You've got the skills, the tools, and a solid business plan. You're ready to launch your home remodeling business. But here's the thing most new contractors overlook: the right insurance isn't just a legal checkbox—it's the difference between a minor setback and losing everything you've built. One lawsuit from a client who trips over materials at a job site, or one worker injury that your personal health insurance won't cover, and your dream business becomes a financial nightmare.
This guide walks you through exactly what insurance you need from day one, when to add coverage as you grow, and the costly mistakes that sink new remodeling businesses before they get off the ground.
Day One Coverage: What You Need Before Your First Job
Before you take on a single client, you need general liability insurance. Not just because it's smart—in many states, including California and Florida, you legally can't get your contractor license without it. General liability covers the basics: property damage or bodily injury that happens because of your work. A cabinet falls during installation and damages a client's hardwood floor? Covered. A homeowner trips over your equipment and breaks their wrist? Covered.
The cost is more manageable than you'd think. Remodeling contractors pay an average of $87 per month for general liability insurance in 2026. That's roughly $1,000 per year to protect yourself from six-figure lawsuits. When you're shopping for policies, pay special attention to completed operations coverage. This is the part of your general liability policy that covers claims arising after you finish a job. A client discovers water damage from improper tile installation six months after you wrapped up their bathroom remodel? That's completed operations territory, and it's one of the most important protections for remodelers.
If you're starting out solo, working alone from your truck, you might think you can skip workers' compensation insurance. Think again. Most states require workers' comp as soon as you hire your first employee—even if it's just your nephew helping out on weekends. Beyond the legal requirement, workers' comp protects you too. If you're injured on the job, your personal health insurance might deny claims for work-related injuries. Workers' comp ensures you're covered. Expect to budget around $245 per month once you bring on employees.
As You Grow: Adding Coverage at the Right Time
Your first few months go well. You're landing bigger projects, maybe buying a work van, investing in better equipment. This is when smart business owners revisit their insurance. A Business Owner's Policy, or BOP, bundles general liability with commercial property insurance at a discount. If you're storing expensive tools at a workshop or office space, or if you've invested in a vehicle dedicated to the business, a BOP often makes more financial sense than paying for coverages separately.
Commercial auto insurance becomes non-negotiable once you're using a vehicle primarily for business. Your personal auto policy won't cover accidents that happen while you're hauling materials to a job site. Inland marine insurance—confusing name, critical coverage—protects your tools and equipment whether they're in your truck, at a job site, or in storage. For remodeling contractors who easily have $10,000 or more in tools, this coverage typically costs between $34 and $64 per month.
Here's a growth trigger many contractors miss: when you shift from cosmetic work to structural projects. Painting cabinets and replacing countertops carries different risk than tearing down walls, upgrading electrical systems, or reworking plumbing. The moment you start taking on higher-risk projects, your insurance needs change. Underwriters price policies based on what you actually do, and structural work comes with higher premiums—but also higher liability exposure. Be upfront with your insurance provider about the scope of work you're pursuing. Trying to save money by understating your services will backfire when you file a claim and discover you're not actually covered for the work you were doing.
Common Mistakes That Sink New Remodeling Businesses
The biggest mistake is choosing the wrong workers' compensation classification code to get a lower premium. Every remodeling business gets assigned a class code based on the type of work they do. Drywall installation has a different code—and different rate—than carpentry or painting. Some business owners are tempted to choose the cheapest classification to save money upfront. The problem? When you file a claim, the insurance company audits your actual work. If your classification doesn't match what you've been doing, they can deny your claim entirely. Pay the right premium from the start.
Another trap: not reading your policy exclusions. Remodeling contractors face some of the longest exclusion lists in the insurance industry because underwriters have seen significant claims from this sector and often don't fully understand each company's operations. You might assume you're covered for water damage, or mold, or structural failure—and then discover these are specifically excluded when you need coverage most. Sit down with your policy. Read the exclusions section. Ask questions. If you're doing work that falls into an excluded category, you need to either get that exclusion removed or find supplemental coverage.
Insufficient coverage limits are a quieter killer. You carry $1 million in general liability coverage—sounds like a lot. But if you're working on a $5 million property and something catastrophic happens, that $1 million might not be enough. The homeowner could come after you personally for the difference. As your projects get larger and more valuable, your coverage limits need to increase proportionally. Review your limits annually, or whenever you start taking on significantly higher-value projects.
Specialized Coverage to Consider as You Scale
Once you're established and taking on larger renovation projects, builders risk insurance becomes worth exploring. This covers materials, fixtures, and equipment during construction from theft, fire, vandalism, and weather damage. If you're midway through a $200,000 kitchen renovation and a storm damages materials stored on-site, builders risk picks up the tab. The average cost is about $101 per month for remodeling contractors—a small price for protecting projects that can easily exceed six figures.
Professional liability insurance, also called errors and omissions, covers you when the issue isn't physical damage but professional mistakes. You missed a permit deadline and the project got delayed. You made a design recommendation that didn't work out. Your client claims you failed to meet agreed-upon timelines. Professional liability covers legal defense costs and settlements for these types of claims. It's not essential when you're starting out doing straightforward cosmetic work, but it becomes valuable as you take on design-build projects or consult on planning and timelines.
Getting Started: Your First 30 Days
Your first step is getting at least three quotes for general liability insurance. Insurance costs vary significantly between providers, and you want to compare not just price but coverage limits, exclusions, and whether completed operations is included. Be thorough when describing your business operations. List the types of projects you've completed, what you're currently pursuing, and what kinds of work you decline. This helps underwriters understand your actual risk profile and price your policy accurately.
Before you sign up for workers' comp, verify your state's requirements and make sure you're being classified correctly based on the work you actually do. If you plan to hire employees within your first year, factor that $245 monthly cost into your business budget now. Many new business owners get caught off guard by this expense.
Budget between $970 and $1,200 annually for basic business insurance when you're starting out. That's less than $100 per month to protect your business, your assets, and your future. As you grow, plan to revisit your coverage every year. Your business will change—your insurance needs to change with it. The contractors who treat insurance as a strategic investment, not just a legal requirement, are the ones still in business five years down the road.
