Subcontractor Insurance Requirements: Complete Coverage Guide (2026)

Quick Answer: Subcontractor Insurance Requirements

Most states don't legally require subcontractors to carry insurance, but general contractors almost always mandate it in subcontract agreements. The requirements vary by project and trade, but typical minimums include:

Bottom line: While rarely required by law, insurance is practically required to work as a subcontractor on construction projects.

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What Insurance Do Subcontractors Actually Need?

General Liability Insurance (Most Critical)

What it covers:

• Property damage you cause at job sites
• Bodily injury to others (workers, clients, public)
• Completed operations (defects appearing after job completion)
• Products and completed work
• Legal defense costs
• Medical payments to others

Why subcontractors need it:

Construction sites are high-risk environments:

• You're working on property you don't own
• Your work affects other contractors' work
• Mistakes can cause expensive property damage
• General contractors require it contractually
• Project owners require it for bonding and compliance

Common subcontractor liability claims:

• Accidental property damage: $10,000-$100,000
• Injuries from your work: $50,000-$500,000+
• Water damage from plumbing work: $25,000-$150,000
• Electrical fire from wiring: $100,000-$1,000,000+
• Structural damage from demolition: $50,000-$500,000
• Completed operations claims: $25,000-$200,000

Typical coverage amounts:

• $1 million per occurrence (minimum for most projects)
• $2 million aggregate (total for all claims per year)
• $2 million per occurrence (better protection, larger projects)
• Commercial projects often require $2M-$5M

Average cost: $800-$2,500 per year depending on trade and revenue

Workers' Compensation Insurance

Required if:

• You have employees (required in all states except Texas)
• Some states require even with 1 employee
• Working on government projects (Davis-Bacon Act)
• General contractor contract mandates it

What it covers:

• Employee injuries on the job
• Medical expenses
• Lost wages (typically 66% of average wage)
• Disability benefits
• Death benefits
• Employer's legal defense

Common construction injuries:

• Falls from heights (most common)
• Struck by objects or equipment
• Caught between equipment/materials
• Overexertion and repetitive motion
• Electrical injuries
• Cuts, lacerations, burns

Average cost by trade (per $100 of payroll):

Example:

• Carpentry subcontractor
• 2 employees, $80,000 total payroll
• Rate: $10 per $100
• Annual cost: $8,000

Commercial Auto Insurance

Required if:

• You use a vehicle for business purposes
• Hauling tools, materials, or equipment
• Driving to and from job sites
• Your personal auto policy excludes business use

What it covers:

• Vehicle accidents while driving to jobs
• Damage to equipment in transit
• Liability for accidents caused by business driving
• Hired/non-owned auto (if employees use personal vehicles)

Why subcontractors need it:

• Personal auto insurance excludes business use
• Hauling materials/equipment increases risk
• Accidents with tools/materials cause higher damages
• General contractors verify commercial auto coverage

Coverage needed:

• Liability: State minimums (typically 25/50/25 minimum)
• Physical damage: For owned vehicles
• Hired/non-owned auto: If employees drive personal cars

Average cost: $1,500-$3,000 per year per vehicle

Umbrella/Excess Liability Insurance

Often required for commercial projects:

What it provides:

• Additional liability coverage beyond primary policies
• Covers when primary policy limits are exhausted
• Broader coverage (fills gaps in primary policies)
• Protects personal assets from large claims

When you need it:

• Commercial projects often require $1M-$5M umbrella
• Larger projects ($500,000+) typically require umbrella
• Working on high-value properties
• Projects with significant public exposure

Coverage amounts:

• $1 million (most common)
• $2-5 million (large commercial projects)

Average cost: $300-$600 per year for $1M coverage

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What General Contractors Require from Subcontractors

Standard Subcontract Insurance Requirements

Residential projects typically require:

• $1 million general liability
• Workers' comp (if you have employees)
• Commercial auto (if applicable)
• Additional insured endorsement
• Certificate of insurance

Commercial projects typically require:

• $2 million general liability ($1M per occurrence, $2M aggregate)
• $2 million umbrella policy
• Workers' compensation meeting state requirements
• $1 million commercial auto
• Additional insured endorsement
• Waiver of subrogation
• Primary and non-contributory endorsement
• 30-day notice of cancellation

