Contractor Insurance Requirements by State

Insurance is not optional for contractors — even when the state does not explicitly require it. General liability, workers compensation, and commercial auto are the three policies every contractor should carry. Many states make one or more of these a licensing requirement. Here is exactly what you need, what it costs, and which states require it.

Types of Insurance Contractors Need

Four types of insurance cover the majority of contractor risks:

1. General Liability Insurance (GL)

General liability is the foundation. It covers third-party bodily injury, property damage, and personal/advertising injury caused by your work. If a client trips over your materials and breaks an ankle, GL pays. If your crew damages a homeowner's landscaping during a remodel, GL pays.

Typical limits: $300,000 to $1,000,000 per occurrence / $2,000,000 aggregate
Annual cost: $500-$3,000/year for most contractors
What it covers: Third-party injury, property damage, completed operations, personal injury
What it does not cover: Your own injuries, your employees' injuries, your vehicles, intentional acts

Cost depends on your trade, revenue, claims history, and location. A handyman doing $100K/year in revenue might pay $500/year. A roofing contractor doing $500K in revenue could pay $2,500-$3,000/year because roofing is classified as high-risk.

2. Workers Compensation Insurance

Workers comp covers medical expenses and lost wages when employees are injured on the job. In construction, injuries are common — falls, electrocution, struck-by incidents, and repetitive stress injuries are everyday risks.

Cost: Varies dramatically by trade and state. Rates are typically 5-15% of payroll for construction trades. Roofing and structural steel pay the highest rates.
What it covers: Employee medical bills, lost wages (typically 60-66% of salary), rehabilitation, death benefits
Who needs it: Required in every state once you have employees. The threshold varies by state (see table below).

3. Commercial Auto Insurance

If you use vehicles for business — hauling materials, driving to job sites, transporting equipment — your personal auto policy does not cover it. Commercial auto covers liability and physical damage for business vehicles.

Typical limits: $1,000,000 combined single limit
Annual cost: $1,200-$3,000/year per vehicle
Required when: Vehicles are titled in the business name or regularly used for business purposes

4. Professional Liability (Errors & Omissions)

Professional liability covers claims arising from your professional advice, design errors, or project management mistakes. This is most relevant for design-build contractors, construction managers, and contractors who provide engineering or architectural services.

Typical limits: $500,000 to $1,000,000
Annual cost: $500-$2,000/year
Who needs it: Design-build firms, construction managers, contractors providing professional services

States That Require General Liability for Licensing

24 states require proof of general liability insurance as part of the contractor licensing or registration process:

State	GL Details
Alabama	GL required: $1M per occurrence / $2M aggregate recommended (industry standard for Alabama). Commercial auto: $1M combined single limit. Workers comp required for employers with 5+...
Alaska	Public liability and property damage insurance required: minimum $20,000 property damage, $50,000 per person injury/death, $100,000 aggregate injury/death
Connecticut	Home Improvement Contractors must carry minimum $20,000 general liability insurance. Major Contractors must also provide proof of general liability insurance. Workers comp required...
Delaware	All contractors must obtain general liability insurance, workers compensation insurance (required for all employers), and unemployment insurance.
District of Columbia	Certificate of Liability Insurance required. Coverage amounts vary by license class. Must also have Certificate of Occupancy/Home Occupation Permit if applicable.
Florida	GL required. Workers comp required if you have employees; exemption available for sole proprietors. Must provide personal credit report.
Georgia	Residential Basic: $300,000 GL per occurrence minimum. Residential Light Commercial, GC Limited, GC Unlimited: $500,000 GL per occurrence minimum. Workers comp required for 3+ empl...
Hawaii	Minimum liability insurance: $100,000 per person bodily injury, $300,000 per occurrence bodily injury, $50,000 property damage per occurrence. Workers comp required for all employe...
Idaho	Minimum $300,000 single-limit general liability insurance required. Policy must include products and completed operations coverage. Workers comp required for all employers; sole pr...
Louisiana	General liability minimum $100,000 required for residential and home improvement licenses. Workers' compensation required if you have employees. Commercial licenses require insuran...
Maryland	As of June 1, 2024, MHIC requires $500,000 minimum general liability insurance. Must provide Certificate of Insurance (COI) with application and at each renewal. Workers comp requi...
Minnesota	General liability insurance required — must submit Certificate of Insurance with application and maintain throughout license term. Workers comp required for all employers. Proof of...
Mississippi	General liability: minimum $300,000 per occurrence and $600,000 aggregate with MSBOC listed as certificate holder. Workers compensation: required if 5 or more employees.
New Jersey	Minimum $500,000 general liability insurance required. Workers' compensation required unless exempt under law. Must provide certificate of insurance with registration/renewal.
New York	NYC requires $1,000,000 minimum general liability insurance per occurrence. Workers' compensation and disability insurance are mandatory for all businesses with employees — New Yor...
North Dakota	Liability insurance certificate required with application and each renewal. Workers compensation required if you have employees.
Ohio	The statewide HIC registration requires proof of commercial general liability insurance (minimum $500,000). Workers' compensation is required for all Ohio employers through the Ohi...
Oregon	$500,000 general liability required for Residential GC and Commercial GC. Workers compensation required if you have or plan to hire employees.
Pennsylvania	Must provide proof of liability insurance with minimum $50,000 personal injury coverage and $50,000 property damage coverage. Workers' comp required if you have any employees (full...
Rhode Island	Minimum $500,000 certificate of general liability insurance naming RICRLB as certificate holder is required
Tennessee	GL required, scaled to license limit: $100K (up to $500K jobs), $500K ($500K-$1.5M), $1M ($1.5M+). Workers comp required for 1+ construction employees (construction has 1-employee ...
Utah	GL insurance required: minimum $100,000 per occurrence, $300,000 aggregate. Workers comp required if you have employees.
Washington	General liability: $200,000 bodily injury + $50,000 property damage, or $250,000 combined single limit. Workers comp must be purchased through the WA State Fund (L&I) — Washington ...
Wisconsin	GL insurance required: minimum $250,000 per occurrence for bodily injury, death, or property damage. Workers comp required if you have employees.

