Most contractors need four kinds of insurance, and each one covers a gap the others do not: general liability, workers' comp, commercial auto, and a tools floater. Skip one and you are personally on the hook for exactly the thing it would have covered. Here is what each does, and the trap hiding in each one.
1. General liability (your base policy)
General liability (GL) pays for someone else's injury or property damage caused by your work. It is the policy every general contractor and commercial job will ask you to carry, usually at a "1M/2M" limit (a million per claim, two million a year), which is the industry standard minimum.
Two things to get right:
- Insist on "occurrence" form, not "claims-made." Occurrence covers an incident that happens while you are insured, even if the claim does not surface for years, which is exactly how construction defects work. Claims-made can leave you exposed after you switch carriers.
- Know the big exclusion. GL does not pay to redo your own faulty work. That is the "your work" exclusion, and it surprises people. It does usually cover damage that results from bad work (a leak that rots the framing), and it covers work your subs did, but fixing your own mistake needs a separate workmanship or E&O product.
Expect GCs to make you name them as an "additional insured" and hand over a certificate of insurance (COI) before you set foot on site. Those two are not the same thing and the difference costs people work: a COI is evidence of cover on the day it was issued and nothing more, while additional insured is an actual change to the policy that extends your cover to them. Certificate of insurance and additional insured: what a COI really proves sets out what each one does and what to check before you send it. The policy itself is in General liability insurance for contractors, explained.
Get the timing right too. Cover has to be live before you set foot on the site, not before you invoice, and a GC's contract will usually say so. If a policy lapses mid-job, even for a few days, you are uninsured for anything that happens in the gap and you have almost certainly breached the contract as well, which can be enough on its own to get you removed from the job. Diary your renewal a month out and do not let it run to the wire.
2. Workers' comp (once you hire anyone)
Workers' comp covers your employees' work injuries: their medical bills and lost wages. Every state except Texas requires it the moment you have even one employee, and most contracts require it regardless. It is a trade-off baked into law: the injured worker gets defined benefits and gives up the right to sue you.
The trap: paying a worker on a 1099 does not get you out of this. If they are really an employee (see 1099 vs W-2), you have created workers' comp exposure and possible penalties, not avoided them.
3. Commercial auto (the work-use trap)
Your personal auto policy excludes business use, buried in the fine print. Use your truck to haul materials, carry tools, or drive between job sites, and a crash during that work can be flat-out denied. If the truck is titled to your business, commercial auto is mandatory. If it is your personal truck but you use it for work, you still need it. Do not assume your personal policy has your back on the job.
4. Tools and equipment (an inland marine floater)
Your tools move around, so a standard property policy (which covers a fixed address) does not cover them, and neither does your auto policy. A tools-and-equipment floater (also called inland marine) covers theft, fire, and damage to your gear on site, in the van, and in transit.
The trap that bites contractors: many of these policies will not pay for theft from a vehicle unless it was locked and there is visible evidence of forced entry. Leave the truck unlocked, a window cracked, or the bed open, and a straight burglary is not covered. Lock it, every time. See Tool theft and security.
When the limits are not enough: umbrella and excess
Sooner or later a general contractor or a public body will ask for more liability cover than your 1M/2M primary carries. You do not solve that by rewriting the base policy, which gets expensive fast. An umbrella (or excess) policy sits on top of your existing general liability and commercial auto and adds limit above them, usually for a fraction of what the same increase would cost on the primary. It is the normal way a small contractor meets a contract requirement they cannot otherwise satisfy. When it is worth buying, and how the two differ, is in Umbrella and excess liability: when a contractor needs more coverage.
The two you might also need
- Builder's risk covers the building itself while it is under construction (fire, wind, theft, water). Usually the owner or GC buys it. As a sub, just confirm you are named or included under the project's policy.
- Professional liability (E&O) matters if you also design, spec, or design-build. Your GL will not respond to a design error, so that risk sits outside it entirely. See Do I need professional liability (E&O) insurance?.
The four above are the spine, and each has a guide of its own that goes further than this page can: General liability insurance for contractors, explained, Commercial auto vs personal auto for contractors, Tools and equipment insurance (inland marine) and Builder's risk insurance: what it is and who buys it. If you are not sure whether the people working for you are employees at all, which decides whether you need workers' comp in the first place, start with 1099 vs W-2: which are you really?.
Common questions
Do I need insurance if I work alone with no employees?
If you work solo you usually still need general liability and a tools floater, but workers' comp often is not required until you hire someone. Most GCs and commercial clients will not let you on site without a general liability certificate regardless of crew size, and some contracts require workers' comp even for a one-person business. Whether your state exempts a sole owner from carrying comp on themselves varies, so check Working in Your State.
Is contractor insurance required by law or just by the contract?
Workers' comp is required by law in every state except Texas once you have employees; general liability is usually required by your contract or your license, not by a general statute. Some states and cities also make a level of liability insurance a condition of holding a contractor license. So whether it is "required" depends on which coverage and where you work. Check Working in Your State for the license and insurance mandates that apply to you.
Does general liability cover my own employees getting hurt?
No. General liability covers injuries to other people and damage to their property, not your own employees' work injuries, which is what workers' comp is for. If a worker is hurt and you carry no comp, you can be sued directly and pay medical bills and lost wages out of pocket, plus state penalties. Treat GL and workers' comp as two separate, non-overlapping policies.
How much does contractor insurance cost?
It varies too much to quote one number, because premium is driven mostly by your trade, your payroll, your location, and your claims history. A low-risk trade with a clean record pays a fraction of what a roofer or excavator pays. The honest answer is to get real quotes from a broker who writes construction rather than trust a ballpark. See How much insurance do I need, and how to cut the premium.
The honest bit
- Premiums and requirements vary enormously by state, trade, and your safety record, so get real quotes rather than trusting a ballpark. See Working in Your State.
- A commercial insurance broker who actually knows construction will match your cover to what your contracts demand, and usually saves more than they cost.
- This is general guidance, not insurance advice.
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