General contractor insurance, and the risk you did not create

"Sub must carry insurance" is not a requirement, it is a wish. Four terms turn it into one, and each does a different job. The subcontractor insurance page reads the same four from the other end of the contract, which is worth sending to a sub who asks why the list is so long.

The certificate, and its limits. A certificate of insurance is "a document providing evidence that certain general types of insurance coverages and limits have been purchased by the party required to furnish the certificate," and the certificate holder is simply "the entity that is provided a certificate of insurance as evidence of the insurance maintained by another entity" (IRMI, certificate of insurance; IRMI, certificate holder). Evidence is the whole of it. ACORD, which publishes the standard certificate forms, states that "A Certificate of Insurance is NOT an insurance policy, and does not serve to provide, endorse, amend, extend or alter in any way the terms of an insurance policy," and that "Reference to a contract between the client and a third party on a certificate does not provide coverage" (ACORD certificates FAQ, quoted in IRMI expert commentary, David Dybdahl, 2015, which quotes the ACORD page). Read practically: a certificate tells you a policy existed on the day it was issued. It does not tell you the policy is still in force, that it has not been eroded by other claims, or that you have been added to it. Only an endorsement does the last one.

Additional insured status, and which of the two endorsements. An additional insured is "a person or organization not automatically included as an insured under an insurance policy who is included or added as an insured under the policy at the request of the named insured," and in liability insurance the status gives that person direct rights to make a claim under the named insured's policy (IRMI, additional insured). Here is the trap. ISO's 1993 revision narrowed the CG 20 10 endorsement to ongoing operations, so that it includes the additional insured "but only with respect to liability arising out of your ongoing operations performed for that insured," which IRMI describes as ruling out the additional insured's protection against completed operations claims. ISO's 2001 revisions then introduced CG 20 37, "which restored the completed operations coverage for the additional insured that was deleted" (IRMI expert commentary, Mark Bell, 2013; IRMI, Additional Insureds and Completed Operations). A general contractor's construction defect exposure is almost entirely completed operations, and the ongoing operations endorsement alone leaves that period open. Name both forms in the contract, or name the coverage in words and make the sub's agent tell you which endorsement delivers it.

Waiver of subrogation. This is "an acknowledgment by an insurer that it has no right to subrogate against a liable third party after it has paid a loss on behalf of its insured" (IRMI, waiver of subrogation). Without it, the sub's insurer can pay its own insured and then pursue you for the same money, which turns a resolved claim into a lawsuit against the general contractor. IRMI notes that policies generally permit the waiver when it is agreed before a loss, and that waiving after a loss can cost the sub coverage, so the term belongs in the contract at signing rather than in an email after an incident.

Primary and non-contributory. IRMI: "Primary and noncontributory is a term commonly used in contract insurance requirements to stipulate the order in which multiple policies triggered by the same loss are to respond" (IRMI, primary and noncontributory). Where the sub's policy is primary and non-contributory, it pays first and pays alone rather than calling on yours to share. Leave it out and a claim arising from the sub's work can reach your policy immediately, with the loss on your file and your renewal.

Every term above assumes the sub is there and something went wrong. The other failure is that the sub walks, goes under, or never staffs the job, and it is a financial loss rather than a liability claim, so liability insurance has nothing to say about it. Two instruments answer it, and they are structurally different. A performance bond is a surety arrangement running to the party who required it. The insurance alternative is default insurance, which IRMI defines as "an alternative method of financing the risk of contractor default (versus performance bonds.) Used primarily by general contractors to manage the risk of subcontractor default, default insurance is first-party insurance that compensates the insured in the event a covered subcontractor fails to fulfill its contractual obligations" (IRMI, default insurance). The proprietary name most people have heard is Subguard, which IRMI records as "a proprietary term for a specific insurer's subcontractor default insurance policy" that became close to generic as the first of its kind (IRMI, subguard insurance).

Be honest about who this is for. IRMI describes buyers as having to run prequalification procedures on their subs and retain a share of losses themselves, and says the coverage suits large projects and large general contractors with a high proportion of subcontracted work and established subcontractor relationships. A three-crew residential builder is not that buyer, and for that builder the subject is bonding rather than default insurance. What "bonded" actually means, and why it is a different instrument from insurance, is on the bonded and insured guide.

Search results promise a state-by-state list of general contractor insurance requirements. What the actual rules show, in the four states worked through here, is that a coverage mandate almost never attaches to the job title. It arrives through a residential registration, through an entity type, or not at all.

