Contractor insurance requirements, one line at a time
The word requirement covers three different things: an amount a licensing board wrote into a rule, a clause in a contract you signed, and a state law that starts the day you hire someone. They ask for different coverage, and only the first is the same for everyone in your trade. Below is what each line does, so you can tell which one a request is really about.
The six lines
Nearly every insurance specification a contractor receives is built from these, in some combination and at some set of limits.
- General liability
Named in almost every certificate request a contractor receives.
The line that answers when someone outside your business is hurt or their property is damaged by your work. It is also the line with the exclusions contractors are most often surprised by, including what it says about damage to the work itself.
- Workers compensation
Asked for wherever you have employees, and by general contractors even where you do not.
Priced from payroll sorted into classifications rather than from a quoted rate, which is why two crews doing similar work can sit far apart. The classification system is worth understanding before you shop it.
- Tools and equipment
Rarely demanded by anyone. Carried because losing the tools stops the work.
Property coverage that travels, which a building policy will not do on its own. What it excludes is usually more instructive than what it covers.
- Professional liability and errors and omissions
Requested when you advise, design, or specify rather than only install.
General liability answers for damage. This answers for the decision that caused it, which is a different question and a different form.
- Builders risk
Written into construction contracts, and often bought by the owner rather than by you.
Property insurance on a structure that does not exist yet. Who is named on it decides who can collect, and that is the part worth reading twice.
- Contractors pollution liability
Specified on jobs where a release is foreseeable, and increasingly on ordinary ones.
It exists because the general liability form excludes pollution, and because the definition of a pollutant reaches further than most contractors expect.
Where the requirement comes from changes the answer
A board's requirement is public and fixed. You can read the rule, see the amount, and know that every licensed contractor in the state is held to the same figure. Three of the trades on this site have one, and the pages say where to look.
A contract's requirement is private and negotiable in principle, though rarely in practice. It can name higher limits than any board asks for, and it usually asks for something a board never does: status on your policy for the party demanding it. That request is the one worth understanding before you agree to it.
A state's workers compensation law is the third kind, and it turns on employment rather than on your trade or your contract. Texas is the exception that proves how the rule normally works, and the Texas hub covers what an employer there gives up by declining.
Start from your trade instead
Each trade carries these lines in a different order of importance, and some carry a requirement the others do not. The trades section sorts every trade we cover by which of the three requirements decides it.