If you're running a home remodeling business in Illinois, you've probably heard conflicting advice about insurance requirements. Here's the truth: Illinois doesn't license general contractors at the state level, but it absolutely requires specific insurance coverage through the Home Repair and Remodeling Act. And if you're working in cities like Chicago, Aurora, or Joliet, you'll face additional local requirements that can be even stricter.
Whether you're a solo contractor doing kitchen renovations or managing a crew that handles whole-home remodels, understanding Illinois insurance requirements isn't optional—it's essential for staying legal, protecting your business, and landing contracts with savvy homeowners who ask to see proof of coverage.
What the Illinois Home Repair and Remodeling Act Requires
The Illinois Home Repair and Remodeling Act (HRRA) is the big one you need to know about. This state law applies to any residential repair or remodeling work over $500 on single-family homes or multi-family buildings with six or fewer units. That means most of your jobs probably fall under it.
Here's what the HRRA requires you to carry during any covered project:
Bodily injury coverage: $100,000 per person and $300,000 per occurrence. This protects you if someone gets hurt on your job site—whether that's a homeowner tripping over equipment or a pedestrian injured by falling debris.
Property damage coverage: $50,000 per occurrence. Accidents happen—you could damage a client's hardwood floors, break a window, or cause water damage. This coverage handles those claims.
Code violation coverage: $10,000 per occurrence for improper work not in compliance with building codes. This is unique to Illinois and protects homeowners if your work doesn't meet state, county, or municipal code requirements.
Now here's the escape hatch: if your business has a net worth of at least $1 million (verified by a financial statement prepared within the last 13 months), you don't have to carry this insurance. But let's be real—most remodeling contractors don't meet that threshold, and even if you do, having insurance is still smart business.
One more thing: violating the HRRA is considered consumer fraud under Illinois law. That means if you skip the insurance requirement and get caught, homeowners can sue you and recover their attorney fees. It's not worth the risk.
Workers' Compensation: No Exceptions If You Have Employees
Illinois makes this simple: if you employ even one person, you must carry workers' compensation insurance. There's no minimum employee threshold, no exemptions for part-timers, and no wiggle room. Hire someone? Get workers' comp.
This coverage pays for medical expenses and lost wages if an employee gets hurt on the job—and in construction, injuries happen. Someone falls off a ladder, strains their back lifting materials, or cuts themselves with a power tool. Workers' comp protects both your employee and your business from devastating medical bills and lawsuits.
If you work alone as a sole proprietor, you're not required to carry workers' comp for yourself. But here's where it gets tricky: if you hire subcontractors who don't have their own workers' comp coverage, insurance companies will often count their payroll as yours during audits. That means you could face unexpected premium increases. Always verify that your subs carry their own coverage and get certificates of insurance before they start work.
Workers' comp in Illinois isn't cheap for remodeling contractors. Expect to pay over $250 per month on average, though your actual cost depends on your payroll, claims history, and the specific work you do. Roofing and demolition carry higher rates than finish carpentry, for example.
Municipal Requirements: What Chicago and Other Cities Require
Because Illinois doesn't license general contractors at the state level, cities and counties handle licensing themselves. And many of them require higher insurance limits than the state minimum. This catches a lot of contractors off guard.
Chicago, Aurora, and Joliet all require general contractors to carry liability insurance to obtain local licenses. The minimums typically range from $500,000 to $1 million per occurrence—significantly higher than the HRRA's $100,000/$300,000 requirement. Cook County also has contractor registration requirements that include insurance verification.
Before you take on a project in a new city, call their building or licensing department and ask about contractor insurance requirements. Don't assume the state minimums will suffice. The last thing you want is to show up ready to pull a permit and discover you need to upgrade your coverage first.
The good news: most insurance professionals in Illinois are familiar with these varying requirements and can help you get a policy that covers you statewide. Many contractors find it easier to just carry $1 million/$2 million general liability coverage—the industry standard—rather than constantly checking whether they meet local minimums.
