Contractor Insurance: What You Actually Need (And What You're Probably Missing)

The gap most contractors don't know about

A solo plumber carries general liability insurance. He's had it for years and assumes he's covered.

He's on a job when the homeowner's antique dresser falls and is damaged — not by him, but by his apprentice who he occasionally brings on jobs as an informal helper. The homeowner files a claim.

His general liability covers the damage. But his insurer asks about the apprentice's status. He's not on payroll; he's "just helping." The insurer considers this a workers' compensation issue and raises questions about coverage.

He thought he was covered. He was — and wasn't. The gap cost him months of uncertainty.

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The four coverage types that matter

1. General Liability Insurance

This is the baseline. It covers bodily injury and property damage to third parties — if your work or your presence on a property causes harm, GL covers the claim.

What it covers: A customer who trips over your equipment. A window you accidentally break. A fire that starts from your torch work.

What it doesn't cover: Damage to the work itself (your installed roof, your poured concrete). Your tools and equipment. Your employees or contractors.

Minimum coverage: $1 million per occurrence, $2 million aggregate is standard. Some commercial clients require $2M/$4M.

2. Commercial Auto Insurance

If you use a vehicle for work — even one you also use personally — your personal auto policy likely excludes business use. A claim that arises while you're driving to a job site may be denied if your insurer determines the vehicle was being used commercially.

A commercial auto policy is essential for any contractor driving to job sites, hauling tools, or towing equipment.

3. Tools and Equipment Coverage

Your general liability doesn't cover your tools. If your truck is broken into and $8,000 of tools are stolen — or your equipment is damaged on a job — GL won't pay for it.

Tools and equipment coverage (sometimes called inland marine) covers your tools and equipment against theft, damage, and loss. For a solo contractor with significant tool investment, this is often the most immediately useful policy.

4. Workers' Compensation

If you have employees — even one part-time helper — most states require workers' comp. If a worker is injured on your job site and you don't have coverage, you're personally liable for their medical costs and lost wages.

Solo contractors with no employees may not be legally required to carry workers' comp, but subcontractors you hire may need to carry their own — and if they don't, you may be exposed.

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What solo contractors often skip

Professional liability / E&O: Covers claims that your advice or professional service caused harm. More relevant for architects and engineers, but increasingly relevant for contractors who provide consultation or design-build services.

Umbrella policy: An additional layer of liability coverage that kicks in when your primary policies are exhausted. Surprisingly affordable and valuable protection for high-value projects.

Builder's risk: Covers a project under construction — materials, equipment, the partially complete structure — against fire, weather, vandalism, and theft. Standard practice on new construction and major renovations.

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Before buying, audit your exposure

The right coverage depends on your trade, your project size, and your team structure. Before shopping for a policy:

1. List every scenario where you've been concerned about liability on a job
2. Note whether you use employees, occasional helpers, or subcontractors
3. Know the value of your tools and equipment
4. Check what your largest clients or general contractors require you to carry

Then talk to an insurance broker who specialises in construction. A specialist will know trade-specific requirements and exclusions that a general broker may miss.

Insurance isn't a checkbox — it's the financial foundation that makes everything else in your business recoverable when something goes wrong.