Do Contractors Need General Liability Insurance?

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Short answer: In most cases, yes. Contractors are commonly required to carry general liability insurance by clients, contracts, property owners, or permitting authorities—even when it is not explicitly mandated by state law. More importantly, general liability insurance is often the difference between a manageable claim and a business-ending loss.

This guide explains when general liability insurance is required, what it covers, what it does not cover, and why many contractors carry it even when it isn’t legally mandated.

General liability insurance (often called GL insurance) protects contractors against third-party claims involving:

• Bodily injury (e.g., a homeowner or visitor is injured)
   
• Property damage (e.g., damage to a client’s home or neighboring property)
   
• Completed operations claims (issues that arise after work is finished)
   
• Advertising injury (less common, but included in many policies)
   

For contractors, this coverage applies to accidents or damage that occur because of business operations, not intentional acts or poor workmanship alone.

While requirements vary, contractors are typically required to carry general liability insurance in the following situations:

Many residential and commercial contracts require proof of general liability insurance before work can begin. This is especially common for:

• General contractors
   
• Remodeling contractors
   
• Commercial construction projects
   
• Work involving HOAs or property managers
   

Without proof of coverage, contractors are often disqualified from bidding or removed from projects.

Some states, cities, or licensing boards require contractors to maintain general liability insurance as a condition of:

• Holding a contractor’s license
   
• Pulling permits
   
• Renewing registrations
   

Even where it is not strictly required by law, inspectors or permitting offices may request proof of insurance.

Subcontractors are frequently required to carry their own general liability insurance and name the general contractor as an additional insured. This shifts risk away from the GC and onto the subcontractor’s policy.

Commercial property owners and public entities almost always require general liability coverage, often with higher limits than residential jobs.

In limited situations, a contractor may not be legally required to carry general liability insurance, such as:

• Very small, informal residential jobs
   
• Sole proprietors working alone
   
• Cash-only projects without contracts
   

However, not being legally required does not eliminate risk. A single accident or claim can still expose a contractor to significant out-of-pocket costs.

A standard contractor general liability policy typically covers:

If a client, visitor, or third party is injured due to your work or jobsite conditions, general liability insurance may cover:

• Medical expenses
   
• Legal defense costs
   
• Settlements or judgments
   

Coverage may apply if you accidentally damage:

• A client’s home
   
• Adjacent structures
   
• Existing property during a renovation or repair
   

Claims can arise after a project is finished, such as damage caused by installed materials or work performed weeks or months earlier.

This may include claims related to:

• Copyright infringement
   
• Slander or libel in advertising materials
   

(This coverage is less relevant for many contractors but is commonly included.)

This is where confusion often occurs.

General liability insurance typically does not cover:

• Poor workmanship by itself
   
• Design errors or professional advice
   
• Employee injuries (covered by workers’ compensation)
   
• Damage to your own tools or equipment
   
• Auto accidents involving work vehicles
   

Contractors who provide design advice, specifications, or consulting services may need professional liability (E&O) insurance in addition to general liability.

Costs vary widely, but typical ranges include:

• Small contractors: a few hundred dollars per year
   
• Larger operations: several thousand dollars per year
   

Factors that affect cost include:

• Type of trade
   
• Annual revenue
   
• Number of employees
   
• Claims history
   
• Coverage limits selected
   
• Location and job types
   

Choosing the cheapest policy without understanding exclusions can leave major gaps in coverage.

Contractors who work without general liability insurance may face:

• Paying for injuries or property damage out of pocket
   
• Lawsuits with no defense coverage
   
• Loss of contracts or future work
   
• License or permit complications
   
• Difficulty working with reputable clients or GCs
   

For many contractors, a single uncovered claim can exceed the cost of years of insurance premiums.

When contractors compare policies, they usually look at:

• Coverage limits
   
• Included and excluded risks
   
• Policy endorsements
   
• Cost vs coverage balance
   
• Ability to meet contract requirements
   

Because coverage details vary significantly, many contractors compare multiple options before choosing a policy.

Compare general liability insurance options for contractors →

(Affiliate disclosure: This site may earn a commission if you choose to compare insurance options through third-party providers. We do not sell insurance or represent any insurer.)

In practice, most contractors need general liability insurance, whether it is legally required or not. Contracts, clients, and real-world risk make coverage a standard part of operating a construction business.

Understanding what general liability insurance covers—and what it does not—is the first step in choosing appropriate protection.