $1 million for general liability. They may increase based on project size, state rules, or client contracts.
- Hiring uninsured contractors exposes clients to financial risks such as medical expenses and property damage, making verification of insurance documents essential.
- Insurance costs depend on the size of the company and the type of project. You may also need bonds and extra policies, like umbrella or errors and omissions, for full compliance.
Contractor Insurance Types and Coverage
Contractor Liability Insurance
General liability insurance is the base coverage for contractors. It covers bodily injury, property damage, and medical expenses that may happen at job sites. For business owners, this insurance protects them against lawsuits and often serves as a requirement for contracts. Knowing what is contractor liability insurance helps you see how insurance protects both contractors and clients.
Workers’ Compensation
Most states require workers' compensation insurance by law. It pays for employee injuries, medical bills, and lost wages. Contractors need this policy to protect their team and their company from big claims. Without it, an insurance company may not provide support after an accident.
Commercial Auto Insurance
You need automobile liability if you use trucks, vans, or other vehicles for work. It pays for damages or injuries from business-related accidents. Contractors with fleets or even one work truck must carry this business insurance to stay compliant.
Builder’s Risk Coverage
Builder’s risk insurance protects active projects. It covers materials, equipment, and structures against fire, theft, or storms. For renovations or new builds, this policy helps protect your business from unexpected costs.
Umbrella and Specialty Policies
An umbrella policy adds extra protection above normal limits. Specialty coverages like errors and omissions or pollution insurance handle special risks. Large contracts or complex projects often require these types of insurance.
What Does Contractors’ Insurance Cover?
Contractor insurance coverages vary, but usually include property damage, bodily injury, defense costs, and payouts for accidents. General liability insurance covers third-party claims, while workers' comp protects employees. Together, these policies keep a business running even after an accident.
Required Insurance Limits for Contractors
Minimum General Liability Insurance
Most contracts require at least $1 million per occurrence in general liability. Larger projects may need higher limits. Business owners should always check contract terms before signing.
Workers’ Comp and Employer’s Liability
Employers’ liability goes with workers' comp and covers lawsuits for workplace injuries. Limits often range from $500,000 to $1 million. These protections are critical for contractors managing teams on job sites.
Auto and Professional Liability
Commercial auto policies often require $1 million in automobile liability. Professional liability insurance, also called errors and omissions, protects against mistakes in design or oversight. Both are vital when projects involve vehicles or planning work.
Legal and Compliance Requirements
Does a General Contractor Need Insurance?
Yes. Most states require contractors to carry insurance to work legally. Insurance also protects clients and contractors from financial risk. Having the right policies shows professionalism and reliability.
Many clients ask if a general contractor can do plumbing. This is because licensing and insurance rules depend on the type of work.
State Requirements (NJ, NY, Virginia Example)
In New Jersey and New York, contractors must obtain general liability insurance and workers' comp to receive their licenses. Virginia also requires proof of coverage with specific limits. While rules differ, all states expect insurance that protects your business and the public.
Certificates of Insurance and Subcontractors
A certificate of insurance proves coverage and requires submission before any work begins. Contractors should also ask subcontractors for COIs to confirm compliance. David Haziza, Owner and Master of Construction at A2Z Construction, warns that hiring uninsured subcontractors creates serious risks.
Contractor Insurance Costs and Bonds
How Much Does Contractor Insurance Cost?
The cost of business insurance depends on company size, project type, and policy limits. Small contractors may spend a few thousand dollars a year, while larger firms pay more. Comparing plans from an insurance company helps balance cost with protection.
Contractor Bond Requirements vs Insurance
Contractor bonds and insurance are different. A bond ensures performance and financial responsibility. Insurance protects against accidents like bodily injury or property damage. Many licenses and contracts require both.
Insurance for Independent Contractors
Independent contractors also need coverage to protect against claims. General liability insurance handles third-party risks, and workers' compensation insurance may apply if they hire help. Carrying coverage builds trust with clients and shows you can protect your business.
Risks of Hiring an Uninsured Contractor
Hiring a contractor without insurance puts both homeowners and business owners at risk. If accidents happen, the client may have to pay for medical expenses or repairs. Always ask for a certificate of insurance before work starts.
For more guidance on making the right choice, see our article on hiring a general contractor to learn what to look for before starting a project.
Why Insurance Requirements Matter
Protecting Contractors and Clients
Insurance protects contractors from financial losses and gives clients peace of mind. The right insurance coverages reduce disputes and keeps projects moving forward.
Meeting Legal and Contract Standards
Contracts often list required policies, and states enforce minimum standards. Following these insurance requirements for contractors keeps projects compliant and helps protect your business from penalties.
Contractor Insurance Final Takeaway
General contractor insurance requirements protect contractors, employees, and clients. With the right types of insurance, contractors can follow state laws, avoid risks, and finish projects with confidence. At A2Z Construction, we guide contractors and clients through compliance to keep every job site safe.
Insurance Requirements for Contractors FAQ
What insurance do I need as a contractor?
- General liability insurance – covers bodily injury and property damage
- Workers’ compensation insurance – required if you have employees
- Commercial auto insurance – for business vehicles
- Builder’s risk insurance – protects active projects and materials
- Professional liability insurance (errors and omissions) – for design or oversight work
- Umbrella policy – adds higher limits
- Certificate of insurance – proof of coverage, with clients listed as additional insured when required
