Hiring a contractor for an addition or major remodel is one of the biggest investments most homeowners make—and one where things can go sideways fast if something gets damaged or someone gets hurt on your property. General contractor insurance isn't glamorous, but it's the financial safety net that separates a manageable project problem from a catastrophic out-of-pocket loss. Understanding what coverage protects you, what to verify, and what gaps to watch for will save you thousands of dollars and sleepless nights.
Why Contractor Insurance Matters for Your Project
When a contractor is working on your home, they're responsible for damages they cause and injuries that happen on your site—but only if they carry the right insurance. Without it, you could be liable if the crew damages your neighbor's fence, someone falls off a ladder, or tools get stolen from your garage. Your homeowner's insurance typically does not cover these scenarios once a contractor is actively working. That's why verifying the contractor's coverage before work begins is non-negotiable.
The Three Core Coverage Types You Need to Verify
General Liability Insurance covers bodily injury (someone gets hurt), property damage (they bust through a wall or damage landscaping), and medical bills for accidents on-site. This is the baseline. You should see a policy limit of at least $1 million per occurrence and $2 million aggregate for residential additions or remodels.
Workers' Compensation Insurance is required by law in nearly every state if the contractor has employees. It covers medical costs and lost wages if a crew member is injured. If a contractor claims to be a solo operator but you suspect they have workers, this is a red flag—they're either cutting corners or breaking the law.
Tools and Equipment Coverage protects their equipment from theft or damage on your property. While this doesn't directly protect you, it matters because an uninsured contractor who loses their tools may rush through work or cut quality to recover losses.
Many contractors also carry Commercial Auto Insurance (for work vehicles) and Inland Marine Insurance (for high-value tools and equipment). Ask about these if they're working on-site long-term.
How to Verify and Request Documentation
Don't take a contractor's word for it. Request:
- A Certificate of Insurance (not just a policy declaration)—this is a standard one-page form that shows active coverage with expiration dates
- Your home's address listed as "additional insured"—this protects you if a claim comes up after the contract ends
- Contact information for their insurance agent so you can verify directly if needed
- Written proof that workers' comp is current (some states allow solo operators to opt out; know your state's rules)
Any contractor who gets defensive about providing these documents is a contractor to skip. Legitimate pros have this ready. Typical general contractors carry these policies at costs ranging from $1,500 to $4,000 annually depending on business size and project scope.
What Coverage Gaps Actually Look Like
A contractor with $500,000 in general liability might not be enough if they're doing structural work or a large addition. A $300,000 project could max out that limit quickly if something goes catastrophically wrong. Also, some policies exclude specific work types—excavation, roofing, or pool work—so ask whether the jobs they'll do for you are covered under their policy.
Performance bonds are different from insurance and worth asking about for major projects ($50,000+). A bond guarantees the contractor finishes the job or you get your money back; insurance doesn't guarantee completion.
When You're Comparing Contractors
If you're getting multiple bids, verify insurance for all of them. Don't choose a contractor solely based on price if another candidate has significantly better coverage. A $2,000 difference in bid means nothing if you eat $25,000 in uninsured damages. When gathering quotes and vetting contractors side-by-side, tools like Mercoly help you compare trusted general contractors in your area and verify their credentials all in one place.
Request that your contractor's insurer add you as additional insured before signing any contract. This typically costs them nothing and takes five minutes.
Frequently Asked Questions
Q: What happens if a contractor gets injured on my property but doesn't have workers' comp? You could be personally liable for their medical bills and lost wages, potentially costing tens of thousands of dollars. Always verify workers' comp is active before they start.
Q: Can I just ask my homeowner's insurance to cover contractor work? Most homeowner policies explicitly exclude work done by hired contractors, especially if there's an accident or property damage caused by their actions.
Q: How long should the certificate of insurance last? It should remain valid through the entire project plus 30 days after completion. Request renewal documentation in writing if a policy expires mid-project.
Ready to find a contractor? Use Mercoly to compare vetted general contractors with verified insurance and get multiple quotes today.