Starting a plumbing contractor business is exciting, but here's the truth that catches most new owners off guard: you need insurance before you can even get your license in most states. And not just any insurance—the right insurance at the right time. Get this wrong, and you could face hefty fines, lose client contracts, or worse, pay out of pocket for a six-figure lawsuit.
This guide walks you through exactly what insurance you need from day one, when to add coverage as you grow, and the common mistakes that trip up new plumbing contractors. Think of it as your insurance roadmap—so you can focus on building your business instead of worrying about what-ifs.
Day One Coverage: What You Need Before Your First Job
Before you take on a single client, you need general liability insurance. In many states, you can't even apply for your plumbing contractor license without proof of coverage. Texas requires at least $300,000 in coverage. Florida mandates $100,000 for bodily injury and $25,000 for property damage. California bumped their minimum to $1 million per occurrence in 2025.
Here's why this matters: imagine you're installing a new water heater and accidentally damage a client's finished basement. Water spreads fast. Drywall, flooring, furniture—the damage adds up quickly. Without general liability insurance, you're paying for all of that yourself. With it, your policy handles the claim while you focus on your business.
Expect to pay between $1,300 and $4,400 annually for general liability coverage as a new contractor. That breaks down to roughly $115 per month. The exact cost depends on your location, coverage limits, and whether you're doing mostly residential or commercial work. Commercial jobs typically mean higher premiums because the stakes are bigger.
If you're operating a vehicle for your business—transporting tools, pipes, or equipment—you also need commercial auto insurance on day one. Personal auto policies explicitly exclude business use. Every state except New Hampshire requires this coverage. Construction and contracting professionals pay an average of $173 per month for commercial auto insurance, and those premiums protect you 24/7, whether you're on a job site or just driving home.
When to Add Coverage: Growth Triggers You Can't Ignore
The moment you hire your first employee—even part-time—workers' compensation insurance becomes mandatory in nearly every state. This surprises many new business owners who assume one helper won't trigger legal requirements. But it does. New York requires coverage with just one part-time worker. Florida allows up to four employees before mandating it, but that's the exception.
Workers' comp covers medical bills and lost wages if an employee gets hurt on the job. Plumbing work involves physical labor, heavy equipment, and sometimes hazardous materials. Injuries happen. In 2025, plumbing businesses pay an average of $3.05 per $100 of payroll for workers' compensation coverage, though rates vary significantly by state. Skip this coverage, and you face steep fines plus personal liability for any employee injuries.
As your revenue crosses $500,000 or you start landing bigger commercial contracts, consider adding umbrella insurance. This provides extra liability protection beyond your base policy limits. Commercial clients often require contractors to carry coverage beyond the standard $2 million limit. If a pipe bursts and floods multiple floors of an office building, repair costs can easily exceed that amount. Umbrella policies kick in when your primary coverage runs out, protecting your business from catastrophic claims.
Once you start keeping expensive materials or equipment on job sites overnight—think water heaters, boilers, copper piping—an installation floater becomes crucial. This coverage protects valuable items in transit or stored at work locations. It's separate from your general liability policy and specifically designed for contractors who can't afford to replace thousands of dollars in materials if they're stolen or damaged before installation.
Common Mistakes That Cost New Contractors Thousands
The biggest mistake new plumbing contractors make is shopping for insurance based solely on price. The cheapest policy usually comes with limited coverage, high deductibles, or critical exclusions. When a claim happens, you discover you're paying far more out of pocket than you saved on premiums. Compare coverage details, not just costs. Look at limits, exclusions, and deductibles across multiple quotes.
Another common error is failing to update policies as your business grows. You add employees, buy new vehicles, expand into commercial work—but forget to call your insurance agent. Those changes create coverage gaps. Your policy from when you were a solo contractor doesn't protect you the same way once you have a team of five. Review your insurance annually or whenever something significant changes in your business.
Many contractors also assume their commercial auto policy covers tools and equipment inside their vehicles. It doesn't. Commercial auto covers the vehicle itself and liability, but tools need separate coverage. If someone breaks into your van and steals $10,000 worth of specialized plumbing equipment, you're out that money unless you have specific tools and equipment insurance.
Finally, some new contractors underestimate how easily accidents happen. Water damage, slips and falls, accidental property damage—these aren't rare events in plumbing work. They're predictable risks. Statistics show that 75% of small businesses are underinsured or have no insurance at all. Don't join that statistic. The cost of proper insurance is always less than the cost of a single major claim.
How to Get Started with the Right Coverage
Start by checking your state's specific licensing requirements. Every state has different minimums, and your state licensing board website will have exact details. Once you know what's required, get quotes from at least three insurance providers. Ask specifically about coverage for plumbing contractors—not generic contractor policies. Plumbing has unique risks, and specialized policies account for those.
When comparing quotes, pay attention to policy limits and exclusions. A policy with a $1 million limit and a $500 deductible might cost less than one with a $2 million limit and a $1,000 deductible, but which one actually protects you better depends on the types of jobs you're doing. Residential work might be fine with lower limits. Commercial projects need more protection.
Consider working with an insurance agent who specializes in contractor coverage. They understand the industry's specific risks and can help you build a comprehensive insurance package that grows with your business. As insurance rates continue trending upward—with increases of 5% to 15% expected through 2025—having an experienced agent can help you find the best value without sacrificing necessary coverage.
Insurance might not be the most exciting part of starting your plumbing business, but it's one of the most important. Get it right from the beginning, keep it current as you grow, and you'll have the protection you need to build a successful contracting business without the constant worry of what could go wrong. Ready to get covered? Start by requesting quotes for general liability insurance today—your business license depends on it.
