General Contractor Insurance Requirements: What You Need to Stay Compliant and Protected

Lucas Alvarez
Nov 4
3 min read

If you’re a general contractor, insurance isn’t optional, it’s essential. From licensing boards to project owners, nearly every aspect of your business requires proof of insurance. Without it, you could lose out on contracts, violate state laws, or face devastating out-of-pocket costs after an accident.

Understanding the insurance requirements for general contractors is key to staying compliant, competitive, and financially secure.

In this article, we’ll break down exactly what insurance general contractors are required to have, why each coverage matters, and how to build a complete protection plan for your business.

Why Insurance is Required for General Contractors

General contractors coordinate multiple moving parts, subcontractors, job sites, materials, and clients, which creates exposure to many risks.

Because of this, insurance requirements exist to:

Protect clients from financial loss due to contractor negligence.
Ensure legal compliance with state licensing laws.
Guarantee project completion in case of accidents or disputes.
Provide financial stability so contractors can recover quickly after a loss.

In short, insurance requirements protect both you and your clients, and help you build trust with project owners who expect professional coverage.

The Core Insurance Policies General Contractors Need

While requirements vary by state and contract, most general contractors must maintain several key policies.

1. General Liability Insurance

What it covers: General liability insurance protects against third-party claims for:

Bodily injury (e.g., a client slips at the job site)
Property damage (e.g., damage to a customer’s home or structure)
Advertising injury (e.g., libel or copyright issues)

Why it’s required:

Mandatory for most contractor licenses.
Required by general contractors hiring subcontractors.
Typically demanded by clients and project owners.

Typical minimum limits:

$1,000,000 per occurrence
$2,000,000 aggregate

Example: A contractor accidentally breaks a water pipe during a renovation, flooding the basement. General liability covers repairs and cleanup.

2. Workers’ Compensation Insurance

What it covers: Workers’ compensation pays for medical expenses, lost wages, and rehabilitation costs if employees are injured on the job.

Why is it required:

Legally mandated in nearly every state for businesses with employees.
Even if you use subcontractors, some states require coverage if you control their work schedule or equipment.

Example: A worker falls from scaffolding and breaks a leg. Workers’ comp covers hospital bills and wage replacement.

3. Commercial Auto Insurance

What it covers: Protects vehicles used for business purposes against accidents, theft, and property damage.

Why is it required:

Personal auto policies typically exclude business use.
Most states require minimum liability coverage for commercial vehicles.

Example: A company truck rear-ends another vehicle while hauling equipment. Commercial auto insurance covers repairs and medical expenses.

4. Professional Liability (Errors & Omissions) Insurance

What it covers: Covers financial losses due to professional errors, negligence, or failure to meet contract terms.

Why it’s required: While not always legally required, many commercial clients and public agencies include it in their contracts.

Example: A general contractor’s design oversight causes structural issues after completion. Professional liability insurance covers legal and repair costs.

State Licensing Insurance Requirements for General Contractors

Each state sets its own rules for contractor licensing and insurance. While coverage types are similar, minimum policy limits vary.

Here’s an example of common state-specific requirements:

State	Required Coverage	Minimum Limits
California	General Liability, Workers’ Comp	$1M per occurrence / $2M aggregate
Florida	General Liability, Workers’ Comp	$300K property / $100K injury
Texas	General Liability (Recommended), Workers’ Comp (Optional)	Varies
New York	General Liability, Workers’ Comp, Disability	$1M+ per occurrence
Georgia	General Liability, Workers’ Comp	$500K minimum recommended

Always check with your state licensing board to confirm current requirements before applying or renewing your license.

How Much Does Insurance for General Contractors Cost?

The total cost depends on factors such as:

Business size and annual revenue
Type of work performed (residential vs. commercial)
Claims history
Number of employees
Location and state requirements

Bundling policies through one agency can lower your overall premium.

How to Stay Compliant and Fully Protected

Review your contracts carefully. Each project may require specific coverages or limits.
Work with an insurance agency specializing in contractors. They’ll understand state laws and industry risks.
Update your policies annually. Your coverage should grow with your business.
Keep certificates current. Expired policies can disqualify you from projects.

Protect Your License, Clients, and Business

Insurance isn’t just paperwork; it’s your license to operate, your reputation, and your financial safety net.

Whether you’re building homes, managing commercial projects, or supervising multiple trades, meeting general contractor insurance requirements ensures you stay compliant, competitive, and covered from all angles.

Ready to simplify your insurance and save money? Get a customized quote today and see why contractors across the country trust us to protect their business.