Large commercial/government projects may require:

• $5-10 million general liability
• $5 million umbrella policy
• Pollution liability (certain trades)
• Professional liability/E&O
• Builder's risk insurance contribution
• Performance and payment bonds
• Certified payroll and prevailing wage compliance

Certificate of Insurance (COI)

General contractors require certificates showing:

Required information:

• Policy numbers and effective dates
• Coverage types and limits
• General contractor listed as Additional Insured
• Certificate holder (project owner or GC)
• 30-day notice of cancellation

When COIs are required:

• Before starting work on project
• Upon contract signing
• For each new project
• Annually if working on ongoing basis
• When policies renew

Cost: Usually $0-$50 per certificate from your insurer

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State Licensing and Insurance Requirements

States Requiring Contractor Licenses for Subcontractors

States with strict subcontractor licensing:

Most states allow subcontractors to work without licenses if:

• Working under licensed general contractor
• Projects below state threshold ($500-$5,000)
• Specialty trades with separate licensing

Federal Requirements (Government Projects)

Davis-Bacon Act requirements:

• Prevailing wage compliance
• Certified payroll reporting
• Workers' compensation required
• General liability insurance
• Performance and payment bonds (prime contractor)

Miller Act requirements (federal projects over $150,000):

• Performance bonds
• Payment bonds
• Typically bonded through general contractor

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Additional Insured and Other Endorsements

Additional Insured Endorsement (Critical)

What it is:

• Extends your liability coverage to the general contractor
• Protects GC from claims arising from your work
• Required on virtually all subcontracts

How it works:

• GC is covered under your policy for your negligence
• They can file claims under your insurance
• Protects them from vicarious liability

Types:

• Blanket Additional Insured: Automatically covers all GCs per written contract
• Scheduled Additional Insured: Names specific GCs (requires updating)

Cost: Usually $0-$100 annually for blanket coverage

Waiver of Subrogation

What it is:

• Your insurer agrees not to sue the GC to recover claim costs
• Prevents your insurance company from pursuing GC after paying your claim
• Standard requirement in subcontracts

Example: Your employee is injured, workers' comp pays $100,000. Normally, your insurer could sue the GC if they were partly at fault. With waiver of subrogation, your insurer cannot pursue the GC.

Cost: Usually $0-$100 annually

Primary and Non-Contributory

What it is:

• Your insurance pays first before GC's insurance
• GC's insurance doesn't contribute to the claim
• Makes your policy "primary" for claims involving your work

Why GCs require it:

• Protects their insurance from rate increases
• Ensures your insurance pays claims first
• Reduces their insurance costs

Cost: Usually included or $0-$100

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How Much Does Subcontractor Insurance Cost?

Total Annual Insurance Costs by Trade

Note: Workers' comp costs based on $80,000 annual payroll for 2 employees

Factors Affecting Insurance Costs

General liability factors:

• Annual revenue/receipts
• Type of work (risk level)
• Claims history
• Years in business
• Number of employees
• Coverage limits
• Location

Workers' comp factors:

• Classification code (trade)
• State where work is performed
• Total payroll
• Claims history/experience modification
• Safety programs

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What Happens If You Don't Have Insurance

Contractual Consequences

• Cannot work for reputable general contractors
• Breach of subcontract agreement
• Removed from project immediately
• Payment withheld for work completed
• Banned from future projects with GC
• Legal action for contract breach

Financial Consequences

If you cause damage or injury without insurance:

• Personally liable for all damages
• Wages can be garnished
• Assets can be seized
• Business bankruptcy likely
• Personal bankruptcy possible
• Cannot discharge some liabilities in bankruptcy

Real-world examples:

• Plumbing leak causes $150,000 water damage → You pay personally
• Worker falls from scaffold, $500,000 medical bills → You pay personally
• Electrical fire causes $1,000,000 property damage → You pay personally

Legal Consequences

• Violating subcontract terms
• Potential fraud charges (claiming insurance you don't have)
• Cannot renew contractor license in some states
• Lawsuits from injured parties
• Criminal charges if severe negligence involved

