What to Do When Your Contractor Doesn't Have Insurance

The moment to find out your contractor has no insurance is before they start. The moment most homeowners actually find out is after something has gone wrong — a fall from a ladder, a fire from a hot-work spark, a burst line behind a wall — when the question "who pays for this" gets a very unwelcome answer.

Here's the answer nobody expects: it can become your problem, and your homeowners policy's. An uninsured worker injured on your property can look, legally, a great deal like your employee. This guide covers how to check before you hire, what to do if you're already mid-project, and what recourse exists if the damage has already happened.

Why this lands on you

Two mechanisms put a homeowner on the hook for an uninsured contractor's problem.

1. The worker may be treated as your employee. California Labor Code §2750.5 creates a presumption that a person performing work requiring a contractor's licence, who does not hold one, is an employee — not an independent contractor. If an unlicensed worker is injured on your property, you can find yourself in the position of an uninsured employer with a workers' compensation exposure. Most homeowners policies provide a small amount of workers' compensation coverage for residence employees; it is generally nowhere near sufficient for a serious injury.

2. Their damage becomes a claim on your policy. If an uninsured contractor's work causes a fire or a water loss, there's no contractor's policy to pay. Your homeowners insurer pays for your damage, and then has to try to recover from a contractor who — by definition — had nothing. Meanwhile you carry the claim on your record, your deductible, and the effect on your renewal.

That's the exposure. Here's how to close it.

Before you hire: the four-document check

Ask for all four. A legitimate contractor produces them without friction, and one who resists is telling you something.

1. The CSLB licence — verified by you, on the CSLB website

Do not accept a licence number on a business card. Look it up yourself at cslb.ca.gov → Check a License. Confirm:

• The licence is active, not expired or suspended

• The name on the licence matches the name on your contract, exactly

• The classification fits your job (a C-10 electrician licence doesn't cover a re-roof)

• There is no disciplinary history or outstanding CSLB action

• The $25,000 contractor licence bond is on file and current — the required amount increased from $15,000 to $25,000 on January 1, 2023

An important limit: the bond is not insurance. It's a small consumer protection fund shared across all claimants against that contractor. It doesn't pay for a house fire.

2. General liability insurance — verified with the insurer, not the contractor

Ask for a certificate of insurance (COI) — the ACORD 25 form. Then look at four things:

• Policy dates covering your entire project, including the tail end

• Each-occurrence and general-aggregate limits, $1,000,000 / $2,000,000 being the common floor

• The named insured matching your contract exactly

• Whether the certificate is current — a COI is a snapshot on its issue date and proves nothing about tomorrow

The step almost nobody takes and everybody should: ask to be added as a certificate holder so the insurer notifies you of cancellation, and for larger jobs, request additional insured status by endorsement. A certificate alone does not make you an additional insured; that requires an endorsement on the contractor's policy.

Use our certificate of insurance request template to ask for it properly, and the contractor insurance verification checklist to work through all of it in order.

3. Workers' compensation — and the exemption question

If the contractor has any employees, workers' compensation is mandatory. If they claim to be exempt as a sole proprietor with no employees, the exemption is on file with CSLB and you can see it in the licence lookup.

This is changing, and the date has moved. Senate Bill 216 (2022) began requiring workers' compensation coverage for licensed contractors regardless of whether they employ anyone — starting January 1, 2023 for the C-8 (concrete), C-20 (HVAC), C-22 (asbestos abatement), and D-49 (tree service) classifications. The requirement was set to extend to all licence classifications on January 1, 2026, but SB 1455 (2024, Chapter 485) pushed that date to January 1, 2028, and directs CSLB to build an exemption verification process by January 1, 2027.

So until 2028, an exempt sole proprietor is legitimate for most classifications — but understand what the exemption means for you: if they're hurt on your property, there is no workers' comp policy behind them.

