Most small contractors carry $1 million per occurrence and $2 million aggregate in general liability, and that is often the minimum a contract requires. In 2026, industry reports warn that claim severity is outgrowing small trade contractors: one serious injury, auto accident, or defect claim can exceed those limits regardless of the contractor's revenue. An umbrella policy adds limits above your general liability, auto, and employer's liability, usually at a lower cost per dollar of coverage than raising primary limits. The right amount depends on your trade, contracts, vehicles, and assets.
Revenue No Longer Predicts the Size of a Claim
In September 2026, Insurance Journal put a blunt headline on a trend brokers have watched for years: claim severity is outgrowing small trade contractors.
The logic behind the old rule of thumb was simple. Small company, small jobs, small claims. That no longer holds. A two-truck roofing company faces the same fall hazards, the same highway traffic, and the same juries as a firm ten times its size. One catastrophic injury, one serious auto accident, or one construction defect suit can exceed a $1 million policy and threaten the business.
What Is Driving Claims Higher
- Jury verdicts. Large verdicts in bodily injury cases, sometimes called nuclear verdicts, have become more common, and insurers price that into every policy.
- Medical costs. Treatment for serious injuries keeps getting more expensive.
- Rebuild costs. Higher material and labor costs make property damage and defect claims larger.
- Auto exposure. Company vehicles are one of the most common sources of severe claims for small contractors.
Market reports in 2026 describe casualty insurance, meaning liability and auto, as the tough part of the construction market, even as property coverage softens. Contractors in residential work and work at height tend to see the steepest pricing.
How Much Coverage Do You Actually Need?
There is no single right number, but you can size it with four questions:
- What do your contracts require? Start with the highest per-occurrence and umbrella limits in any contract you sign.
- What is your worst realistic claim? For most trades, that is a serious injury to a third party or a severe auto accident, not a small property damage claim.
- What do you own? Business and personal assets that a large judgment could reach are part of the math.
- What work do you want next? Commercial, public, and larger residential jobs often require $2 million per occurrence or an umbrella of $1 million to $5 million.
Why an Umbrella Is Usually the Answer
An umbrella policy adds a layer of limits above your general liability, commercial auto, and employer's liability. When a covered claim uses up the underlying limit, the umbrella pays the rest, up to its own limit.
For most small contractors, adding a $1 million or $2 million umbrella costs far less than trying to raise every underlying policy. Each additional million is usually cheaper than the first. It also lets one purchase satisfy contract requirements across general liability and auto at the same time.
A few things to confirm when you buy one:
- The umbrella lists all of your underlying policies, especially commercial auto.
- Your underlying limits meet the umbrella's minimums, or you could face a gap.
- Additional insured and primary and non-contributory wording flows through when your contracts require it. Our additional insured guide explains that wording.
The Bottom Line
Your revenue does not cap your liability. If your limits have not changed in the last few years while your jobs, vehicles, and crew have grown, you are probably carrying less protection than you think.
Construction Pros quotes general liability and umbrella coverage for contractors in California, Nevada, Arizona, and Texas. Get a free liability and umbrella quote, or read more about umbrella insurance for contractors and California general liability.
Frequently Asked Questions
Is $1 million in general liability enough for a small contractor?
It meets many contract minimums, but it is not always enough to protect the business. A serious bodily injury, a vehicle accident with a company truck, or a construction defect claim can exceed $1 million. Size limits to your worst realistic claim and your contract requirements, not to your revenue.
What does an umbrella policy cover for contractors?
An umbrella sits above your underlying general liability, commercial auto, and employer's liability policies. When a covered claim exhausts an underlying limit, the umbrella pays the excess up to its own limit. Some umbrellas also cover certain claims the underlying policies do not, subject to a retention.
How much does a contractor umbrella cost?
It varies by trade, vehicles, loss history, and location. The first $1 million of umbrella is typically much cheaper than the underlying general liability policy, and each additional million usually costs less than the one before it. Contractors with heavy auto exposure or work at height should expect higher pricing.
Why do general contractors require higher limits from subs?
Because the GC and owner are usually named as additional insureds on your policy. Your limits are their first line of protection for claims arising from your work. Many GCs and property managers now require $2 million per occurrence or a $1 million to $5 million umbrella before you can start.