Starting Your Insurance Program Right
Launching a contracting business requires proper insurance from day one. Understanding what you need immediately versus what can wait helps you start protected without overspending.
Day One Essentials
General Liability
This is your first priority. Most customers won't hire you without GL coverage. Protects against third-party property damage and injury claims. Even a basic policy with $1 million limits gets you started.
Contractor's License Bond
Required by the Contractors State License Board before your license issues. The bond amount is $25,000 for all California contractors. Relatively inexpensive, usually a few hundred dollars annually.
Workers' Compensation
Required immediately if you have any employees. Even if you're solo now, get this in place before your first hire.
Commercial Auto
If you're using vehicles for business, personal policies won't cover accidents during work use. Get commercial coverage before your first job site visit.
What Can Wait
As your business grows, add these coverages:
Umbrella liability for higher limits when contracts require them. Professional liability if you start offering design services. Builder's risk coverage as project size increases. Higher limits across all coverages as your asset base grows.
New Business Challenges
Limited Track Record
Carriers want to see experience and claims history. New businesses have neither. This means fewer carrier options, higher premiums initially, and more difficulty finding coverage for higher-risk trades.
Finding Coverage
Work with agents who specialize in contractor insurance. They know which carriers write new businesses in your trade. Generic business insurance agents lack this specialized knowledge.
Building Over Time
Year One Goals
Establish baseline coverage that meets licensing and customer requirements. Document your safety practices from the start. Begin building a claims-free history. Meet the minimum requirements of your contracts.
Year Two and Beyond
Shop for better rates once you have 12 months of claims-free history. Add coverage as your operation expands. Continue building your safety record. Develop relationships with carriers who reward longevity.
Common Mistakes
Underbuying Coverage
Minimum limits save money short-term but leave you exposed. One serious claim can exceed $1 million. Match coverage to actual exposure, not just minimum requirements.
Overbuying Coverage
Don't purchase coverage you don't need yet. Endorsements and limits beyond current requirements waste premium dollars. Build your program as your business grows.
Waiting Too Long
Operating without coverage violates licensing requirements and exposes you personally. Get coverage in place before your first job.
Getting Started
What You'll Need for Quotes
Business license information. Contractor license or application status. Description of services offered. Estimated first-year revenue. Estimated payroll if hiring. Prior experience in the trade.
Gathering this information before contacting agents speeds the process.
Common Questions
Can I get insurance before my license is issued?
Some carriers will bind coverage contingent on obtaining your license. Discuss timing with your agent to coordinate properly.
What does startup insurance cost?
Varies widely by trade and coverage. Budget $2,000 to $5,000 annually for basic GL and bond for smaller operations. Workers' comp adds significant cost depending on trade and payroll.
Will my premiums decrease over time?
Usually yes. Claims-free history earns better rates. Carriers reward established businesses with good track records.