A clear overview of the types of insurance involved in a construction project, what they cover, and what to confirm before work begins
Introduction
Before any work begins on your property, it’s important to make sure everyone involved, especially your contractor, is properly insured. Construction carries risk, and insurance is the tool that protects you, your home, and the people working on the project if something goes wrong.
Whether you’re remodeling a bathroom or building a new home, this page explains the most common types of insurance you’ll encounter and what you need to ask for before signing off.
Why Insurance Matters During Construction
Construction involves tools, tradespeople, and often major changes to your home or structure. Without proper insurance in place:
- You could be held financially responsible for injuries on your property
- You could be stuck covering damage to your home or materials
- You may have issues with your lender, permit office, or HOA
Having the right insurance is about protecting your investment and avoiding surprises during or after construction.
Key Insurance Types to Know
General Liability Insurance (Provided by the Contractor)
This is the most essential insurance for any construction project.
What it covers:
- Damage to your property caused by the contractor or their crew (e.g., a water line is hit during demo, or a falling ladder breaks a window)
- Injuries to third parties (like a neighbor or delivery driver who trips over jobsite materials)
- Legal costs if the contractor is sued due to negligence during the project
What to check:
- Confirm that the contractor has an active policy that covers the entire duration of your project
- Coverage amounts should be at least $1 million per occurrence, with $2 million aggregate as a general standard
- Ask for a Certificate of Insurance and check that your name and project address are listed
Why it matters: Without this coverage, any damage caused by the contractor may fall on you to repair—or you may have to fight for reimbursement out-of-pocket.
Workers’ Compensation Insurance (Contractor)
This protects workers, not the property owner, from jobsite injuries.
What it covers:
- Medical bills, lost wages, and rehabilitation for injured workers
- Liability protection for the property owner if a worker is injured on site
When it’s required:
- Most states require it if the contractor has one or more employees
- Some small or solo contractors claim exemption—but this may put you at risk
What to check:
- Ask for a certificate of workers’ compensation insurance
- If they claim exemption (e.g., for owner-operated businesses), get this in writing and proceed with caution
Why it matters: Without workers’ comp, an injured worker could try to file a claim against your homeowner’s insurance or pursue legal action against you.
Builder’s Risk Insurance
This covers damage to the building under construction and to materials on site.
What it covers:
- Fire, theft, vandalism, or weather-related damage during construction
- Building materials stored onsite or in transit
- Tools, equipment, and temporary structures (in some policies)
- Damage caused by accidents that are not contractor negligence
Who provides it:
- Sometimes included by the general contractor
- In many cases, especially when using a loan, the owner is required to provide the policy
- Premiums are based on the project value and duration
When it’s needed:
- New construction
- Major additions or structural remodels
- Projects with long timelines or high material value
Why it matters: If a storm destroys framing mid-construction or materials are stolen from the site, builder’s risk is often the only coverage that applies. Homeowner’s insurance rarely covers materials or incomplete structures.
Homeowner’s Insurance (Owner)
This covers your existing property, but often excludes coverage during major construction.
What it usually covers:
- Basic structure and personal belongings before and after construction
- Liability for accidents on your property (but not for construction-related injuries)
What it typically does not cover:
- Damage caused by ongoing construction (e.g., fire from new electrical work, damage from demo)
- Theft or vandalism of construction materials
- Work being done by uninsured contractors
What to do:
- Contact your insurer before construction starts
- Ask if your policy needs a construction endorsement or rider
- If required, they may recommend switching to a Builder’s Risk policy for the project duration
Why it matters: Many owners assume their policy covers everything, but if something happens during active work, your claim may be denied if you didn’t notify your insurer.
Common Scenarios and What Insurance Covers
Understanding the technical details of insurance policies is one thing; knowing how those policies apply in the real world is another. To help you make sense of how coverage actually works during construction, we’ve created a visual matrix that outlines common real-life scenarios and which insurance types typically apply.
