Starting a contracting business, whether as a general contractor, handyman, specialty trade, or small crew is exciting, but it comes with real risks right from day one. One wrong move on a job site (a dropped tool damaging property, a slip-and-fall injury, or even a client claiming faulty work) can lead to lawsuits or out-of-pocket costs that sink a new venture before it gains traction.

In 2026, contractors insurance isn’t optional for most new businesses, it’s essential for legal compliance, winning contracts, protecting personal assets, and building credibility with clients. The good news? You can get solid coverage affordably and quickly, even with no prior claims history or revenue track record.

Here’s a practical, step-by-step guide to what new contractors need in their first year, common challenges, typical costs, and how to get started without overpaying or leaving gaps.

1. Core Coverages Every New Contractor Should Have in Year 1

Focus on these foundational policies first—they protect against the most common early risks.

General Liability Insurance (GL) — The #1 must-have. Covers third-party bodily injury, property damage, and personal/advertising injury from your work.
- Why new businesses need it: Clients, general contractors, and many states/projects require proof via Certificate of Insurance (COI) before you start work.
- Typical limits for startups: $1M per occurrence / $2M aggregate (standard minimum; some contracts demand $2M/$4M).
- 2026 average cost for new/low-revenue contractors: $400–$1,200/year ($33–$100/month), depending on trade, state, and revenue (under $100K often qualifies for lowest brackets).
Workers’ Compensation Insurance — Required in most states if you have even one employee or sub (many states exempt true solo owners, but check yours).
- Why it matters early: Covers medical bills, lost wages, and rehab if a worker gets hurt. Skipping it risks fines, license issues, or personal liability.
- 2026 cost for small/new ops: $500–$3,000+/year (higher for high-risk trades like roofing/electrical due to class codes).
Commercial Auto Insurance (if using vehicles for business) — Personal auto policies usually exclude business use.
- Covers accidents while hauling tools/materials or driving to sites.
- Often $800–$2,000/year for a single truck/van.
Tools & Equipment Coverage (Inland Marine) — Protects ladders, power tools, generators against theft/damage on-site or in transit.
- Affordable add-on: $200–$800/year for $10K–$50K in gear (common for startups).

Optional but smart in year 1:

Professional Liability (E&O) — If you offer design, consulting, or advice (e.g., remodel planning).
Umbrella/Excess Liability — For extra protection once you land bigger jobs.

2. Common Challenges for New Contractors Getting Insured in 2026

New businesses face hurdles that established ones don’t:

Limited or No Claims/Revenue History — Carriers see higher risk, so some standard insurers decline or charge more. Many new contractors end up in the E&S (surplus lines/non-admitted) market initially.
Trade & State Restrictions — High-risk trades (roofing, electrical) or high-litigation states (FL, CA, NY, TX) have fewer carrier options and higher rates.
Contract Requirements — Clients often demand COIs with specific wording (e.g., additional insured via CG 20 10) before bidding or starting—new ops must secure this fast.
Misclassification Risks — If using subs, ensure they’re properly classified to avoid workers’ comp audits or penalties.

Tip: Work with a broker specializing in contractors—they know which carriers accept new-in-business applicants and can shop multiple quotes quickly.

3. Step-by-Step: How to Get Contractors Insurance as a New Business

Assess Your Risks & Needs
List your trade, expected revenue (even if low), states/projects, employees/subs, vehicles, and tools. Check state licensing board for mandatory coverages.
Gather Basic Info for Quotes
- Business name, EIN, start date
- Owner details (age, experience)
- Payroll estimate (even $0 if solo)
- Annual revenue projection
- Trade classification codes
Shop Specialized Carriers/Brokers
Avoid general insurers—use contractors-focused providers (many offer online instant quotes for new/low-revenue ops). Compare 3–5 quotes.
Choose & Purchase
Start with GL + workers’ comp (if needed). Add tools/auto as riders. Coverage can start same-day or next-day.
Get Your Certificate of Insurance (COI)
Request one immediately—send to clients/GCs to prove coverage.
Review & Update Quarterly
As revenue grows or you add subs/projects, revisit—premiums often drop with claims-free history.

4. Cost-Saving Tips for Year 1

Start with minimum required limits (upgrade later).
Bundle GL + workers’ comp + tools for 10–20% discounts.
Implement basic safety (training, PPE) for future credits.
Pay annually for savings.
Maintain clean record—no claims = big drops in year 2+.

Bottom Line for New Contractors in 2026

You don’t need every policy on day one, but skipping general liability (and workers’ comp where required) can shut down opportunities fast. With the right coverage, you protect your personal assets, meet client demands, and focus on growing your business—not worrying about “what if” claims.

Many new contractors start with $500–$1,500/year total for core protection—far cheaper than one uninsured incident.

Ready to get protected without the hassle? Get a free, no-obligation quote tailored for new contractors in minutes at https://contractorsliability.com/ or (888) 766-4991. We specialize in startups and can help you launch with the right coverage from day one.