Through a home improvement registration. New Jersey requires anyone doing construction, remodeling, renovation, repair, installation, or demolition work on residential property to register with the Division of Consumer Affairs, and registration requires proof of commercial general liability of at least $500,000 per occurrence; applications arriving without the certificate are not processed (NJ Division of Consumer Affairs, home improvement contractor registration). Pennsylvania's Home Improvement Consumer Protection Act requires registration by every contractor whose home improvements total $5,000 or more in a year, with proof of "at least $50,000 of personal injury liability coverage and $50,000 of property damage coverage" (Pennsylvania Office of Attorney General, HIC registration FAQ). Both are consumer-protection registrations rather than trade licenses, and both are written to residential work, which is why the home improvement contractor insurance page carries them at length.

Through the entity you formed. California conditions an LLC contractor license on coverage: "Liability insurance with the cumulative limit of at least $1 million for licensees with five or fewer persons listed as members of the personnel of record is required. Also, an additional $100,000 is required for each additional member of the personnel of record, not required to exceed $5 million total. (B&P Code section 7071.19)." An LLC licensee also posts "A $100,000 surety bond (in addition to the $25,000 contractor bond)" for the benefit of workers unpaid wages or benefits (CSLB, Licenses for Limited Liability Companies). Note what that is and is not. It is a real state mandate, and it is written to the LLC form rather than to contracting generally. The CSLB page states the LLC requirement and says nothing about a sole owner or a corporation, so neither does this page.

Or through nothing at all. Texas does not license general contractors at the state level. It licenses named trades, electricians and HVAC through TDLR and plumbers through the Texas State Board of Plumbing Examiners, and leaves general construction to municipalities where it is regulated (TDLR, licensed programs). Competitor pages implying a Texas state general contractor license exist and are simply wrong. In a state with no license condition, every requirement you meet comes from a contract: the owner's, the developer's, the property manager's. The Texas contractor insurance hub has the state's structure, and the difference between a licensed trade and unlicensed general work is worked through on the handyman insurance page, where the threshold questions are sharpest.

Four states read is four states read. We do not extrapolate to "most states," in either direction, and neither should the page you read next. Check your own state, then check the city, because in the no-license states the city is usually where the rule lives.

The structure while it is going up. A builders risk policy "is a property insurance policy that is designed to cover property in the course of construction," usually written on inland marine forms and usually reaching materials in transit and at off-site storage as well as the site itself (IRMI, builders risk policy). Who buys it is a contract question and it is worth settling in writing before the first delivery, because both parties assuming the other has it is the common failure. The builders risk coverage page has the form family, the soft costs question, and what the policies leave out.

Tools, materials, and equipment. Business property coverage can include, owned or leased, inventory, furniture, equipment and supplies, machinery, and computers (NAIC). A general contractor's property is scattered by definition: a conex on site, a trailer, a yard, three trucks. Ask how each of those is treated, because a policy written to a fixed address answers for one of them.

Vehicles. A business that owns or leases vehicles needs commercial auto, personal policies may exclude business-related liability, and commercial forms can reach rented and non-owned vehicles including employees' own cars driven on company business (NAIC). The superintendent's personal truck running the job is the exposure most general contractors have not scheduled.

The crew. Nearly all states require an employer to carry workers compensation for employees (NAIC), with Texas the well-known exception: the Texas Department of Insurance says private employers there can choose to carry it, and it "is not required in most cases" (TDI, employer resources). The choice has real trade-offs and the Texas hub has them. What is specific to a general contractor is that the question does not stop at your own payroll: a sub's uninsured worker who gets hurt on your site becomes your problem in a way an insured sub's worker does not, which is the practical reason the certificate file matters as much as the policy.

A number printed here would be a guess, and the range for general contracting is wide enough that a guess would be worse than silence. Receipts and payroll come first, because liability is commonly rated on one and workers compensation on the other. Then the subcontract picture: what share of the work you sublet, whether those subs carry limits of their own, and whether your file can show it, since an underwriter who cannot see the certificates prices the payments as if they were your own payroll. Then the work itself. Residential against commercial, new build against renovation, the number of stories, whether the scope is structural, whether there is excavation, roofing, or any of the trades that carry their own hazard. Then the paper: your limits, the endorsements your contracts oblige you to buy, and whether completed operations additional insured status is being asked of you. Then vehicles, builders risk values, loss history, and your state. The lever a general contractor actually holds is the subcontractor file. A company that can produce current certificates with the right endorsements for every sub on every job is describing a different risk from the company that cannot, and it is priced as one.