Starting a handyman business in Illinois? You're probably wondering whether you need a license, what insurance you're required to carry, and how to avoid legal headaches down the road. Here's the thing: Illinois keeps it simple at the state level—there's no statewide handyman license requirement. But before you celebrate, understand that cities and counties across Illinois have their own rules, and they can be strict. If you're working in Chicago, Aurora, or other major municipalities, you'll face licensing requirements that come with mandatory insurance minimums.
The insurance question matters even more than licensing. Whether you're hanging drywall, fixing faucets, or painting kitchen cabinets, one accident can wipe out your business. A client slips on your drop cloth and breaks their ankle? That's a lawsuit. Your drill falls through a ceiling and destroys a homeowner's antique table? You're liable. This guide breaks down exactly what insurance you need, what the law requires, and how to protect yourself without overpaying.
Do You Need a Handyman License in Illinois?
At the state level, Illinois doesn't require handymen to hold a contractor license. You won't find a statewide handyman certification or registration process. That makes Illinois one of the easier states for getting started in the handyman business—at least on paper.
But here's where it gets complicated. Cities and counties throughout Illinois handle contractor licensing themselves. Chicago, for example, requires general contractors to obtain a city-issued license, and they categorize these licenses into five different classes based on the type and value of work you're doing. Other municipalities like Aurora have similar requirements. Before you schedule your first job, contact your local building department to find out exactly what your city requires. What flies in Peoria might get you fined in Naperville.
There are also important exceptions for specific trades. Plumbing and roofing are licensed at the state level by the Illinois Department of Public Health and the Illinois Department of Financial and Professional Regulation. If your handyman services include plumbing or roofing work, you'll need state credentials for those trades. Electrical work also typically requires state licensing. Stick to general repairs, painting, carpentry, and basic maintenance if you want to avoid state licensing requirements.
Workers' Compensation Insurance: The Non-Negotiable Requirement
If you're a solo handyman with no employees, you can skip workers' comp. But the moment you hire your first helper—even part-time, even for a single day—Illinois law requires you to carry workers' compensation insurance. There's no minimum employee threshold, no grace period, and no exceptions for small businesses. One employee means you need coverage, period.
Illinois takes this seriously. The state requires employers to provide workers' compensation coverage from the moment an employee is hired, even if the hire was made in Illinois but the work is performed elsewhere. If your worker falls off a ladder and breaks their arm, workers' comp covers their medical bills and lost wages. Without it, you're personally liable for those costs, plus you face penalties from the state.
One wrinkle: the distinction between employees and independent contractors matters. If you hire subcontractors who operate their own businesses, provide their own tools, and control their own schedules, they're not your employees and you don't need to cover them under your workers' comp policy. But be careful—only the Illinois Workers Compensation Commission can make the final determination of whether someone is an employee or independent contractor. If you guess wrong and treat an employee as a contractor, you're on the hook.
Handyman work falls under what Illinois considers extra-hazardous occupations, which includes construction, roofing, and similar trades. This means if you operate as an LLC or corporation, you generally cannot opt your corporate officers or LLC members out of coverage. Even if you're the owner, you're likely required to be covered.
General Liability Insurance: Protecting Your Business from Lawsuits
Illinois doesn't require handymen to carry general liability insurance at the state level. But that's a bit like saying you don't legally need a fire extinguisher in your kitchen—technically true, but ignoring the practical reality. General liability insurance protects you when you accidentally damage a client's property or when someone gets hurt because of your work. Without it, you're one lawsuit away from losing everything.
Many Illinois municipalities require general liability insurance to obtain a contractor license. In Chicago, if you need a general contractor license, you must carry general liability coverage with minimum limits that vary by license class. Most require at least $1 million per occurrence and $2 million general aggregate. Aurora and other cities have similar requirements. Even if your city doesn't mandate it, most homeowners and property managers will require proof of insurance before signing a contract with you.
The standard recommendation for handyman businesses is to carry at least $1 million general aggregate with $500,000 per occurrence. This covers bodily injury and property damage claims. If you're working on higher-value properties or commercial projects, you may want to increase those limits. The average Illinois handyman pays around $67 per month for general liability coverage—a small price compared to what a single lawsuit could cost you.
Here's a real-world example. You're installing shelving in a client's home office. Your drill slips and punches through the wall, damaging electrical wiring and causing a small fire. The homeowner's insurance covers the immediate damage, but then their insurer comes after you to recover the $15,000 in repair costs. Your general liability insurance handles that claim, pays for a lawyer to represent you, and covers the settlement. Without insurance, you'd be writing that check yourself—or facing a judgment that could force you into bankruptcy.
Local Requirements: Why Your City Matters More Than the State
Illinois operates on a patchwork system where municipalities set their own rules. What you need in one city might be completely different from what's required ten miles away. Most Illinois jurisdictions have licensing regulations for handymen, but the specifics vary wildly. Some cities require a simple business registration and nothing else. Others demand proof of insurance, bonding, and passing a trade exam.
Chicago has the most comprehensive requirements. The city issues five classes of general contractor licenses based on project value, ranging from unlimited work down to projects under $10,000. Each class has its own insurance requirements. If you're doing smaller handyman jobs in Chicago, you'll likely need a Class C or D license, which still requires substantial liability coverage. Larger projects demand even higher limits—some classifications require up to $5 million in coverage.
Before you start marketing your services, call or visit the website of your local building department. Ask specifically about handyman or general contractor licensing requirements, required insurance minimums, and whether you need to register your business with the city. Get this information in writing if possible, and keep records of who you spoke with and when. If requirements change or you're later questioned about compliance, documentation protects you.
Additional Coverage to Consider
Beyond the legally required coverage, smart handyman business owners consider several additional policies. Commercial auto insurance is essential if you use a vehicle for business purposes—your personal auto policy won't cover accidents that happen while you're driving to job sites or hauling equipment. Tools and equipment insurance protects your investment in drills, saws, ladders, and other gear if they're stolen from your truck or damaged on a job site.
Professional liability insurance, also called errors and omissions coverage, protects you if a client claims your work was defective or didn't meet the agreed-upon specifications. This is particularly important if you provide consultations or design recommendations in addition to hands-on repairs. If you store clients' belongings while working in their homes, or if you have an office or warehouse space, consider property insurance for your business location.
How to Get Started and Stay Compliant
First, register your business with the state of Illinois. Even though you don't need a state contractor license, you need to register your business structure—whether that's a sole proprietorship, LLC, or corporation—and obtain an Employer Identification Number from the IRS if you have employees. This gives you the legal foundation to operate and pay taxes.
Next, contact your local building department to understand municipal licensing requirements. Once you know what's required, shop for insurance. Get quotes from multiple insurers and compare not just price but coverage limits, deductibles, and exclusions. Many insurance companies specialize in coverage for contractors and handyman businesses—they understand your risks better than a general business insurer.
Keep your insurance current and review your coverage annually. As your business grows, your insurance needs will change. You might take on larger projects, hire more workers, or expand into new service areas. Each change can affect your coverage requirements. Stay in regular contact with your insurance agent, and report any significant changes to your business operations. The worst time to discover you're underinsured is after an accident happens.
Running a handyman business in Illinois gives you flexibility that many states don't offer, but that freedom comes with responsibility. You're in charge of understanding local requirements, securing appropriate insurance, and protecting both your business and your clients. Take the time to get your licensing and insurance right from the start. It's far easier—and cheaper—than trying to fix compliance problems after they've already cost you money or damaged your reputation. Ready to get properly covered? Reach out to an insurance agent who specializes in contractor coverage and get quotes today.