4. A written contract

California requires home improvement contracts over $500 to be in writing, with specified terms including a payment schedule and a limit on the down payment (generally the lesser of $1,000 or 10% of the contract price). Add two clauses of your own: an insurance requirement naming the limits, and an indemnity clause.

Hiring for a big project? Send us the COI before work starts. TSM will read it and tell you what it actually covers — free, whether or not you're a client. (209) 524-6366 Modesto · (530) 221-3031 Redding.

If work has already started and you've just discovered they're uninsured

Stop work — politely and in writing. A text saying "please pause until we sort out insurance documentation" is enough. Don't make it a confrontation; make it a documentation request.

Ask for the COI directly from their broker. Legitimate contractors have brokers who issue certificates on request within a day.

If they can't produce it, decide. You can (a) require them to obtain coverage before resuming — a general liability policy for a small contractor is not a barrier for a real business; (b) terminate under the contract; or (c) accept the risk knowingly, which for anything involving roofs, ladders, electrical, hot work, or water lines is a genuinely bad trade.

Call your own insurer or agent before deciding. Ask specifically: what does my policy do if an uninsured worker is injured here, and what does it do if their work causes damage? Get the answer before you need it.

Check your umbrella. A personal umbrella sits above your homeowners liability and is the coverage most likely to matter if this goes wrong. See umbrella insurance for California families.

If the damage has already happened

1. Document everything immediately. Photographs, video, the contract, all texts and emails, the payment record, and the state of the work.

2. Report it to your homeowners insurer. Even if you intend to pursue the contractor, notice protects your rights under your own policy. See how to file a homeowners insurance claim.

3. File a complaint with CSLB. The board investigates, can discipline the licence, and complaints against a licensed contractor may reach the $25,000 licence bond.

4. Consider small claims court. California small claims handles disputes up to $12,500 for individuals, with no attorney required.

5. If they were unlicensed, know the leverage you have. California law is unusually hard on unlicensed contracting: an unlicensed contractor generally cannot sue to be paid for the work, and a homeowner may be able to recover compensation already paid (B&P Code §7031).

For contractors reading this: this page is also about you

If you're a contractor and a homeowner just asked you for a COI, an additional insured endorsement, and a licence verification — that's not distrust, it's becoming standard, and the contractors who answer it in an hour win the jobs.

What a properly built contractor programme includes: general liability with products/completed operations, commercial auto, workers' compensation, tools and equipment (inland marine), installation floater, and — for anyone doing design or consulting — professional liability. Plus the ability to issue certificates and additional insured endorsements the same day a GC or homeowner asks.

Start with contractors insurance, or read the ultimate contractors insurance guide and business insurance for California contractors.

FAQs

Am I liable if an uninsured contractor is injured at my house?

Potentially, yes. Under Labor Code §2750.5, an unlicensed person doing work that requires a licence is presumed to be an employee, which can expose a homeowner to workers' compensation liability. Homeowners policies include only limited residence-employee coverage.

How do I check if a contractor is insured in California?

Verify the licence at cslb.ca.gov, then request a certificate of insurance (ACORD 25) and confirm the policy dates, limits, and named insured. For larger jobs, ask to be added as an additional insured by endorsement.

Is a contractor's bond the same as insurance?

No. The $25,000 licence bond is a limited consumer protection fund shared among claimants. It does not function as liability insurance.

Do all California contractors need workers' comp?

Contractors with employees always do. The requirement for all licensees regardless of employees was extended by SB 1455 to January 1, 2028; the C-8, C-20, C-22, and D-49 classifications have been required since January 1, 2023.

What if my contractor's insurance expires mid-project?

Ask to be listed as a certificate holder so the insurer notifies you, and request an updated certificate at each project phase.

Read the certificate before you sign the contract.

TSM Insurance reviews contractor certificates for Central Valley homeowners as a courtesy — and writes the coverage for the contractors on the other side of the table. Either way, we'd rather look at it now than after the claim.

Modesto (209) 524-6366 · Redding (530) 221-3031 · Talk to a TSM advisor