Is contractor insurance required by law?

The short answer

Often, yes — in two ways. Many states require general liability insurance and/or a license bond to hold or renew a contractor license, so it can be legally mandatory just to operate. And even where the state does not require it, general contractors, project owners, and lenders almost always require proof of coverage before you can start work.

Who actually requires it

• State licensing boards. Many states condition a contractor license on carrying general liability, workers compensation (if you have employees), and/or a license/surety bond.
• General contractors and project owners. GCs routinely require subcontractors to carry their own general liability and name the GC as additional insured before work begins.
• Lenders and permitting authorities. Construction lenders and some permit processes require proof of insurance for the project.

What coverage applies

• General liability. Generally intended to respond to third-party injury or property damage from your work, including completed-operations claims that surface after a job.
• Workers compensation. Required in most states once you have employees; also commonly required of subs by the GCs that hire them.
• License / surety bond. Many states require a contractor license bond — a guarantee to the public, distinct from liability insurance.

How to prove you have it

You provide a certificate of insurance (COI) — frequently $1M/$2M with the GC or owner named as additional insured — and, where required, file your bond with the state. Keep the COI current; lapses can stop work or jeopardize a license.

The bottom line

If a law, license, contract, or client asks for it, you generally need it — and getting a quote is the quickest way to see your options and obtain a certificate. Coverage terms, eligibility, and requirements vary by state and individual circumstance.

Frequently asked questions