What insurance does a contractor actually need?
Think of it as a stack, built from must-have outward. At the base are the coverages almost no contractor should run without: general liability for the harm your work can cause others, commercial auto for the trucks and trailers, and inland marine for the tools and equipment that leave the shop — tool theft from a truck is one of the most common claims a contractor files. The next layer fits the job in front of you: builder's risk for a structure under construction, workers' comp the moment you put a crew on payroll. The final layer wins and protects the work: surety bonds to bid and deliver, and an umbrella for the larger operations that need higher limits. Most contractors need most of the base; we size each layer to your trades rather than selling a one-size box.
Coverage stack
The contractor coverage stack — what each one does and how urgent it is
| Coverage | What it does | Priority |
|---|---|---|
| General Liability | Jobsite injury & property damage you cause to others | Must-have |
| Commercial Auto | Work trucks, trailers, gear on the move | Most |
| Inland Marine / Tools | Your tools & equipment off-site or in transit (a common small claim) | Nearly all |
| Builder's Risk | The structure while it's under construction | Build/remodel |
| Workers' Comp | Employee injuries (required with a crew) | Must-have w/staff |
| Surety Bonds | License, bid, performance & payment bonds | Bidders/licensed |
| Umbrella | Extra limits over the whole stack | Larger ops |
The distinction
Does general liability cover my stolen tools?
No — and this is the misunderstanding that trips up nearly every contractor. General liability covers harm YOUR work causes to OTHER people or their property: someone tripping on your jobsite, or your crew damaging a client's wall. It does NOT cover your own tools, equipment, or materials being stolen or damaged. That's inland marine (often sold as “tools and equipment” coverage), and tools stolen from a work truck is the most common contractor claim there is. And neither one covers the building you're constructing while it's going up — that's builder's risk. Three coverages, three different exposures you face every day.
- → The “are my stolen tools covered?” deep dive: Inland Marine / Equipment Insurance
- → The building under construction: Builder's Risk Insurance
Do I need commercial auto if I just use my own truck?
Usually yes. The moment a truck hauls tools, trailers, or materials for the business, a personal auto policy can deny the claim — that business use was never covered. Commercial auto is built for it: the right vehicle and driver classes, higher limits, and the room to add the trailers and equipment you actually run. For a one-truck owner-operator that can feel like overkill until the first denied claim; for a crew with multiple vehicles it's not optional. We scale it to how the trucks are really used.
When does a contractor need a bond?
More often than most expect. A license bond is frequently required just to get or keep a contractor's license, and bid, performance, and payment bonds are routinely required to win and deliver public or commercial work. A bond isn't insurance for you — it's a guarantee to the project owner that you'll perform, backed by your own indemnity. Because the bond question surfaces the day a bid lands, we ask it on every contractor quote so paperwork never costs you a job.
- → Full detail on the four contract bonds: Construction Bonds
- → How bonds work and what they cost: How Construction Bonds Work and Cost
(Bond and state licensing rules change often — tell us your trade and state and we'll confirm what's currently required.)
FAQ
Contractor insurance FAQs
- What insurance does a contractor need?
- At minimum, general liability, commercial auto for the work trucks, and inland marine for tools and equipment. Add builder's risk if you're building, workers' comp if you have a crew, and a bond to bid public or commercial work. We size each layer to your trades.
- Does my general liability cover my stolen tools?
- No. GL covers harm you cause others; it doesn't cover your own tools being stolen or damaged. That's inland marine (tools and equipment) coverage — and tool theft from a truck is a common contractor claim.
- Do I need builder's risk, or just general liability?
- Both, usually, if you're building. GL covers injury and damage you cause others; builder's risk covers the structure itself while it's under construction. A finished-building policy won't cover a project mid-build.
- How much does contractor insurance cost?
- It depends on your trades, payroll, vehicles, and the coverages you need. The fastest path to a real number is a quote.
By Zachary J. Kramer, licensed insurance agent, 20+ years' experience, NPN 7570201, Baylor University BBA. Flatland Expeditions LLC, founded in 2022.