General Liability (Contractor) | Worker’s Compensation | Builder’s Risk | Homeowner’s Insurance | |
| Contractor accidentally floods the home during plumbing work | Covered | Not Covered | Not Covered | Not Covered |
| Worker falls off a ladder and is injured on the job site | Not Covered | Covered | Not Covered | Not Covered |
| Storm damages partially framed addition | Not Covered | Not Covered | Covered | Not Covered |
| Theft of building materials left on site overnight | Not Covered | Not Covered | Covered | Not Covered |
| Neighbor trips on construction debris and is injured | Covered | Not Covered | Not Covered | Covered |
| Owner-provided appliance is damaged during install | Covered | Not Covered | Not Covered | Not Covered |
| Dispute arises over scope of work not completed properly | Covered | Not Covered | Not Covered | Not Covered |
| Fire breaks out due to construction activity | Covered | Not Covered | Covered | Not Covered |
| Subcontractor causes property damage | Covered | Not Covered | Not Covered | Not Covered |
| Vandalism to structure during off-hours | Not Covered | Not Covered | Covered | Not Covered |
| Construction materials catch fire during welding | Covered | Not Covered | Covered | Not Covered |
| Project is delayed due to contractor injury | Not Covered | Covered | Not Covered | Not Covered |
| Crane damages neighbor’s property during delivery | Covered | Not Covered | Not Covered | Covered |
| Flood damages job site due to uncovered roof | Not Covered | Not Covered | Covered | Not Covered |
| Contractor’s employee breaks window while unloading materials | Covered | Not Covered | Not Covered | Not Covered |
What to Ask Your Contractor For
Before signing a contract or starting work, request documentation that confirms your contractor has active insurance coverage. Specifically, ask for:
- A Certificate of General Liability Insurance with:
- Coverage amounts clearly listed (e.g., $1M per occurrence)
- Your name and project address listed, if possible
- You named as Additional Insured for added protection
- Proof of Workers’ Compensation Insurance if the contractor has employees.
- If the contractor claims exemption (e.g., a solo operator), ask for this in writing and confirm what happens if subcontractors are brought on.
- Clarification about Builder’s Risk Insurance:
- Ask if they carry it or expect you to provide it
- If the contractor doesn’t carry it, confirm whether it’s needed for your specific project type
Not all contractors will volunteer this information, but reputable professionals are accustomed to being asked and will usually have certificates ready to share.
Who Provides Builder’s Risk Insurance?
Whether you or the contractor provides Builder’s Risk Insurance depends on the project and the structure of the agreement.
- Owner-Provided Policies are more common when:
- You’re building a custom home or financing the project through a lender
- You’re acting as the owner-builder or contracting trades separately
- The project involves long timelines or high-value materials
- Contractor-Provided Policies are more common when:
- The contractor has wrapped this into their total project cost
- You’re working with a design-build firm or general contractor that manages the entire project lifecycle
If you’re using a construction loan, your lender will usually require Builder’s Risk and may specify who must carry it. If unclear, talk to both your contractor and lender to confirm how it will be handled. You want to avoid gaps where no one is carrying the policy or double coverage where both parties are unknowingly insured for the same risk.
What If Subcontractors Are Involved?
Most general contractors hire subcontractors for specialized trades like plumbing, electrical, HVAC, roofing, or cabinetry. These subs may or may not be covered under the GC’s insurance policy, so it’s important to verify:
- Ask your contractor:
- “Do you require your subcontractors to carry their own insurance?”
- “Do you collect certificates of insurance from all your subs?”
- “Are your subcontractors covered under your general liability and workers’ comp policies?”
- If subcontractors are not covered by the GC, each one should carry:
- General Liability Insurance
- Workers’ Compensation if they have employees
You don’t need to review every subcontractor’s certificate yourself, but you do want assurance from your GC that they’re managing this process responsibly.
What’s Next: Project Protections You Might Not Know About
Once your contract is signed and insurance is confirmed, there are still a few legal and financial protections that often get overlooked, especially by first-time project owners. These include how payments are structured, how change orders are handled, and how to protect yourself from liens or legal claims if things go sideways.
Understanding these terms upfront can help you avoid misunderstandings, reduce risk, and move through construction with more confidence.
Continue to Project Protections: Liens, Payments & Legal Terms to learn about lien waivers, progress payments, warranty language, and other important details that aren’t always obvious in the fine print.