If you're running a handyman business in California, you're probably aware that the rules around licensing and insurance can feel like a maze. The good news? California recently made things a bit easier for small operators. The not-so-good news? If you're growing beyond small jobs, the insurance requirements are real—and they're non-negotiable.
Here's what you need to know about California handyman insurance requirements in 2025, including the new licensing threshold, what coverage you actually need, and how to stay on the right side of the law while protecting your business.
The $1,000 Rule: When You Need a License
As of January 1, 2025, Assembly Bill 2622 raised California's handyman exemption threshold from $500 to $1,000. This is the first adjustment in nearly 38 years, and it's a big deal for small operators. What does this mean in practice? If your total project cost—including both labor and materials—stays under $1,000, you can legally work without a contractor's license.
But here's the catch: this exemption comes with strict conditions. You cannot hire helpers, subcontractors, or employees for that job. You cannot pull building permits. And you must clearly advertise that you are not a licensed contractor. If you violate any of these rules or exceed the $1,000 threshold, you're required to get a full contractor's license from the California Contractors State License Board (CSLB)—and that means meeting all the insurance requirements that come with it.
Insurance Requirements for Licensed Handyman Contractors
Once you cross that $1,000 threshold, California doesn't mess around. To obtain a contractor's license, you'll need to be at least 18 years old, have four years of journeyman-level experience, pass both trade and law exams, pay an application fee of approximately $450, and—most importantly for our purposes—prove you have the required insurance and bonding in place.
Here's what California requires:
General Liability Insurance: You need at least $1 million in aggregate coverage. This protects you if you accidentally damage someone's property or if someone gets hurt on the job. If you're operating as a sole proprietor, the minimum is $1 million aggregate. LLCs need the same $1 million minimum. This isn't optional—the CSLB won't issue your license without proof of this coverage.
Workers' Compensation Insurance: This is where things get interesting. California recently changed the rules with SB 216, requiring all licensed contractors to carry workers' comp insurance—even if you don't have employees. Yes, you read that right. Even solo operators need coverage. The good news is that if you're working alone, you can purchase what's called a 'ghost policy,' which is priced based on your own wages and typically costs much less than a standard workers' comp policy. For handymen with employees, expect to pay anywhere from $400 to $3,000 annually depending on your payroll.
Surety Bond: You'll also need a $25,000 surety bond. This protects your customers if you fail to complete a job or don't pay suppliers. It's not insurance for you—it's a guarantee for them.
The Workers' Comp Mandate: What Changed and When
Senate Bill 216 shook things up for California contractors. Originally, the law required all contractors—even those without employees—to carry workers' comp by January 2026. However, SB 1455 extended this deadline. Now, licensed contractors without employees have until January 2028 to comply.
If you have even one employee, the rule is immediate: you must carry workers' comp insurance right now. California doesn't care if it's a part-time helper or your cousin who works weekends. One employee means full compliance.
There are some exemptions available. You cannot file for an exemption if you employ anyone subject to California workers' comp laws, if your license is qualified by a Responsible Managing Employee (RME), or if you hold certain high-risk classifications like C-39 (Roofing) or C-61/D-49 (Tree Service). For everyone else, the workers' comp requirement is coming—if it hasn't already.
What Happens If You Skip Insurance?
Let's be blunt: operating without required insurance in California is a terrible idea. The penalties are severe. If you fail to carry workers' comp insurance when you're supposed to, you're looking at fines ranging from $10,000 to $100,000. That's not a typo. The California Division of Labor Standards Enforcement (DLSE) can also shut down your business until you get proper coverage.
Beyond the fines, think about the practical risk. Without general liability insurance, a single accident could bankrupt you. If you damage a client's home—say, you accidentally break a water pipe and flood their basement—you're personally liable for tens of thousands in repairs. If someone gets hurt on your job site and you don't have coverage, you're facing medical bills, lost wages, and potential lawsuits.
Insurance isn't just about compliance. It's about protecting the business you've worked hard to build.
How to Get Started: Practical Steps
If you're ready to get licensed and properly insured, here's your roadmap:
First, decide if you actually need a license. If all your jobs are under $1,000, you work solo, and you don't need permits, you can legally operate without one. But if you're doing bigger projects or want to grow your business, getting licensed opens more doors.
Second, shop for general liability insurance. Get quotes from multiple providers. Look for policies that specifically cover handyman or contractor work. Make sure you're getting at least the $1 million aggregate minimum California requires. Many insurers offer policies designed for small contractors that bundle general liability with tools coverage and other useful protections.
Third, secure your workers' comp coverage if applicable. If you have employees, this is mandatory right now. If you're solo, you have until 2028, but getting it sooner can help you bid on bigger jobs and demonstrate professionalism to clients.
Fourth, get your $25,000 surety bond. You can purchase this through insurance agents or specialized bonding companies. It's usually a straightforward process and costs a small percentage of the bond amount annually.
Finally, apply for your contractor's license through the CSLB with proof of your insurance and bond in hand. Once approved, keep your insurance active and your bond current. Let your coverage lapse, and the CSLB will suspend your license.
California's insurance requirements for handymen might seem strict, but they're designed to protect both you and your customers. The new $1,000 threshold gives small operators more breathing room, but if you're serious about growing your business, getting licensed and properly insured is the smartest move you can make. The cost of insurance is manageable—the cost of operating without it could end your business for good.
