California License #4472487 | NPN License #21655529

California contractors are required to carry multiple forms of insurance to operate legally and safely.

The most important include:

• General Liability Insurance – Required by the California State Licensing Board (CSLB) for many trades. Most contracts require $1M–$2M minimum limits.
  
  
• Workers’ Compensation Insurance – Mandatory for all contractors with employees, even part-time helpers.
  
  
• Contractor License Bond – A $25,000 CSLB bond is required for all licensed contractors.
  
  
• Commercial Auto Insurance – Covers work trucks, vans, and vehicles used for transporting crews and materials.
  
  
• Tools & Equipment Coverage – Protects essential tools and machinery from theft or damage.
  
  

Optional but highly recommended: Professional Liability Insurance, Umbrella Coverage, Inland Marine Insurance, and Cyber Liability Insurance.

TGeneral Liability (GL) protects your business from lawsuits and claims related to:

• Property damage caused during work (e.g., a water line break flooding a client’s home).
  
  
• Third-party injuries, such as a visitor tripping on job site materials.
  
  
• Completed operations claims, like a defect causing damage months after project completion.
  
  

California has a high litigation rate, with settlements and medical costs significantly above the national average.

Most municipalities, general contractors, and private clients require proof of GL insurance before awarding contracts, especially for public works projects.

Workers’ Compensation is mandatory for any contractor with employees, including part-time, seasonal, or family workers.

Key facts:

• Even a single employee triggers the requirement.
  
  
• The CSLB frequently performs site sweeps and audits, issuing stop-work orders and fines exceeding $100,000 for non-compliance.
  
  
• Certain high-risk trades, such as roofing, are under heightened scrutiny.
  
  

Independent contractors who work solo are not required to carry Workers’ Comp but may still need Occupational Accident Insurance for personal injury protection.

A contractor license bond is a $25,000 financial guarantee required by the CSLB to protect consumers from contractor misconduct, fraud, or code violations.

If a contractor fails to meet contractual obligations, the bond pays claims to harmed parties.

Additional permit bonds may be required by cities such as Los Angeles, San Jose, or San Diego before building permits are issued.

Failing to maintain an active bond can result in immediate license suspension and stalled projects.

No. Personal auto policies exclude vehicles used for business purposes, especially those transporting crews, tools, or heavy materials.

Commercial Auto Insurance provides protection for:

• Collisions and liability while driving to job sites.
  
  
• Theft or vandalism of work vehicles.
  
  
• Employees operating company-owned trucks or vans.
  
  

California’s traffic congestion, high accident rates, and expensive repair costs make this coverage critical for contractors.

Tools and Equipment Insurance (sometimes called Contractor’s Equipment Coverage) protects against theft, loss, or damage to:

• Power tools, compressors, scaffolding, and specialty machinery.
  
  
• Equipment stored in vehicles, trailers, or at job sites.
  
  

With California’s high rates of construction site theft, this coverage ensures stolen gear is quickly replaced so projects stay on schedule.

Inland Marine Insurance protects mobile equipment and materials while in transit or temporarily stored off-site.

Example:

• A truck carrying $40,000 worth of lumber and framing equipment is stolen overnight.
  
  
• Inland Marine coverage reimburses the loss so the project can continue without financial strain.
  
  

It’s especially valuable for contractors who frequently move equipment between sites.

Professional Liability (Errors & Omissions) protects contractors against claims of negligence, design errors, or faulty project management.

Examples of when it’s needed:

• Design-build firms creating project plans.
  
  
• Contractors managing subcontractors on complex commercial builds.
  
  
• Public works projects that require architect or engineer sign-off.
  
  

In California’s litigation-heavy climate, even unfounded allegations can cost tens of thousands in defense fees without this protection.

Umbrella Insurance extends liability limits beyond your General Liability, Workers’ Comp, and Commercial Auto policies.

This protects your business when a claim exceeds standard policy limits.

Example:

• A job site accident results in a $2.5M lawsuit.
  
  
• Your General Liability caps at $1M.
  
  

Umbrella coverage pays the remaining $1.5M, preventing bankruptcy or asset liquidation.

Subcontractors are not automatically covered under a contractor’s policy.

To avoid exposure:

• Require subs to provide their own insurance certificates with adequate limits.
  
  
• Include indemnification agreements in contracts.
  
  
• Work with your insurance advisor to confirm whether subcontractor coverage endorsements are needed.
  
  

This step protects you from liability if a subcontractor causes damage or injury.

Public works projects often require higher coverage limits and specific endorsements, such as:

• General Liability: Often $2M–$5M minimum.
  
  
• Workers’ Compensation: Proof for all employees and subcontractors.
  
  
• Performance Bonds: Guaranteeing project completion.
  
  
• Professional Liability: For design-build or engineering integration.
  
  

Failing to meet these requirements can result in bid rejection or lost contracts.

Cost reduction comes from risk management, not cutting coverage.

Strategies include:

• Bundling multiple policies (GL, Auto, Tools) with one insurer.
  
  
• Maintaining a clean claims history through safety training and OSHA compliance.
  
  
• Updating coverage annually to remove outdated assets.
  
  
• Implementing theft-prevention measures to lower Inland Marine and Tools premiums.
  
  
• Using subcontractor agreements to limit liability exposure.
  
  

The goal is to build a lean, efficient insurance portfolio that protects your business while keeping costs predictable.