States Where GL Is Recommended but Not Required

In these 26 states, the state licensing board does not require general liability insurance for licensing, but it is strongly recommended:

Arizona, Arkansas, California, Colorado, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Michigan, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, Oklahoma, South Carolina, South Dakota, Texas, Vermont, Virginia, West Virginia, Wyoming

Even when the state does not require GL, most clients, general contractors, and property managers will require proof of insurance before hiring you. Operating without GL exposes your personal assets to lawsuits. The $500-$3,000/year premium is one of the most important business expenses you will have.

Workers Compensation Requirements by State

Workers comp rules vary by state, and the employee threshold matters:

Required for All Contractors (Including Sole Proprietors)

New Mexico, West Virginia

Required With Employees (Most States)

The majority of states (46) require workers compensation once you hire employees. Most use a threshold of 1 employee. Notable exceptions with higher thresholds:

3+ employees: Georgia, North Carolina

5+ employees: Alabama

Two states — Ohio and Washington— are monopolistic state-fund states for workers comp. This means you must purchase workers comp through the state fund, not from private carriers. Ohio uses the Bureau of Workers' Compensation (BWC) and Washington uses the Department of Labor & Industries (L&I) State Fund.

Typical Insurance Costs by Trade

Insurance costs vary significantly by trade because risk profiles differ. Here are typical annual ranges for a small contractor ($100K-$500K revenue):

Trade	GL (Annual)	Workers Comp Rate	Risk Level
General Contractor	$800-$2,500	5-10% of payroll	Medium-High
Electrician	$600-$2,000	4-8% of payroll	Medium
Plumber	$600-$1,800	4-7% of payroll	Medium
HVAC Technician	$600-$2,000	5-9% of payroll	Medium
Roofing Contractor	$1,500-$3,500	15-30% of payroll	High

Ranges based on industry averages for small contractors. Actual premiums depend on revenue, claims history, location, number of employees, and specific policy terms. Roofing has the highest workers comp rates due to fall risk.

How to Get Contractor Insurance: 3 Steps

Determine your requirements. Check your state licensing board for minimum GL limits and workers comp rules. Check your state page on our site for specific insurance requirements by trade. Also check any local requirements where you work.
Get quotes from multiple providers. Contact at least 3 insurance providers. Options include:
- Industry-specific insurers: Next Insurance, Simply Business, and EMPLOYERS specialize in contractor coverage with online quoting.
- Large carriers: State Farm, The Hartford, Nationwide, and Liberty Mutual all write contractor policies.
- Independent agents: An independent agent can compare multiple carriers. Look for agents who specialize in construction insurance.
Maintain continuous coverage.Gaps in coverage can affect your license status, increase future premiums, and leave you personally liable. Set up auto-pay and calendar renewal dates 30 days before expiration. Many state licensing boards require insurance certificates to be on file — a lapse can trigger license suspension.

Bundled Policies and BOPs

A Business Owner's Policy (BOP) bundles general liability with commercial property insurance at a discount. For contractors with an office, shop, or stored equipment, a BOP can save 10-20% compared to buying separate policies. Most contractors should also consider an umbrella policy ($1M-$5M) once their business grows, especially if they take on commercial projects with higher insurance requirements.

Frequently Asked Questions

How much does contractor insurance cost per month?

General liability typically costs $40-$250/month depending on your trade, revenue, and location. Workers comp adds significantly more, especially for high-risk trades like roofing ($200-$500+/month even for small crews). Most insurers offer monthly payment plans with a small fee.

Do I need insurance if I'm a sole proprietor with no employees?

You can often skip workers comp as a sole proprietor (many states offer exemptions), but you should always carry general liability. One lawsuit from a client injury can bankrupt an uninsured sole proprietor. Many states require GL for licensing regardless of business size.

What is a Certificate of Insurance (COI)?

A COI is a one-page document from your insurer that proves you have active coverage. Clients, general contractors, and licensing boards request COIs regularly. Your insurer can issue them within 24 hours. You will need to add "additional insured" endorsements for GCs you work under.

What happens if my insurance lapses while I hold an active license?

Most state licensing boards are notified automatically when a contractor's insurance lapses. This can trigger license suspension, fines, or required reinstatement with back-dated coverage. In states like Florida and California, your license status changes to "inactive" until proof of new coverage is provided.

Is general liability the same as a contractor bond?

No. General liability insurance protects you (the contractor) from claims. A surety bond protects the client and the state — if you fail to complete work or violate regulations, the bond pays the client and the bonding company comes after you for repayment. Many states require both. See our contractor bonds guide for details.

Next Steps

Find your state's specific insurance requirements for your trade using our state guides: