Short answer: To hold a California contractor license, you need a $25,000 contractor's bond on file with the Contractors State License Board (CSLB) and either a workers' comp certificate or a valid exemption if you truly have no employees. Roofing (C-39), concrete (C-8), HVAC (C-20), asbestos abatement (C-22) and tree service (D-49) licensees must carry workers' comp even without employees, and the requirement is set to extend to all license classifications on January 1, 2028. LLC licensees must also carry liability insurance with an aggregate limit of at least $1 million when five or fewer people are listed on the license, plus $100,000 for each additional person, up to $5 million. Beyond that, most contractors need general liability because clients and general contractors require it, commercial auto for work vehicles, tools and equipment coverage, and, on many jobs, builder's risk and the additional insured endorsements written into the contract.
This guide is for California contractors and skilled trades, from a one-person handyman business with a license to a crew of framers, electricians or roofers. It's general information. Check the CSLB's current rules, read your contracts, and talk to your broker about your specific work.
What the CSLB requires
| Requirement | Who | Source |
|---|---|---|
| $25,000 contractor's bond | Every licensee | CSLB |
| Workers' comp certificate, or exemption if no employees | Every licensee | CSLB workers' compensation requirements |
| Workers' comp even with no employees | C-8 Concrete, C-20 HVAC, C-22 Asbestos Abatement, C-39 Roofing, D-49 Tree Service; all classifications from January 1, 2028 | CSLB; see the contractor workers' comp 2028 guide |
| Liability insurance | LLC licensees: at least $1 million aggregate for five or fewer personnel of record, plus $100,000 per additional person, up to $5 million | CSLB LLC information |
| Written disclosure | Home improvement contracts must state whether the contractor carries commercial general liability insurance | CSLB law materials |
A license bond protects consumers and others harmed by license-law violations. It isn't insurance for you. Read your bond's indemnity agreement to see whether you must repay the surety for claims it pays. See California contractor insurance and bond requirements and what a California contractor license bond is.
A lapse in workers' comp can suspend your license, which can stop jobs and payments. Treat renewal dates as seriously as the license itself.
Workers' comp for contractors
California requires workers' comp from your first employee (Labor Code §3700), and the ABC test decides who counts as an employee. Paying a helper on a 1099 doesn't make them a subcontractor. If a sub you hire has no workers' comp, its workers may be treated as yours at audit or after an injury, so collect a current certificate from every sub before they start. Workers' comp is often a contractor's largest insurance cost, and it's priced by trade classification and payroll. See California contractors' workers' comp by trade and the workers' comp guide for California small employers.
General liability: required by contracts, essential for the work
No California statute requires most contractors to carry general liability, except the LLC requirement above, but almost every general contractor, property manager and commercial client will ask for it. It covers third-party bodily injury and property damage from your work and operations, such as a homeowner tripping over your materials or water damage caused by a bad plumbing joint.
What it usually doesn't cover is the cost to redo your own faulty work. See does general liability cover faulty workmanship?
What to check in a contractor's GL policy
- Limits: per occurrence, general aggregate and products-completed operations aggregate.
- Completed operations: coverage for claims after the job is finished, which is critical for builders and remodelers.
- Exclusions: common ones on contractor policies include residential work, height limits, specific trades, subcontractor exclusions or conditions, and action-over exclusions.
- Additional insured endorsements: ongoing and completed operations forms, required by many contracts. See contractor general liability: additional insured.
- Waiver of subrogation and primary and non-contributory wording.
The rest of a contractor's insurance program
| Coverage | Why contractors buy it |
|---|---|
| Commercial auto | Work trucks and vans need commercial coverage; employees' personal cars need hired and non-owned auto. See the commercial auto and fleet guide |
| Tools and equipment (inland marine) | Covers tools and equipment on job sites and in vehicles, which commercial auto and GL usually don't |
| Builder's risk | Covers the structure under construction against covered losses such as fire or theft of materials; often required on new builds and major remodels |
| Commercial umbrella | Adds limits above GL, auto and employer's liability; many GCs require it. See commercial umbrella insurance |
| Contractor's professional liability | For design-build work or where your advice and design are relied on. See contractors professional liability |
| Pollution liability | For trades that can release or disturb pollutants, such as mold, asbestos or fuel. See pollution liability insurance |
| Owner's and contractor's protective (OCP) | Sometimes required by project owners. See OCP liability insurance |
Step by step: insuring your contracting business
Step 1: Check your license and classification
Confirm your license classifications and whether your trade must carry workers' comp now, or will on January 1, 2028.
Step 2: Keep the bond and workers' comp current
Calendar renewal dates and confirm the CSLB has current filings on record.
Step 3: Decide who works for you
List employees and subcontractors, and get certificates from every sub.
