What insurance does a contractor need?

Most contractors carry general liability insurance, commercial auto insurance for work vehicles and, once they have employees, workers' compensation. Many also need a license bond, coverage for tools and equipment, and higher limits that commercial customers ask for. What is required for you depends on your state, your trade and your contracts, so confirm it with your state licensing board and a licensed insurance agent.

This page is a map of the categories, not insurance or legal advice. Rules change by state and year, and two contractors in the same trade can need very different coverage.

Where requirements come from

Three sources set the minimum you carry.

The law. The SBA notes that businesses with employees are required to carry workers' compensation, unemployment and disability insurance, and that some states require more (checked October 2026). Vehicle insurance rules are set by each state.

Your license. Many state licensing boards set insurance or bond minimums as a condition of the license. Two examples, both checked October 2026:

• Texas requires licensed air conditioning and refrigeration contractors to carry general liability insurance with set minimums for each license class, listed on the TDLR certificate of insurance form.
• California requires a $25,000 contractor bond before the CSLB will issue, reactivate or renew an active license.

Other states have different rules. Check your own board.

Your customers. Commercial customers, property managers and general contractors often require specific limits, additional insured status and a certificate of insurance before you start work. These are frequently higher than the legal minimum.

The main categories

General liability

Covers claims that your work caused bodily injury or property damage to someone else, such as a leak after a repair or a customer tripping over your equipment. The SBA describes it as protection against losses from bodily injury, property damage and legal costs. It's the policy most customers ask about first. Check whether "products and completed operations" is included, since many trade claims show up after the job is done.

Commercial auto

Personal auto policies often exclude business use. A work truck, a van with your name on it or a vehicle driven by an employee typically needs a commercial policy. Ask about coverage for employees driving their own vehicles for work, too.

Workers' compensation

Pays medical costs and lost wages for employees hurt on the job. The SBA lists it as required for businesses with employees; exemptions and details vary by state. Ask your agent how the premium is rated, since it usually depends on the kind of work your people do.

Tools and equipment

Often sold as inland marine or contractor's equipment coverage. Protects tools and gear on the truck, at job sites and in storage, which a property policy may not cover away from your premises.

Commercial property

Covers a shop, office, warehouse and the stock inside it. Some small businesses use a business owner's policy, which the SBA describes as a package that combines typical coverage into one bundle.

Umbrella or excess liability

Adds limits above your general liability and auto policies. Useful when a customer requires higher limits than your base policy.

Professional liability

For contractors who design systems, provide engineering or give paid advice. Covers claims of errors in that work. Many service-only shops don't need it; ask your agent.

Bonds

A license bond (like California's) protects consumers and the state. Some jobs, especially public work, also require bid or performance bonds. A bond is not insurance for you; if the surety pays a claim, it typically expects you to repay it.

Subcontractors and 1099s

If you send work to 1099 subcontractors, ask for their certificate of insurance before the job and keep it on file. If they are uninsured, a claim can land on your policy, and your insurer may ask about uninsured subs at audit. Whether a worker is really a contractor or an employee is a legal question with its own consequences; see subcontract vs hire.

On CrewConnect, the sending company can require license, insurance, certification or background check from partners, and a person whose credential lapses before the job date isn't offered for that job.

What to ask an agent

The SBA suggests assessing your risks, finding a licensed agent, shopping around and comparing terms. Bring:

• Your state, trade and license class
• Number of employees and what each does
• Vehicles and who drives them
• Annual revenue and the share that is commercial
• Any customer contracts with insurance requirements
• Whether you use subcontractors

Then ask what each policy excludes. Exclusions matter as much as limits. The startup cost side of insurance is covered in how much it costs to start an HVAC business, and the full setup sequence is in how to start a field service business.

Common questions

Is general liability insurance required for contractors?

It depends on the state and the license. Some licensing boards require it as a condition of licensure, and many customers require it before work starts. Check your state board.

Do I need workers' comp if I have no employees?

Rules vary by state. Some states let sole owners opt out, others treat certain workers as employees regardless of the label. Ask your state's workers' compensation agency or an agent.

Does my personal auto policy cover my work truck?

Often it doesn't when the vehicle is used for business. Tell your insurer how the vehicle is used and ask whether you need a commercial policy.

What is a certificate of insurance?

A document from your insurer or agent showing your policies, limits and dates. Customers and licensing boards ask for it as proof of coverage. It doesn't change the policy itself.