Contractor Bonds & Insurance
Most states require contractors to maintain insurance and/or surety bonds as a condition of licensure. Here's what you need to know.
Surety Bonds
A surety bond protects consumers against financial loss if a contractor fails to complete a project or violates regulations. It's a three-party agreement between you (the principal), the state (the obligee), and a bonding company (the surety).
Typical Range
$5K - $25K
Bond amount varies by state and trade
Annual Premium
1-15%
Of bond amount, based on credit score
Good Credit
1-3%
Premium with credit score 700+
General Liability Insurance
General liability insurance protects against third-party claims for bodily injury and property damage. It's the most commonly required insurance type for contractors.
Common Minimums:
- $300,000 per occurrence / $600,000 aggregate (lower-risk trades)
- $500,000 per occurrence / $1,000,000 aggregate (most trades)
- $1,000,000 per occurrence / $2,000,000 aggregate (high-risk trades)
Workers' Compensation
Workers' compensation insurance covers medical costs and lost wages for employees injured on the job. Almost every state requires it if you have employees. Some states (like Texas) make it optional, but it's strongly recommended.
Specialty Insurance Types
Pollution Liability
Required for environmental trades like asbestos abatement, lead paint removal, and septic system installation. Covers cleanup costs from pollutant releases.
Professional Liability (E&O)
Required for home inspectors and some specialty contractors. Covers claims of negligence or errors in professional services.