Step 4: Describe your work accurately
Insurers price by trade. Describe residential versus commercial work, new construction versus remodeling, heights, and any hazardous work. Misdescribing your operations can lead to an excluded claim.
Step 5: Read your contracts first
Pull the insurance requirements from your contracts and the GCs you work for: limits, additional insured forms, waivers and umbrella requirements.
Step 6: Buy general liability that matches the work
Check completed operations coverage and exclusions, not just the price.
Step 7: Insure your vehicles and tools
Commercial auto for work vehicles, HNOA for employees' cars, and an inland marine policy for tools and equipment.
Step 8: Add builder's risk when a job calls for it
Ask who is responsible for builder's risk on each project, and make sure someone buys it.
Step 9: Get certificates before every job
Issue certificates with the right additional insured endorsements before you mobilize.
Step 10: Review every renewal
Payroll, revenue, trades and the kind of work you do all change your pricing and coverage needs.
Common mistakes contractors make
- Letting workers' comp lapse between policies. It can suspend your license and leave an injured worker's claim on you.
- Not collecting certificates from subs. An uninsured sub's workers can end up on your audit or your claim.
- Buying GL that excludes the work you do. Residential, height, roofing or subcontractor exclusions can void coverage for your main jobs.
- Assuming GL pays to redo bad work. It generally covers damage your work causes to others, not the cost of fixing the work itself.
- Leaving tools uninsured. Theft from trucks and job sites is common, and auto and GL policies usually don't cover tools.
- Signing contracts without reading the insurance section. Additional insured, waiver and umbrella requirements may require endorsements before you start.
- Misclassifying your trade on applications. A claim from work you didn't disclose can be denied.
Trade-specific guides
- Roofing contractor insurance
- HVAC contractor insurance
- Painting contractor insurance
- Concrete contractor insurance
- Solar contractor insurance
- Home builder insurance
- All contractor insurance
Questions to ask your broker
- Does my GL policy exclude residential work, certain heights, specific trades or work by subcontractors?
- Does it include completed operations coverage, and for how long?
- Which additional insured forms are included for ongoing and completed operations?
- Are my tools and equipment covered on job sites and in vehicles?
- Who will buy builder's risk on this project?
- Does my trade need workers' comp now, or on January 1, 2028?
- What limits do my general contractors require for the umbrella?
- How will my audit treat payments to subcontractors without certificates?
Key terms
- Contractor's bond: a surety bond required by the CSLB to protect consumers and others.
- Completed operations: liability coverage for claims arising after a job is finished.
- Additional insured: a client or GC added to your liability policy.
- Action-over exclusion: an exclusion for claims where an injured worker sues a third party, which then sues you.
- Inland marine: coverage for tools, equipment and property in transit or on job sites.
- Builder's risk: property coverage for a building under construction.
- Personnel of record: the people listed on a CSLB license.
Your yearly contractor insurance review
Before renewal, confirm your license classifications and the CSLB's records of your bond and workers' comp, update payroll by trade and your revenue estimate, and collect current certificates from every subcontractor. Compare your GL limits and exclusions with the contracts you expect to sign next year. Check that your tool schedule matches what you own, and that each work vehicle is on the auto policy. If you're adding a new trade or moving into commercial or new construction work, tell your broker before you bid.
Related state tables and guides
- Workers' comp requirements by state
- Small business insurance in California: required vs. recommended
- Is general liability insurance required in California?
- State insurance rules hub
Frequently asked questions
What insurance does a California contractor need to keep a license?
A $25,000 contractor's bond and a workers' comp certificate or valid exemption. LLC licensees also need liability insurance of at least $1 million aggregate for five or fewer personnel of record, increasing with more personnel.
Do contractors need workers' comp with no employees?
C-8, C-20, C-22, C-39 and D-49 licensees must carry it regardless, and the requirement is set to extend to all license classifications on January 1, 2028. Others can file an exemption only if they truly have no employees.
Is general liability required for California contractors?
By statute, only for LLC licensees. But most clients and general contractors require it, so most contractors need it in practice.
Does general liability cover my tools?
Usually not. Tools and equipment are typically covered by an inland marine or contractor's equipment policy.
What is builder's risk insurance?
Property coverage for a building under construction and the materials for it, against covered losses such as fire or theft. Contracts often say who must buy it.
Is a contractor's bond the same as insurance?
No. The bond protects consumers and others harmed by license-law violations. Your bond's indemnity agreement may require you to repay the surety for claims it pays.
Alishahi Insurance · 439 N Canon Dr, Penthouse, Beverly Hills, CA 90210 · (877) 711-4545 · CA License #4348151. General information only. Not legal, tax or financial advice, and not a coverage determination. Coverage depends on policy language and underwriting.