Texas Contractor Insurance: Cost & Requirements

Running a construction business in Texas comes with significant financial risks. You need insurance to protect your livelihood. Without the right coverage, you cannot bid on profitable commercial projects, you cannot pull permits in major cities, and a single lawsuit could seize your personal assets and shut down your company.

Additionally, for many trades it is necessary to keep your license active. State boards like TDLR or TSBPE require you to have certain types of insurance to perform work in the state.

This guide breaks down exactly what coverage you need to stay in business, the specific legal risks of operating in Texas, what it costs, and which carriers are best suited for the job.

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The Essential Coverages

Although some contractors need insurance in addition to these coverages, here are the basics and best-practices that most contractors will need to cover most their risks and comply with jobsite requirements.

1) General Liability

General Liability is the core insurance policy that every contractor needs. It is the day-one and most commonly purchased insurance policy for contractors.

• What it covers: Bodily injury to third parties and property damage (e.g., your soldering torch starts a fire behind a wall).
• The standard requirements: Most commercial contracts require $1,000,000 per occurrence / $2,000,000 aggregate limits.
• Critical for contractors: You must ensure your policy includes "Products & Completed Operations". If you install a breaker box today and it casues a fire next year, this is the only coverage that pays out.

2) Workers' Compensation

Texas allows private employers to "opt out" of Workers' Comp, but for contractors, this is rarely a good idea. It is the only coverage that prevents your own employees from suing you into bankruptcy.

• What opting out means: When you buy Workers' Comp, you get statutory immunity. If your apprentice gets hurt, they generally cannot sue you for negligence; they simply get their medical bills and lost wages paid by the policy.
• The "Opt-Out" risk: If you opt out and get sued, you lose your common-law defenses. You cannot argue the employee was clumsy, knew the risks, or that another employee caused the accident. If you are 1% at fault, you pay 100% of the damages.
• Contractual Necessity: Most reputable general contractors will refuse to hire subcontractors who do not carry true Workers' Comp. They don't want your liability spilling over onto their insurance.

3) Commercial Auto

Contractors live in their trucks. This is one of the few coverages strictly enforced by Texas state law.

• Personal vs. Commercial: If you are in an accident while hauling materials or have employees driving your truck, your personal insurer could give you a hard time on the claim. Commercial trucks are better insured on a commercial auto policy.
• Recommended Limits: Aim for a $1,000,000 limit, especially if you drive heavy trucks or if you have an umbrella policy with a minimum limit requirement.

4) Inland Marine (Tools & Equipment)

Your livelihood is in the back of your truck. A general liability policy does not cover your tools if they are stolen.

• The solution: An "Inland Marine" (or tool floater) policy follows your drills, saws, and testers wherever they go - from the shop, to the truck, to the job site.
• Installation Floater: For HVAC and equipment installers, consider an installation floater to cover the expensive units you are installing until the job is accepted by the client.

License-Specific Insurance Requirements

MEP (Mechanical, Electrical, Plumbing) trades have hard-coded insurance limits required by the state to maintain active licensure.

Electrical Contractors (TDLR)

The Texas Department of Licensing and Regulation requires strict limits. You must show a minimum:

• $300,000 Per Occurrence
• $600,000 Aggregate
• $300,000 specifically for Products & Completed Operations

HVAC / ACR Contractors (TDLR)

Insurance limits depend on your license class:

• Class A (any size unit): $300,000 Occurrence / $600,000 Aggregate / $300,000 Completed Ops.
• Class B (restricted size): $100,000 Occurrence / $200,000 Aggregate / $100,000 Completed Ops.

Plumbing Contractors (TSBPE)

The Texas State Board of Plumbing Examiners has the following insurance requirement.

• Requirement: $300,000 in Commercial General Liability.

Estimated Annual Costs

Below are example annual premiums for trade contractors in Texas. These figures assume standard coverage limits ($1,000,000 limit GL, WC, and Auto) for a $1,000,000 revenue contractor.

Real-World Claim Examples

1. The Fire (General Liability)

Scenario: An electrical contractor in Plano inadvertently nicks a wire. Two weeks later, it arcs and starts a fire.

Outcome: The GL policy pays $135,000 for repais and loss of use. Crucially, the completed operations coverage is what pays this, since the work was already "finished" when the fire started.

2. The Trench Collapse (Workers' Comp)

Scenario: A plumber is crushed by a pipe in a trench.

Outcome: Workers' Comp pays $45,000 for sugery and lost wages. Because the employer had Workers' Comp, the employee could not sue for millions in "pain and suffering".

3. The Hotel Theft (Inland Marine)

Scenario: An HVAC tech has his truck broken into overnight at a hotel. Thieves take vacuum pumps and gauges.

Outcome: General Liability pays nothing. Inland Marine pays $8,500 to replace the tools and rent substitutes.

Best Insurance Companies for Texas Contractors

1. Chubb

• Best For: Smaller Trade Contractors (Electricians, Plumbers, HVAC, etc.)
• Why: Chubb is an excellent fit for smaller trade contractors. Their specific "Contractors Liability Enhancement" endorsement is robust, designed to automatically meet the vast majority of standard contractual requirements. They combine this comprehensive coverage with competitive pricing and a streamlined portal.

2. Hartford

• Best For: Small to Middle-Market MEP Contractors & Larger General Contractors
• Why: Hartford offers a strong off-the-shelf product for small businesses, but they also boast a dedicated middle-market construction team known for deep industry knowledge. This makes them a reliable choice whether you are a growing specialist or a large general contractor.

3. Berkley Aspire

• Best For: Small & Medium-Sized "High Hazard" Trades
• Why: Berkley Aspire specializes in risks that standard carriers often decline. They have a strong appetite for higher-hazard trades such as fiber contractors, homebuilders, or businesses with a prior claims history. While their premiums are higher by design to account for the increased risk, they offer the flexibility and compliance options necessary for businesses that don't fit the "low risk" mold of Chubb or Hartford.