General Contractor Insurance Requirements: Complete Guide (2025)

Quick Answer: What Insurance Do General Contractors Need?

Most states require licensed general contractors to carry general liability insurance, and many require workers' compensation. The exact requirements depend on your state, license class, and project types.

Requirements vary significantly by state and license classification. Commercial clients often require higher limits than state minimums.

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Why General Contractors Need Insurance

General contracting involves coordinating complex projects with significant risks:

Industry Risks

Third-Party Injury

• Workers injured on your job site
• Visitors or homeowners injured during construction
• Pedestrians injured near work areas
• Subcontractor employee injuries

Property Damage

• Damage to client's existing property
• Damage to neighboring properties
• Damage from subcontractor work
• Completed operations failures

Professional Errors

• Design mistakes in plans
• Code violations
• Schedule delays causing client losses
• Material specification errors

Financial Protection

Insurance protects your business from:

• Lawsuits potentially worth hundreds of thousands
• Medical bills for injured parties
• Property repair costs you cause
• Legal defense fees even for frivolous claims
• License suspension for uninsured work
• Contract violations requiring coverage

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Types of Insurance for General Contractors

General Liability Insurance

The foundation of contractor coverage:

What It Covers:

• Third-party bodily injury
• Property damage to others
• Personal and advertising injury
• Products and completed operations
• Medical payments
• Legal defense costs

Typical Coverage Limits:

Completed Operations Coverage

Critical for contractors—covers claims arising after work is finished:

• Roof leak discovered months after installation
• Foundation crack appearing after completion
• Electrical fire from faulty wiring you installed
• Plumbing failure in completed bathroom

Workers' Compensation Insurance

Required When:

• You have employees (threshold varies by state)
• Working on commercial projects
• Required by clients regardless of state law

What It Covers:

• Employee medical expenses from work injuries
• Lost wages during recovery
• Disability benefits (temporary and permanent)
• Death benefits for dependents
• Rehabilitation and retraining

Contractor-Specific Considerations:

• Construction has high workers' comp rates
• Rates vary by trade classification
• Experience modifier affects premiums
• Coverage for subcontractors may be required

Builder's Risk Insurance

What It Covers:

• Structure under construction
• Materials on site
• Materials in transit
• Temporary structures
• Scaffolding and equipment

Common Perils Covered:

• Fire and lightning
• Wind and hail
• Theft and vandalism
• Water damage
• Collapse

Who Needs It:

• Usually required by project owner or lender
• May be owner's or contractor's responsibility
• Specified in construction contract

Commercial Auto Insurance

Required When:

• Using vehicles for business purposes
• Hauling materials and equipment
• Traveling between job sites

Coverage Types:

Contractor's Equipment (Inland Marine)

What It Covers:

• Tools stolen from job sites or vehicles
• Equipment damaged in transit
• Machinery breakdown
• Leased or rented equipment

Typical Limits: $10,000 - $500,000+ depending on inventory

Professional Liability (Errors & Omissions)

Who Needs It:

• Design-build contractors
• GCs providing design services
• Construction managers
• Consultants

What It Covers:

• Design errors
• Plan defects
• Specification mistakes
• Professional negligence

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State-by-State Requirements

General contractor requirements vary significantly:

States Requiring Liability Insurance

States with Local/No State Requirements

Some states regulate contractors locally or minimally:

• Texas: No state license, local requirements vary
• Kansas: Limited state requirements
• Indiana: Local licensing varies
• Missouri: State + local requirements

Commercial Project Requirements

Regardless of state minimums, commercial clients typically require:

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Surety Bond Requirements

Many states require contractor bonds:

Types of Contractor Bonds

License Bond

• Required for contractor license
• Protects public from contractor misconduct
• Amounts: $5,000 - $50,000+

Bid Bond

• Required for bidding on projects
• Guarantees you'll enter contract if selected
• Typically 5-10% of bid amount

Performance Bond

• Guarantees project completion
• Required on public and large private projects
• Typically 100% of contract value

Payment Bond

• Guarantees payment to subcontractors/suppliers
• Required alongside performance bonds
• Protects project from mechanics' liens

Bond vs. Insurance

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How Much Does GC Insurance Cost?

Typical annual premiums for general contractors:

Cost Factors

Business Factors:

• Annual revenue/payroll
• Years in business
• Claims history
• Number of employees
• Subcontractor management

Project Factors:

• Type of work (residential vs. commercial)
• Project size and complexity
• Geographic location
• Specialty trades involved

Cost by Business Size

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Subcontractor Insurance Requirements

As a GC, you're responsible for verifying subcontractor coverage:

What to Require from Subs

Additional Insured Status

Require subcontractors to add you as additional insured:

• Their policy covers claims against you
• Provides primary coverage for sub's work
• Protects you from vicarious liability
• Should include completed operations

Certificate of Insurance (COI)

Always obtain COIs from subs showing:

• Coverage types and limits
• Policy effective dates
• Additional insured status
• Certificate holder (your company)

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Frequently Asked Questions

Is insurance required for general contractors?

In most states, yes. Requirements vary but typically include general liability insurance and sometimes workers' compensation and surety bonds. Even where not legally required, commercial clients require insurance before awarding contracts.

What's the minimum insurance for a general contractor?

State minimums range from $50,000 to $1,000,000 for general liability. However, most commercial projects require $1,000,000 to $2,000,000 minimum. Meeting only state minimums may limit the projects you can bid on.

Do I need workers' comp with no employees?

It depends on your state. Some states require workers' comp for all contractors regardless of employees. Even if exempt, many clients require it before allowing you on their job site. Subcontractors working for you may also need coverage.

What's an additional insured endorsement?

An additional insured endorsement extends your liability policy to cover another party (like a client or GC) for claims arising from your work. It's commonly required in construction contracts and subcontractor agreements.

Does my insurance cover subcontractor mistakes?

Generally, no. Your policy covers claims against you, but subcontractor negligence is typically their responsibility. However, you may face vicarious liability claims, which is why requiring additional insured status from subs is important.

How do I get licensed as a general contractor?

Requirements vary by state but typically include:

1. Meet experience requirements (2-5 years)
2. Pass contractor exam
3. Obtain required insurance and bonds
4. Submit application and fees
5. Some states require financial statements

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Key Takeaways

• Most states require general liability insurance for licensed GCs
• Workers' comp required in most states if you have employees
• Surety bonds often required alongside insurance
• Commercial clients typically require higher limits than state minimums
• Verify subcontractor coverage and require additional insured status
• Typical cost: $8,000 - $50,000/year for small to mid-size contractors
• Completed operations coverage is critical for post-project claims

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Important Disclaimer

This guide provides general information about general contractor insurance requirements based on publicly available sources. This is not legal or insurance advice. Insurance requirements vary by state, license classification, and project type.

Always verify current requirements with your state contractor licensing board and consult with a licensed insurance professional for coverage specific to your business.

Last verified: November 2025

Sources: State contractor licensing boards, Associated General Contractors of America (AGC), National Association of Home Builders (NAHB)