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How to Get Subcontractor Insurance

Step 1: Assess Your Coverage Needs

Minimum for most subcontractors:

• General liability: $1M/$2M
• Workers' comp: If you have employees
• Commercial auto: If using vehicles

Better for commercial work:

• General liability: $2M/$4M
• $1M umbrella policy
• Higher commercial auto limits

Step 2: Get Quotes

Best options:

• Independent insurance agents (compare multiple carriers)
• Contractor-specialist insurers (Pie Insurance, NEXT, Hiscox)
• Trade association programs (ABC, AGC member benefits)
• Direct insurers (State Farm Commercial, Progressive Commercial)

Compare:

• Coverage limits and types
• Deductibles
• Endorsements included
• Premium costs
• Payment plans
• Insurer financial ratings

Step 3: Provide Information

Insurers will need:

• Years in business
• Annual revenue/projected revenue
• Number of employees and total payroll
• Type of construction work (detailed)
• Project types (residential/commercial)
• Claims history (5 years)
• Contractor license information
• Equipment values

Step 4: Add Required Endorsements

Standard endorsements for subcontractors:

• Blanket additional insured
• Waiver of subrogation
• Primary and non-contributory
• 30-day notice of cancellation

Cost: Usually $0-$200 total for all endorsements

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Frequently Asked Questions

Do I need insurance if I work alone with no employees?

Legally, workers' comp isn't required if you're solo (in most states). However, you absolutely need general liability insurance. General contractors will not hire you without proof of GL coverage, even as a one-person operation.

Can I use the general contractor's insurance instead of getting my own?

No. GCs require you to have your own insurance and name them as additional insured. Their insurance covers their own work and liability—not yours. Relying on their coverage leaves you personally exposed and violates subcontracts.

What if I only work on small residential jobs?

You still need insurance. Even small jobs can result in large claims. A $500 repair job can cause $50,000 in property damage. Homeowners and reputable contractors require proof of insurance regardless of project size.

How much general liability coverage do I need?

Minimum: $1 million per occurrence / $2 million aggregate
Better: $2 million per occurrence / $4 million aggregate
Commercial projects: Often require $2M + $1M-$5M umbrella

Base your decision on typical project values and GC requirements.

What's the difference between subcontractor and general contractor insurance?

The coverage types are similar (GL, workers' comp, commercial auto), but:

• GCs typically need higher limits ($5M-$10M)
• GCs need builder's risk insurance for projects
• GCs need broader completed operations coverage
• Subcontractors premiums are based on specific trade risk
• Subcontractors need additional insured endorsements

Do I need insurance when working as a 1099 contractor?

Yes. Being classified as 1099 (independent contractor) doesn't eliminate insurance requirements. General contractors require proof of insurance from all subcontractors regardless of employment classification.

What if I can't afford workers' compensation insurance?

Options:

• Work solo (no employees) in states that don't require solo coverage
• Use independent contractors instead of employees (verify their insurance)
• Join a workers' comp group/PEO for better rates
• Implement safety programs to reduce premiums over time
• Cannot skip workers' comp if required—it's illegal and leaves you exposed

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Key Takeaways

• General liability essential - $1M-$2M minimum required by most GCs
• Workers' comp required if you have employees (all states except Texas)
• Commercial auto needed if using vehicles for business
• Additional insured endorsement required on virtually all subcontracts
• Average cost: $4,500-$50,000/year depending on trade and employees
• Cannot work without insurance - GCs won't hire uninsured subcontractors
• Certificates of insurance required before starting each project
• Umbrella policies typically required for commercial projects ($1M-$5M)

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Important Disclaimer

This guide provides general information about subcontractor insurance requirements based on publicly available sources and industry standards. This is not legal or insurance advice. Requirements vary by state, local jurisdiction, general contractor, and specific project.

Always verify current requirements with general contractors, your state licensing board, and consult with a licensed insurance professional for advice specific to your subcontracting business.

Last verified: January 2026

Sources: State contractor licensing boards, NCCI workers' compensation classifications, AGC (Associated General Contractors), industry insurance providers