If you're running a demolition business in Texas, here's something that catches people off guard: the insurance requirements aren't straightforward. Unlike many states with clear statewide rules, Texas takes a patchwork approach. You might not need a state license, but your city might require one. Workers' comp isn't mandatory—until it is. And while there's no state minimum for general liability, good luck landing a contract without at least $1 million in coverage.
The good news? Once you understand how Texas works, you can set up your insurance portfolio correctly from day one. Let's break down exactly what you need to operate legally and protect your business.
Licensing Requirements: It Depends Where You Work
Texas doesn't have a statewide demolition contractor license administered by the Texas Department of Licensing and Regulation (TDLR). Instead, cities handle their own licensing. This means your requirements change based on where you're working.
San Antonio requires a special demolition contractor license that's valid for two years and backed by a $5,000 annual bond. Dallas includes demolition under its general contractor license framework. Houston has its own permitting requirements. If you're working across multiple cities, you'll need to research each jurisdiction's specific rules before you bid on projects.
Even when a license isn't required, you'll almost always need insurance to pull demolition permits. Cities want to see proof of general liability coverage and often workers' compensation before they'll approve your permit application. The insurance requirement is essentially universal, even when licensing isn't.
General Liability Insurance: Your Foundation Coverage
Here's the reality of demolition work in Texas: even though the state doesn't mandate general liability insurance, you absolutely need it. General contractors won't hire you without it. Property owners won't sign contracts without it. And frankly, one accident could wipe out your business without it.
The industry standard is $1 million per occurrence and $2 million aggregate. This covers bodily injury and property damage that happens during your work. If your excavator clips a gas line, or debris falls and injures a bystander, your GL policy handles those claims. Many contractors carry $2 million per occurrence for extra protection, especially when working on large commercial projects.
Be prepared for the cost. Demolition is classified as high-risk work, so annual premiums typically range from $25,000 to over $100,000 depending on your revenue, claims history, and the type of projects you handle. A small residential demolition contractor will pay far less than a company bringing down multi-story commercial buildings.
Workers' Compensation: Understanding Texas's Unique System
Texas is the only state where workers' compensation isn't mandatory for most private employers. You can technically operate a demolition business without it. But here's why that's a terrible idea: without workers' comp, you lose your legal protection against employee lawsuits. If a worker gets hurt on the job, they can sue you directly for unlimited damages.
In demolition—where workers operate heavy equipment, handle hazardous materials, and work on unstable structures—the injury risk is massive. One serious accident could result in a lawsuit that bankrupts your company. Workers' comp provides a safety net for your employees and legal protection for you.
There are also situations where workers' comp becomes mandatory in Texas. If you're working on public projects or government contracts, you must provide workers' compensation coverage for every employee on that project. Additionally, surety companies typically require workers' comp before they'll issue bonds. No bond means no ability to bid on bonded projects.
Keep an eye on potential changes, too. In 2025, the Texas Legislature is considering Senate Bill 338, which would require all building and construction contractors to carry workers' comp. If it passes, Texas's voluntary system would end, bringing the state in line with the rest of the country.
Specialized Coverage for Demolition Work
General liability and workers' comp form your foundation, but demolition contractors need additional specialized coverage. These policies address the unique risks of your trade.
Pollution liability covers dust, debris, and hazardous material exposure. Demolition inherently creates airborne particles and potential contamination risks. If asbestos or lead paint becomes airborne during a demo job, standard GL policies won't cover the cleanup or health claims. Pollution liability fills that gap.
Inland marine insurance protects your excavators, loaders, dump trucks, and other equipment whether it's at the job site or in transit. A single excavator can cost $100,000 or more—you need dedicated coverage for that asset. Commercial auto insurance covers your fleet vehicles for on-road accidents and liability. And if you're storing equipment or materials at a yard, commercial property insurance protects against theft, vandalism, and weather damage.
How to Get Started with Your Insurance Portfolio
Start by identifying where you'll be working and what projects you'll pursue. If you're focusing on residential demo in smaller cities, your requirements will differ from commercial work in Dallas or Houston. Contact the building departments in your target cities to get their specific permit and insurance requirements in writing.
Work with an insurance agent who specializes in construction trades. Demolition is a high-risk specialty, and not all insurers will cover it. You need an agent who understands your specific exposures and can access markets that write demolition policies. Get quotes for a complete package: general liability, workers' comp, pollution liability, inland marine, and commercial auto.
Review your coverage annually as your business grows. Your first-year needs as a one-truck operation will look different from year five when you're running multiple crews and larger equipment. Keep your agent informed about new equipment purchases, additional employees, and expansions into new service areas. Proper coverage adjustments protect you from gaps that could prove catastrophic.
Texas's decentralized approach to demolition contractor requirements means you need to stay informed about local rules and maintain comprehensive insurance coverage. The upfront cost might seem steep, but the protection it provides is essential. One uninsured accident could end your business permanently. Get your coverage right from the start, and you'll have the foundation to build a successful demolition contracting business.
