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California Contractor Insurance: Cost & Quotes From $30/mo

If you are a contractor in California, protecting yourself and your business with the right insurance coverage is crucial. Contractor insurance offers financial protection for you under unspecific circumstances. Using the right insurance policy helps you to avoid potentially devastating financial losses that could threaten your business.

There are several options to choose from regarding contractor insurance in California. They include commercial auto insurance, general liability insurance, workers' compensation insurance, and more. 

Each type of coverage offers particular benefits that can assist you in protecting your business from many risks, from legal alterations with the local California handymen up to high profile clients. Here’s a guide that will answer your questions about California general contractor insurance. 

What is the Difference Between Bond and Insurance in Construction?

In the construction industry, bonds and insurance are critical forms of protection for contractors and project owners. However, contractors should understand the differences between these two forms of protection.


Bonds: Contractual Obligations

A bond is a contract involving three parties: the surety, the contractor, and the project owner. The bond guarantees that the contractor will fulfill their contractual obligations. The surety will step in to cover the cost of damages or losses incurred by the project owner if the contractor fails to meet their obligations. Several types of bonds apply in construction, including:

  • Bid bonds–Guarantee that the contractor will enter into a contract if their bid gains acceptance

  • Performance bonds–Guarantee that the contractor will complete the project as specified in the contract

  • Payment bonds–Guarantee that the contractor will pay all suppliers and subcontractors involved in the project


Insurance: Coverage for Losses

Insurance is a form of protection that covers losses or damages incurred by the policyholder. In the construction industry, contractors can purchase different insurance policies, such as:

  • General liability insurance

  • Professional liability insurance

  • Workers' compensation insurance


Key Differences

CriteriaBondInsurance
CoverageSpecific to projectBroad range of risks
Cost1-3% of the amountDiffers depending on risk and coverage
IssuerSurety companyInsurance company
PurposeEnsures project completionProtects against losses
PayoutsPaid to project ownerPaid to policyholder
ClaimsFiled by the project ownerFiled by policyholder


The project owner is the main beneficiary with bonds, as the bond ensures one will get compensation if the contractor does not complete the project.

The policyholder is the main beneficiary with insurance since the policy covers damages or losses incurred by the contractor.

If the contractor fails to fulfill their bond obligations, the project owner must claim the bond. The policyholder must file a claim with the insurance company to get compensation for covered losses.


What Does a California Contractors Bond Cover?

California contractor's bond covers the following:


Performance and Payment

A California contractor's bond offers coverage for two main areas of risk: payment and performance. The bond ensures that the contractor will execute the project as contracted.

If the contractor fails, the bond will pay the project owner's losses up to the bond maximum.

The bond guarantees the contractor will pay subcontractors and suppliers. If the contractor doesn't pay, the bond covers unpaid costs up to its limit.


License and Permit Bonds

California contractors may require to obtain license and permit bonds. State and local governments require these bonds to ensure contractors comply with building codes, regulations, and other legal requirements.

A license bond guarantees that the contractor must comply with all regulations and laws related to their profession. The bond will cover the cost of damages or losses up to the bond's limit if the contractor violates any laws or regulations.

A permit bond guarantees that the contractor must comply with all regulations and building codes related to the specific project. The bond will cover the cost of damages or losses up to the bond's limit if the contractor fails to comply with these requirements.


Claims and Limits

The surety company that issued the bond will investigate the claim if a project owner or other party files a claim against a contractor's bond. Suppose the claim is valid; the surety will pay the claim up to the bond's limit.

The contractor will reimburse the surety company for the amount paid. California's minimum coverage for a contractor's bond is $15,000. However, depending on the contractor's license classification, the needed amount may be higher.

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What Insurance is Required for Contractors in California?

You may need insurance as an independent contractor in California, depending on your business. There are different independent contractor insurance requirements California. For situation-specific advice, consult a lawyer or insurance agent. Contractors in California should have various types of insurance to protect themselves, their employees, and their clients. Here are some of them:


Workers' Compensation Insurance

Contractors in California should have workers' compensation insurance to protect their employees in the event of work-related illnesses or injuries. This insurance covers lost wages, medical expenses, and other related expenses.


General Liability Insurance

General liability insurance is another requirement for California contractors. Workers' comp insurance for independent contractors in California protects them from liability for damages or injuries caused to third parties, like clients or their property.


Commercial Auto Insurance

Contractors should have commercial auto insurance if they operate vehicles for business purposes. The policy covers damages to the contractor's vehicles and any injuries or damages caused to others by the contractor's vehicles.


Professional Liability Insurance

Insurance is key for contractors who offer professional services, like engineers or architects. Such insurance protects the contractor from liability for omissions and operating errors.