The short answer: four covers do most of the work. General liability covers damage and injury you cause to others, tool and equipment cover handles theft from a van or site, commercial auto covers the vehicle while it is working, and workers' compensation covers your people. Clients usually ask for proof of the first, and often the last.
The email arrives Friday afternoon, from the general contractor whose project starts Monday: "Send over your certificate of insurance before your crew comes on site." You do not have a certificate of insurance. You are not entirely sure what one is. And somewhere between reading that email twice and opening a search tab, you realize you have been running a construction business for two years on the assumption that being careful is a coverage type.
Almost every contractor gets insured in one of two ways: calmly, on a normal Tuesday, because they decided to. Or frantically, over a weekend, because a client demanded it or something already went wrong. The first way costs less and covers better. This article is the map for doing it the first way.
One thing before the list: this is general education, not advice about your policy. Insurance is regulated by province and by state, wordings differ between insurers, and your trade changes everything. The purpose here is to walk into a broker's office knowing what the pieces are and which questions to ask, not to replace the broker.
What does general liability actually cover?
Commercial general liability (CGL) is the policy people mean when they say "are you insured?" It responds when your work or your operations injure someone who is not your employee or damage property that is not yours. Think of the ladder that goes through the bay window, the water line nicked behind the wall that floods the finished basement, the client who trips over your cord.
What matters when buying it:
- Limits. $2 million per occurrence is the common working floor for trades in Canada, and many commercial clients and municipalities want $5 million. In the US, $1 million per occurrence with a $2 million aggregate is a common baseline. Higher limits usually cost less than people expect, because the premium is mostly driven by the first dollar of coverage.
- Your operations, described honestly. The policy covers the business you told the insurer you run. A "handyman" policy does not stretch over roofing; a renovation policy may exclude structural work or anything above two stories. Undersell your operations on the application and you have bought a document, not coverage.
- The exclusions, read out loud. Common ones that bite trades: work on certain building types, hot work like welding and torch-down roofing, mold and asbestos, and the one that surprises everyone: damage to your own completed work. CGL generally covers what your faulty work damages, not redoing the faulty work itself. That distinction decides real claims.
This is also where that Friday email gets answered: a certificate of insurance (COI) is just a one-page proof, issued by your broker, showing your coverage types, limits, and dates. GCs, property managers, commercial clients, and many municipalities will not let you on site without one, and some will ask to be named as additional insured for the project. That is a routine request your broker handles, sometimes for a small fee. Once you are properly covered, certificates are a same-day phone call. Contractors who cannot produce one quickly lose exactly the commercial work that pays best.
Tools and equipment: the theft you already believe in
Every contractor knows someone whose van or trailer got emptied overnight. Ask what the replacement cost of everything in your own van is, and most people land somewhere between $10,000 and $40,000, all of it sitting in a parking lot behind one lock.
Tools coverage (a "tool floater" or contractor's equipment policy) covers your tools and equipment against theft and damage, typically wherever they are: the van, the site, the shop. The details that decide whether it actually pays:
- Replacement cost vs actual cash value. Actual cash value pays what your five-year-old saw was worth (little); replacement cost pays for a new one. The premium difference is usually modest; the claim difference is enormous.
- Per-item limits. Many policies cap unscheduled items at a few thousand dollars each. Machines above the cap (a big compressor, a laser level) need to be individually listed ("scheduled").
- The overnight-in-vehicle question. Some policies restrict or exclude theft from unattended vehicles overnight. Given that this is precisely how tools get stolen, ask the question directly and get the answer in writing.
A current tool inventory, even a phone video walking the shelves twice a year, turns the claim process from an argument into a checklist.
Does your personal auto policy cover your work truck?
Here is a quiet way to be uninsured while holding an insurance card: run your work truck on a personal auto policy. Personal policies generally exclude or restrict business use, and "his truck was full of ladders and he was driving between job sites" is not a hard investigation. The wreck happens, the business use is obvious, and the personal insurer has an exit.
If a vehicle carries your tools, your materials, your signage, or your crew to paid work, it needs a commercial auto policy. That covers the vehicle in business use, with liability limits that make sense given what a loaded work truck can do in an intersection. While you are at it, ask the broker about trailer coverage and about the contents question: auto policies often cover the vehicle but not the cargo, which is why the tool floater above exists.
Commercial auto costs more than personal. It is also the difference between an insured business and a decorated one.
Workers' compensation: not optional, not really insurance
Workers' compensation (WCB/WSIB in Canada, workers' comp in the US) is the system that covers workplace injuries to workers, and it operates on different logic from everything above: in most jurisdictions, registration is mandatory once you have workers, and in several, it applies to some owners and contractors too. The rules vary sharply by province and state: who counts as a worker, whether owners can or must cover themselves, how subcontractors are treated. So this section's only universal advice is to find out your jurisdiction's rules the week you first pay anyone, including a casual helper.
