If you're planning to operate as a general contractor in California, understanding your insurance requirements isn't optional—it's essential to staying legal and protecting your business. California has some of the most comprehensive contractor insurance regulations in the country, and recent legislative changes mean that nearly all licensed contractors will soon need workers' compensation coverage, even if they work solo. Here's what you need to know to stay compliant in 2025 and beyond.
The California Contractor License Bond Requirement
Before you can get your contractor's license in California, you'll need to file a $25,000 contractor license bond with the Contractors State License Board (CSLB). This bond protects consumers and others who hire you from financial harm if you fail to comply with state laws or contract terms. Think of it as a safety net for your clients—if you don't complete work as promised or violate licensing laws, the bond can pay out claims up to $25,000.
If you're operating as a Limited Liability Company, you'll also need to maintain a $100,000 LLC Employee/Worker Bond. You must keep these bonds active when renewing your license every two years. If your bond lapses, your license becomes inactive until you restore coverage.
Workers' Compensation Insurance: Major Changes Ahead
California's workers' compensation landscape for contractors has undergone significant transformation. Senate Bill 216 introduced a phased approach to requiring workers' comp coverage for all licensed contractors, regardless of whether they have employees. While the original deadline was January 1, 2026, Senate Bill 1455 extended the full implementation deadline to January 1, 2028.
Here's how it works: If you have even one employee, you're already required to carry workers' compensation insurance under California law. But starting in 2028, you'll need coverage even if you're a sole proprietor with no employees. The goal is to ensure that every licensed contractor has protection for job-related injuries, closing loopholes that left many solo contractors vulnerable.
Certain contractor classifications have already been subject to mandatory workers' comp since 2023, with no exemptions allowed. If you hold any of these license types, you must maintain active workers' compensation coverage right now: C-8 Concrete, C-20 HVAC, C-22 Asbestos Abatement, C-39 Roofing, and C-61/D-49 Tree Service. These high-risk classifications were prioritized due to the nature of the work and injury rates.
Under the new rules, exemptions are extremely limited. The only contractors who can file for exemption are those organized as a joint venture with no employees. You cannot claim an exemption if you employ anyone subject to California workers' compensation laws, if your license is qualified by a Responsible Managing Employee (RME), or if you employ Home Improvement Salespersons. If you do file an exemption and later hire employees, you must obtain workers' comp coverage within 90 days of the hire, or your exemption becomes invalid.
As for costs, contractors with employees should expect modest premium increases in 2025, with rates rising between flat to 5 percent. While this isn't dramatic, it's something to factor into your business planning.
General Liability Insurance: What You Actually Need
Here's where things get a little confusing. California state law doesn't universally mandate general liability insurance for all contractors, but it is required for licensed contractors. More importantly, virtually every client you work with will require you to carry it, and most project owners demand specific minimum coverage amounts.
For smaller operations with five or fewer personnel, the standard minimum is $1 million per occurrence with a $2 million aggregate. If you have more than five people on your team, you'll need an additional $100,000 in coverage per person beyond the first five employees. So if you have eight employees, you'd need $1.3 million per occurrence coverage.
A key update for 2025 involves completed operations coverage. You're now required to maintain this coverage for three years after project completion. This protects you if a client discovers a problem with your work months or even years after you finish the job. For example, if you installed a kitchen in 2024 and the homeowner files a claim in 2026 alleging faulty workmanship, your completed operations coverage would respond to that claim.
In practice, many project owners require even higher limits. It's common to see contract requirements for $2 million aggregate limits for construction projects. Cities like Los Angeles have specific requirements: $1 million per occurrence and $2 million aggregate for commercial projects, while residential projects require a minimum of $300,000 in personal liability coverage.
Premium rates for general liability insurance are trending upward, with increases ranging from 5 to 15 percent in 2025. Shopping around and maintaining a clean claims history can help you secure better rates.
Compliance and Documentation Requirements
When you apply for or renew your contractor's license, you'll need to provide the CSLB with proof of workers' compensation coverage. This comes in the form of a Certificate of Workers' Compensation Insurance from an insurance company licensed through the California Department of Insurance, or a Certification of Self-Insurance from the Department of Industrial Relations.
Your certificate must include specific information: the CSLB listed as the Certificate Holder, your business name and license number, the policy's effective and expiration dates, and the signature of an authorized insurance company representative. If any of this information is missing or incorrect, your application or renewal will be delayed.
If you qualify for an exemption (which, again, is very limited), you'll need to submit a signed exemption form certifying under penalty of perjury that you have no employees subject to California workers' compensation laws. This exemption must be renewed every two years when you renew your license.
How to Get Started and Stay Compliant
Getting your insurance in order doesn't have to be overwhelming. Start by contacting a business insurance agent who specializes in contractor coverage—they'll understand California's unique requirements and can help you find the right policies at competitive rates. Many agents can bundle your contractor license bond, workers' compensation, and general liability insurance together, which often results in cost savings.
Make sure you understand your classification's specific requirements. If you hold one of the mandatory workers' comp classifications (C-8, C-20, C-22, C-39, or C-61/D-49), you need coverage now, not in 2028. For everyone else, you have until January 1, 2028, to comply, but there's no harm in getting coverage sooner—it protects you and can make you more attractive to clients.
Keep copies of all your insurance certificates and bonds in an easily accessible location. You'll need to provide them to clients, to the CSLB for renewals, and sometimes to permit offices when pulling permits for projects. Set calendar reminders for policy renewal dates so you never let coverage lapse.
Finally, review your coverage annually. As your business grows, your insurance needs will change. Adding employees, expanding into new service areas, or taking on larger projects may require you to increase your coverage limits. Working with an experienced agent means you'll have someone who can adjust your policies as your business evolves, keeping you protected and compliant every step of the way.
