Starting an HVAC contracting business in Texas? You're stepping into one of the fastest-growing trades in the state, but here's something that catches a lot of new contractors off guard: you can't legally operate without the right insurance coverage. It's not optional, it's not a suggestion—it's baked right into the licensing requirements from the Texas Department of Licensing and Regulation (TDLR).
Before you can pull your first permit or install your first AC unit as a licensed contractor, you'll need to prove you have adequate general liability coverage. But that's just the starting point. Smart HVAC contractors carry several types of insurance to protect themselves from the specific risks that come with working in hot attics, handling refrigerants, and installing expensive equipment in people's homes. Let's break down exactly what you need to know.
Understanding Texas HVAC Licensing and Insurance Requirements
The TDLR oversees all HVAC contractor licensing in Texas, and they're serious about insurance requirements. To get licensed, you'll need to decide between a Class A or Class B license. A Class A license lets you work on systems of any size—think big commercial projects, industrial facilities, and residential work. A Class B license restricts you to cooling systems of 25 tons or less and heating systems under 1.5 million BTUs per hour, which covers most residential and small commercial jobs.
Here's where insurance comes in: the moment you submit your license application, you need to provide a Certificate of Insurance showing you have commercial general liability coverage from an insurance company authorized to do business in Texas. For Class A contractors, that means at least $300,000 per occurrence (covering both property damage and bodily injury), $600,000 aggregate total coverage, and $300,000 aggregate for products and completed operations. Class B contractors have lower minimums: $100,000 per occurrence and $200,000 aggregate.
This isn't a one-time requirement either. You must maintain that insurance continuously while your license is active. Let your policy lapse, and you're operating illegally. The TDLR can verify your coverage at any time, and many general contractors and property owners will ask to see your current certificate before they'll let you work on their projects.
Workers' Compensation: Not Required, But Probably Smart
Texas is one of the few states where workers' compensation insurance isn't mandatory for private employers. If you're running a one-person HVAC shop or working with a small crew, you can legally skip workers' comp coverage. But here's the reality check: HVAC work is physically demanding and comes with real injury risks. You're climbing ladders, working in tight crawl spaces, handling heavy equipment, and dealing with electrical components.
If one of your employees gets hurt on the job and you don't have workers' comp, they can sue you directly for medical expenses and lost wages. That exposure can put your entire business at risk. Many HVAC contractors find that the peace of mind—and the protection from lawsuits—makes workers' comp worth the premium even when it's not legally required.
There are also situations where workers' comp becomes mandatory. If you take on any government contracts—whether federal, state, or municipal—you'll need to provide workers' compensation coverage for employees working on those projects. Some general contractors and commercial property owners also require it as a condition of doing business, so not having it can cost you opportunities.
Commercial Auto and Equipment Coverage
Your personal auto insurance won't cover your work truck when you're using it for business purposes. If you're hauling tools, equipment, and materials to job sites, you need commercial auto insurance. This covers vehicle damage, liability if you cause an accident while working, and often includes coverage for the equipment you're transporting.
Speaking of equipment, most HVAC contractors carry tens of thousands of dollars worth of specialized tools: manifold gauges, vacuum pumps, refrigerant recovery machines, leak detectors, multimeters, and more. If these get stolen from your truck or damaged on a job site, your general liability policy typically won't cover them. That's where inland marine insurance (also called equipment floater coverage) comes in. It protects your tools and equipment whether they're in your shop, in your vehicle, or at a customer's property.
Professional Liability and What Could Go Wrong
Even experienced HVAC contractors make mistakes. Maybe you incorrectly size a system, install ductwork that creates airflow problems, or miss something during a load calculation that leads to inefficient operation. Professional liability insurance (also called errors and omissions insurance) covers claims arising from your professional advice and workmanship—not physical damage, but the financial consequences of errors in your work.
Here's a real-world example: you install a new HVAC system, but due to a calculation error, it's undersized for the building. The system runs constantly, energy bills skyrocket, and the customer demands you replace the entire system. Your general liability policy won't cover this because nothing was physically damaged—it was installed incorrectly. Professional liability insurance would cover your legal defense and any settlement or judgment.
Getting Started: License Application and Insurance Proof
Before you can apply for your Texas HVAC contractor license, you need to meet the experience requirements. That typically means four years of verifiable experience working under a licensed HVAC contractor within the past six years. If you already hold a technician certificate, you can reduce that to three years of experience within the past four years.
Once you pass the TDLR exam, you'll submit your license application along with a $115 fee and your Certificate of Insurance. That certificate needs to list your business name exactly as it appears on your license application, show the required coverage amounts, and come from an insurance carrier authorized to operate in Texas. Many contractors work with insurance agents who specialize in contractor coverage—they understand TDLR requirements and can make sure your certificate is formatted correctly.
Don't forget about local requirements. While Texas doesn't require HVAC contractor bonds at the state level, some municipalities have their own rules. Check with your city or county to see if they require additional bonds, permits, or insurance before you start operating. Getting this right from the beginning saves you from headaches and potential fines down the road.
The bottom line? Texas requires general liability insurance for HVAC contractors, and the smart money says you'll want workers' comp, commercial auto, equipment coverage, and professional liability too. These policies protect you from the specific risks HVAC contractors face every day. Talk to an insurance agent who works with contractors, get quotes for a comprehensive package, and make sure you're properly covered before you take on your first job. Your license depends on it, and your business's financial health does too.