Two trade-specific realities are worth knowing going in. Your helper is probably a worker, no matter how the arrangement is described. Cash, part-time, "just labor": none of those words matter to a compensation board, and an unregistered employer whose helper falls off a ladder faces the injury costs and the penalties, personally. And hiring subcontractors doesn't always exempt you: in many places, a principal contractor is responsible for confirming their subs carry their own coverage. A clearance letter (or certificate of good standing) from the compensation board is the standard proof, and GCs ask you for the same. Collect them before the sub starts, not after the incident.
For owners who can opt in to personal coverage, think hard before declining: your health insurance may exclude workplace injuries, and a solo operator's broken wrist is both a medical event and a total revenue stop.
The second ring: worth asking your broker about
Once the four foundations are placed, a handful of additions matter for specific situations. Ask about the ones that fit your work:
- Builder's risk / course of construction covers the structure and materials while being built, which is what you want when you are the prime on new builds or major renos. Who buys it (owner or contractor) is a contract question worth settling before demolition, not after the fire.
- Professional liability (errors and omissions) matters when clients rely on your design: design-build work, layouts, specifying systems. CGL covers what your hands damage; E&O covers what your drawings get wrong.
- Pollution liability for trades touching fuel, tanks, spray foam, or contaminated material. Standard CGL pollution exclusions are broad.
- Cyber / crime coverage has become a real trades question, mostly for one scenario: payment redirection fraud, where someone impersonates you to your client (or a supplier to you) and the deposit goes to a stranger's account.
- Bonding (bid and performance bonds) is not insurance for you but a guarantee for the client, required on much public and some commercial work. If you want municipal jobs, ask about bonding capacity early; it takes time to establish.
Buying it: broker, honesty, and the annual fifteen minutes
Use a broker who insures trades all day. Construction insurance is a specialty, and a broker who mostly writes restaurants will not spot that your policy excludes the exact work you do most. Ask other contractors in your trade who they use; it is one of the few pieces of business advice trades share freely. Describe your work completely, including the ugly parts: height work, hot work, the occasional structural job, the winter snow contract. Every omission on the application is a door the insurer can walk out of at claim time, and the premium difference for honesty is small while the coverage difference is total. And re-read the package once a year, out loud, with the broker. Businesses drift: a new service here, a helper hired there, a bigger trailer, the first commercial contract. Policies do not follow automatically. Fifteen minutes at renewal ("here's what changed this year") keeps the coverage pointed at the business you actually run, not the one you started.
"Before you bind anything, can you walk me through the three most common claims you see for my trade, and show me where this policy responds to each one?"
That single question, asked in the broker's office, does more than an afternoon of internet research. A good broker answers it specifically and enjoys being asked. A broker who can't is your sign to find one who can.
None of this is the fun part of contracting. But the Friday email stops being frightening, the commercial doors open, and the one bad afternoon every contractor eventually has becomes a claim number instead of a catastrophe. That is the entire product: you are buying the boringness of your worst day.
Frequently asked questions
What does contractor insurance typically cost?
It varies too much for an honest single number: trade risk, revenue, location, claims history, and limits all move it substantially. A low-risk solo trade might see general liability for under a thousand dollars a year; roofing and structural work cost multiples of that. The useful move is getting two or three real quotes through trade-specialist brokers, then comparing coverage details rather than just premiums. The cheapest quote is often cheap because of what it quietly excludes.
I only do small jobs. Do I really need this?
Small jobs carry the same physics as big ones. A nicked pipe floods the same basement whether the invoice was $400 or $40,000. And practically, insurance is increasingly the ticket to work at all: GCs, property managers, and a growing share of homeowners ask for proof before you start. The businesses that skip coverage are usually saving a four-figure premium against a six-figure exposure and locking themselves out of their best-paying clients at the same time.
What is the difference between being "bonded" and being "insured"?
Insurance protects against accidents and liability: it pays when something goes wrong that the policy covers. A bond is a financial guarantee to your client that you will complete the work as contracted; if you default, the bonding company pays the client and then comes after you. "Licensed, bonded, and insured" therefore describes three separate things: permission to do the work, a guarantee you'll finish it, and protection when accidents happen. Some jurisdictions and job types require specific bonds; your broker or licensing body can tell you which apply.
Do subcontractors need their own insurance, or does mine cover them?
Plan on the answer being: they need their own, and you need to verify it. Your CGL covers your operations, and most policies get uncomfortable, or explicitly exclusionary, about uninsured subs working under you. The standard practice that protects everyone: collect a certificate of insurance and, where applicable, a workers' compensation clearance letter from every sub before they start, and keep them on file. GCs demand exactly this from you for the same reason.
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