California Contractor Bond and Insurance Guide
The financial protections behind a California contractor license are often misunderstood. Homeowners assume that a licensed contractor is "insured" in some general sense, but the reality is more specific. There are three distinct types of financial protection, and each covers different situations.
The Contractor License Bond
Every active California contractor must carry a $25,000 license bond filed with the CSLB. This is a surety bond, not an insurance policy. The difference matters.
A surety bond is a three-party agreement between the contractor, the bonding company, and the state. If the contractor violates the law, breaches a contract, or fails to pay subcontractors or suppliers, affected parties can file a claim against the bond. The bonding company pays the claim (up to $25,000), and then the contractor must reimburse the bonding company.
The bond covers violations of the Contractors State License Law and damages resulting from defective construction caused by license law violations. It does not cover general property damage or personal injury. Think of it as a regulatory backstop, not as project insurance.
Need a Contractor License Bond?
California contractors must carry a $25,000 license bond. Get a quote and file directly with the CSLB.
Workers' Compensation Insurance
If a contractor has any employees, California law requires workers' compensation coverage. This insurance pays for medical treatment and lost wages if a worker is injured on the job.
As a homeowner, this matters directly to you. If an uninsured worker is injured on your property, you may be held liable under California's property owner liability rules. When you verify a contractor's license, the record will show one of two things: workers' comp insurance on file with a named carrier, or a Certificate of Exemption (meaning the contractor has certified they have no employees).
If the contractor has filed an exemption but shows up to your project with helpers, laborers, or subcontractors, ask for proof that those workers are covered. A legitimate general contractor using subcontractors should be able to show that each subcontractor carries their own workers' comp policy.
General Liability Insurance
A contractor license does not by itself establish general liability coverage. CSLB requires liability insurance for LLC licensees, while requirements for other business structures can depend on the project or contract. See CSLB's LLC insurance requirements.
General liability insurance can cover certain property damage and bodily injury claims, subject to policy terms, exclusions, and limits. If a plumber causes a pipe burst that floods your kitchen, or a roofer damages your neighbor's property, coverage depends on the policy and the circumstances of the claim.
Many reputable contractors carry general liability policies voluntarily because their clients require it. But it is your responsibility to ask. Request a Certificate of Insurance (COI) and verify that the policy is current before work begins. Standard minimums are $1 million per occurrence and $2 million aggregate.
Need Business Insurance?
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What to Verify Before Hiring
For any significant project, verify all three:
- License bond: confirmed active on the contractor's CSLB record.
- Workers' compensation: either active coverage or a valid exemption. If exempt, confirm no employees or helpers will be on your property.
- General liability insurance: request a COI directly from the contractor. The CSLB does not track this, so you must ask.
A contractor who is properly bonded, carries workers' comp, and holds liability insurance has invested in protecting both their business and their clients. That tells you something about how they run their operation.
Verify a Contractor's License Now
Search our directory by city to find licensed contractors in your area, then verify their bond and insurance status before signing a contract.