How Much Does Insurance Actually Cost?
Let's talk numbers, because this is where theory meets reality. Insurance is a business expense you need to budget for, and the costs vary based on what you do, how big you are, and your track record.
General liability insurance for home remodeling contractors runs about $81 to $97 per month on average, or roughly $970 to $1,200 annually. That's for policies that meet or exceed the Illinois HRRA minimums. If you need higher limits to satisfy municipal requirements or client contracts, expect to pay more—but often not dramatically more. A $1 million/$2 million policy might cost $87 per month instead of $81.
Workers' compensation is the bigger expense. Illinois contractors typically pay over $250 per month for workers' comp, though this varies significantly based on your payroll and the type of work you do. If you're doing high-risk work like roofing or structural demolition, expect higher rates. Finish carpentry and painting tend to cost less.
Many contractors also purchase a Business Owner's Policy (BOP), which bundles general liability with property insurance to cover your tools, equipment, and vehicles. BOPs average around $102 per month for remodeling contractors. If you're doing major projects, you might also need builders risk insurance to cover materials and work in progress, which runs about $101 per month.
Your actual costs depend on several factors: the services you offer, your revenue, your location within Illinois, your claims history, and how long you've been in business. A brand-new contractor with no claims history might pay more initially than someone with five years of clean operations. The best way to get accurate pricing is to compare quotes from multiple insurers who specialize in contractor coverage.
Additional Requirements You Should Know About
Beyond insurance, the Illinois Home Repair and Remodeling Act has other requirements that affect your business operations. For any residential project over $1,000, you must provide a written contract. That contract needs to include specific information about the work, timeline, payment terms, and your insurance coverage.
You're also required to provide homeowners with a Consumer Rights Brochure, and for contracts over $1,000, you need a signed acknowledgment form from the homeowner confirming they received it. These aren't just bureaucratic formalities—they're your proof that you've complied with the law if a dispute arises.
If you're doing specialized work like plumbing or roofing, Illinois does regulate those trades at the state level. Plumbers need state registration and must carry minimum coverage of $100,000 per occurrence and $300,000 aggregate for bodily injury, plus $50,000 in property damage. Make sure any specialty subs you hire are properly licensed and insured.
One recent change to be aware of: Illinois House Bill 0024, signed into law in August 2025, added new provisions regarding attorney fee provisions in residential construction contracts. This doesn't change insurance requirements, but it does affect how disputes are resolved and what you can include in your contracts.
Getting Started: Your Action Plan
If you're new to contracting in Illinois or you're worried you might not have the right coverage, here's what to do:
First, contact an insurance agent who specializes in contractor coverage. They'll know the Illinois requirements inside and out and can help you get a policy that meets both state law and municipal requirements where you work. Don't just buy the cheapest policy—make sure it actually covers what the HRRA requires, including that $10,000 code violation coverage that many general liability policies don't automatically include.
Second, if you work in multiple cities, verify the local requirements for each jurisdiction. A quick call to the building department can save you from permit delays or license denials. Keep a spreadsheet of which cities you're licensed in and what their specific insurance minimums are.
Third, if you use subcontractors, always get certificates of insurance before they step foot on a job site. Make sure their coverage is current and meets the same standards you're required to carry. If they don't have insurance, you could end up paying for it through higher workers' comp premiums.
Finally, don't view insurance as just a legal requirement—it's protection for everything you've built. One serious injury or property damage claim could bankrupt an uninsured contractor. The homeowner who asks to see your certificate of insurance isn't being difficult; they're being smart. And frankly, so are you when you maintain proper coverage.
Illinois insurance requirements for home remodeling contractors are clear once you understand the layers: state minimums through the HRRA, municipal requirements for local licenses, and workers' comp if you have employees. Get the right coverage, keep your certificates current, and you can focus on what you do best—transforming houses into homes.
