If you’re a licensed contractor or if you’re on your way to securing licensure, you’re probably already aware that in the state of California, you are required to be insured one way or another while performing work in construction.
The exact insurance requirements per the Contractors State Licensing Board (CSLB), however, might not always be top of mind for everyone.
Let this comprehensive guide be a refresher you can return to when you’re searching for relevant information about general contractor insurance requirements and the CSLB’s policies that concern them in California.
The Most Essential Types of Insurance For General Contractors in California to Know
There are various types of insurance that contractors in California are required to carry.
Sometimes they’re required to purchase insurance coverage for themselves, sometimes it’s to protect their employees and sometimes it’s to protect clients and their assets throughout the duration of construction projects.
The most common, and probably the most essential, types of insurance for a general contractor to know are those mentioned below:
Bodily injury, property damage, and personal injury claims arising from contractor operations are covered by this insurance. It protects contractors and people who hire them against liabilities on the job site or those relating to completed construction work.
Mandatory for contractors with employees, this insurance covers medical expenses and lost wages for employees who become sick or injured on the job. We go into greater detail about California worker’s compensation insurance requirements in this post here.
Of course, any contractors using motor vehicles for business purposes will need commercial auto insurance. This insurance covers accidents, injuries, and incidents of property damage involving those company-owned and operated vehicles.
We’ve talked about bonding a bunch on the blog before so you may already be familiar with contractors’ requirements to obtain surety bonds. These include bid bonds, performance bonds, or payment bonds depending on the project and client needs.
Reasons to Maintain Your General Contractor Insurance
- Legal Compliance
Adhering to CSLB insurance requirements ensures compliance with state regulations and licensing laws, helping contractors avoid penalties and legal consequences.
- Risk Management
Insurance provides financial protection against liabilities, accidents, and unforeseen events that could result in costly legal disputes and damages.
- Client Expectations
To put it bluntly, clients are less inclined to want to do business with an uninsured contractor. The contractor maintaining all their insurance policies is the contractor they can trust to keep them and their construction projects safe and secure. Many clients require contractors to carry insurance as a condition of contract agreements.
- Business Continuity
Despite whatever setbacks or accidents come up while you operate your business, keeping up your insurance payments allows you to continue working uninterrupted. It is also a display of professionalism that will protect your reputation from taking any irreparable damage when mistakes happen.
What Happens if You Lose Your Contractor Insurance?
General contractors who lose their insurance may face serious consequences. If you find yourself in this situation, you risk…
- Contractual Breach
Your contractual agreements with clients or subcontractors that require insurance coverage could be in jeopardy. This could lead to legal disputes or termination of contracts.
- CSLB Disciplinary Actions
You may get hit with fines, license suspension, or license revocation per the CSLB.
- Financial Liability
Without an insurance policy in good standing, you may be personally liable for damages, injuries, or legal expenses that arise after accidents or incidents on the job site.
CSLB Policy Regarding Contractor Insurance in California
The CSLB takes its responsibility to track contractors’ eligibility to work very seriously.
In that same vein, they closely monitor and enforce insurance requirements for contractors to protect consumers, ensure fair business practices, and maintain the integrity of the construction industry.
You probably know from experience that all contractors must provide proof of insurance coverage as part of their licensing and renewal process. And if they can’t or don’t comply, they may face disciplinary actions by the CSLB.
Summary
As general contractors must oversee construction projects from inception to completion there are a great many aspects of their work that they are required to protect with adequate insurance coverage.
Their businesses, employees, and clients all rely on them to keep their insurance in good standing and to make sure that the CSLB has the required proof of insurance on file for them.
Investing in comprehensive insurance coverage is not only a legal obligation but also a prudent business decision that fosters trust, reliability, and longevity in the competitive construction market.