The short answer: Contractor insurance protects general contractors, subcontractors, and tradespeople if someone gets hurt, property gets damaged, or a job goes wrong.
Construction is risky work. One accident on a job site can cost more than the job paid. The right insurance pays so you do not have to.
Key Takeaways
- General liability is the most important coverage for any contractor.
- Most general contractors and many homeowners will not hire you without proof of insurance.
- Many states and cities require insurance to get or keep a contractor license.
- Your tools and equipment usually need their own coverage.
- Hiring subcontractors without insurance can make their claims your problem.
Who Needs Contractor Insurance?
If you build, fix, or install anything for a client, you need it.
That includes:
- General contractors and home builders
- Handymen
- Electricians and plumbers
- HVAC contractors
- Roofers
- Carpenters and framers
- Painters
- Concrete and masonry contractors
- Flooring and drywall installers
- Landscapers
It does not matter if you are a one person shop or have a full crew.
What Does Contractor Insurance Cover?
General Liability for Contractors
Covers accidents that hurt someone or damage their property.
Examples:
- A homeowner trips over your extension cord and breaks an arm
- You drop a ladder and crack a client’s granite countertop
- Sparks from your work start a small fire in a client’s garage
It also covers problems that show up after the job is done.
Examples:
- A pipe you installed leaks a month later and floods the basement
- A deck railing you built gives way and someone is hurt
It can pay for repairs, medical bills, lawyers, and court costs. It usually does not pay to redo your own work, but it can pay for the damage your work caused.
Learn more about general liability insurance.
Tools and Equipment Insurance
Covers your tools and equipment wherever they go.
Examples:
- Your tools are stolen out of your truck overnight
- A skid steer is damaged on a job site
- Your generator is stolen from an open job site
Most business and auto policies do not cover tools well once they leave your shop.
Workers’ Comp for Contractors
Covers your employees if they get hurt on the job.
Examples:
- A worker falls off a ladder and breaks a leg
- An employee cuts their hand on a saw
- A laborer hurts their back carrying drywall
It pays their medical bills and part of their lost paycheck. Most states require it once you have employees.
Learn more about workers’ compensation insurance.
Commercial Auto for Contractors
Covers trucks and vans you use for your business.
Examples:
- You rear end someone on the way to a job
- Materials fly out of your truck bed and crack another driver’s windshield
Your personal car insurance may not cover driving for your business, especially with a trailer, tools, or crew.
Learn more about commercial auto insurance.
Builders Risk Insurance
Covers a building while it is being built or remodeled.
Examples:
- A fire destroys a half built house
- Someone steals lumber and copper wire from the site
- A storm rips off the framing before the roof is on
Other Coverages to Ask About
- Contractor license bonds: often required to get your license
- Umbrella: extra protection on top of your other policies for very large claims
- Professional liability: for design and build contractors who also draw plans or give advice
Why Do Clients Ask for Proof of Insurance?
Because if you cause damage and have no insurance, they could end up paying for it.
Before you start, general contractors, property managers, and homeowners often ask for:
- A certificate of insurance: a one page document that proves you have coverage
- To be listed on your policy: so your insurance also protects them on that job
- Certain coverage amounts: like $1 million in general liability
A good agent can send this proof quickly so you do not lose the job.
What If You Hire Subcontractors?
Always get proof of insurance from every sub you hire.
If an uninsured sub gets hurt or damages a client’s property, the claim can land on you.
It can also raise your own insurance bill, because some insurance companies charge you for uninsured subs as if they were your own employees.
Pro Tip: Keep a copy of every sub’s certificate of insurance and check that it is still active before each job.
A Simple Example
A roofer replaces shingles on a house and finishes on a Friday.
The next week, a heavy rain hits. Water leaks through a spot that was not sealed right.
The ceiling, drywall, and hardwood floors are ruined. The homeowner wants $25,000 to fix it.
Without insurance: The roofer pays for the repairs and a lawyer out of pocket.
With general liability: The insurance company pays to repair the water damage inside the home and defends the roofer if the homeowner sues.
One claim can cost more than years of insurance.
Contractor Insurance FAQs
How much does contractor insurance cost?
It depends on your trade, your revenue, how many employees you have, and your past claims. A painter usually pays much less than a roofer, because roofing work is riskier.
Do I need insurance to be a contractor?
In many states and cities, yes. Insurance is often required to get or keep a contractor license. Most general contractors and many homeowners also require it before they will hire you.
What insurance does a general contractor need?
Most general contractors need general liability, workers’ comp, commercial auto, and tools and equipment coverage. Builders risk is often needed for new construction and big remodels.
Does contractor insurance cover my own mistakes?
It usually does not pay to redo your own work. It can pay for damage your work causes, like a leak that ruins a client’s floors.
Do I need insurance as a subcontractor?
Yes. Most general contractors will not let you on the job without your own general liability and proof of insurance.
Where can I get contractor insurance?
Nelson Insurance Agency offers contractor insurance for general contractors, subcontractors, and tradespeople in 42 states.
The Bottom Line
Contractor insurance is not one policy. It is a few coverages that each protect you from a different problem:
- General liability for accidents and damage, during and after the job
- Tools and equipment for your gear
- Workers’ comp for crew injuries
- Commercial auto for your trucks and trailers
- Builders risk for buildings under construction
Make sure you have the pieces that fit your trade. Not sure what you need? See our contractor insurance options.
