New Contractor's First Insurance Policy in Texas: What You Need Before Your First Job

Starting a contracting business in Texas means dealing with insurance before you've had a chance to build much history. Carriers price new ventures based on what they don't know about you, which means your first year of premiums will be higher than they'll be after you've demonstrated a clean record. That's honest and worth knowing upfront.

But it doesn't mean you overpay. It means you get the right coverage, structured correctly, from the start — so you can bid on jobs that require certificates, get on GC-approved vendor lists, and build the track record that brings premiums down in year two and three.

This guide covers what you actually need before your first job in Texas, what it costs, and how to avoid the confusion between insurance, licensing, and bonds that trips up most new contractors.

The Minimum Viable Coverage Stack

Most new contractors in Texas need at minimum:

1. General liability insurance — covers bodily injury and property damage you cause to others during and after your work
2. Commercial auto insurance — covers vehicles used for work (a personal auto policy won't respond to a business-use claim)
3. Workers' compensation — required by most GCs as a contract condition even though Texas law doesn't mandate it for most private employers

Depending on your trade and what jobs you're pursuing, you may also need:

• Tools and equipment (inland marine) — covers your tools and equipment on job sites and in your vehicle; GL and auto don't
• Umbrella / excess liability — required by many commercial GC contracts; sits above your primary GL and auto limits
• Surety bond — required by some licensing bodies and contract types; this is not insurance (more on this below)

General Liability: The Coverage Every Job Requires

General liability (GL) is the foundation. It covers you if you damage someone else's property while working, or if someone is injured and holds you responsible. A GC who asks for a certificate of insurance is almost always requiring GL at minimum.

Standard limits in Texas for most trade work: $1 million per occurrence / $2 million general aggregate. For commercial projects, especially work for larger GCs or property owners, the requirement may be $2 million per occurrence with a $4 million aggregate, or $1 million per occurrence with a $2 million umbrella on top.

What GL does not cover

GL is not a catch-all. It does not cover your own property (tools, equipment, your truck), injuries to your own employees (that's workers' comp), or the cost of fixing your own bad work. It covers the third-party consequences of your work going wrong — a pipe you installed that leaks and destroys the customer's kitchen, a ladder that falls and breaks a window, a sub-floor repair that collapses under a client's foot.

New-venture pricing reality

Carriers price GL based on your revenue or payroll. As a new contractor with limited history, you'll pay a minimum premium rather than a formula-calculated one. Minimum premiums for GL vary by trade and carrier, but realistic ranges for a sole proprietor or small crew in Texas:

These are minimum/entry-level ranges. As you add payroll and revenue, premiums are calculated on those figures and will increase. The upside: your audit at year-end reconciles actual vs. estimated exposure, so you don't permanently overpay if your first year is slower than projected.

Workers' Compensation: Technically Optional, Practically Required

Texas is the only state that does not require private employers to carry workers' compensation insurance. Most private employers in Texas can legally operate as "non-subscribers" — meaning no workers' comp policy.

But here's the practical reality: most general contractors require proof of workers' comp for every sub on their approved list. If a sub is a non-subscriber and a worker is injured on site, the liability flows up to the GC. To avoid that, GCs simply require workers' comp certificates before allowing any sub on site.

If you're working directly for homeowners on smaller projects, non-subscriber status is more tenable. If you're trying to get on GC vendor lists or bid commercial work, you almost certainly need workers' comp — not because Texas law requires it, but because the contracts do.

What workers' comp costs for new contractors

Workers' comp in Texas is priced per $100 of payroll at a class code rate set by the National Council on Compensation Insurance (NCCI). Rates vary by trade:

For a sole proprietor who includes themselves in the policy, carriers typically require a minimum payroll assumption (often $500–$700/week for owners) regardless of what you actually pay yourself. This is an underwriting minimum, not a tax number.

New contractors with no experience modification factor (mod) start at a mod of 1.0 — the industry average. A clean claims record drives the mod down over three years, which reduces your workers' comp premium significantly. A bad claim in year one drives it up and follows you for several years.

Commercial Auto: Don't Rely on Your Personal Policy

If you use your truck for work — hauling tools, materials, or equipment; driving to job sites; towing a trailer — your personal auto policy does not cover it for business use. This is one of the most common gaps new contractors discover after an accident.

Commercial auto covers liability (damage you cause to others) and physical damage (damage to your vehicle). It follows the vehicle, not the person, so employees driving your work truck are covered. It also extends to trailers you own and tow.

A pickup truck used primarily for contracting work in Texas typically runs $1,500 to $4,000 per year depending on the vehicle value, driver history, and what you're hauling. Add a trailer and the premium adjusts modestly. Add a second or third truck and you're building toward fleet pricing.

Tools and Equipment Coverage

Your GL policy does not cover your tools. Your commercial auto policy does not cover tools and equipment stored in your truck (they cover the truck itself). If your tools are stolen from a job site or your truck, or if they're damaged in transit, neither policy pays.

Inland marine / tools and equipment coverage fills this gap. It's typically written as a scheduled policy (you list items individually) or a blanket policy (a per-item and per-occurrence limit covers all items collectively). For most new contractors with $15,000 to $50,000 in tools and equipment, a blanket policy of $25,000 to $50,000 runs $300 to $900 per year.

Inventory your tools annually and update coverage accordingly. New purchases should be added within 30 days or they may not be covered if you have a scheduled policy.

The License-Bond vs. Insurance Confusion

New contractors frequently ask whether their license requires insurance and whether a bond is the same as insurance. The answer to both questions depends on the trade, and the confusion is understandable because the requirements are issued by different agencies with different terminology.

Texas licensing by trade

Texas does not have a general contractor license at the state level. Most residential remodeling, painting, drywall, carpentry, and similar trades are unlicensed in Texas (though some municipalities require local registration). The trades that are state-licensed through TDLR or TSBPE:

• Electricians: Licensed by TDLR. Electrical contractors need a license; some require proof of liability insurance to maintain the license.
• HVAC technicians: Licensed by TDLR. Insurance not required by TDLR for the license itself, but required by GC contracts.
• Plumbers: Licensed by TSBPE (Texas State Board of Plumbing Examiners). Plumbing contractors must carry insurance and file proof with TSBPE.
• Irrigators: Licensed by TCEQ. Insurance required for licensure.
• AC and refrigeration technicians: TDLR licensing; no mandatory insurance for the license itself.

For unlicensed trades, the insurance requirement comes from contract (GC requirements), not state law.

A license bond is not insurance

Some trades or municipalities require a surety bond — often called a license bond or contractor bond — to operate legally. A bond is a three-party guarantee: you (the principal), the party protected (the obligee — often the municipality or the public), and the surety (the bond company). If you fail to perform or violate licensing rules, the surety pays a claim — and then comes after you for reimbursement.

This is the critical difference from insurance: insurance absorbs the loss. A bond guarantees performance and expects repayment if it pays a claim. A $10,000 license bond costs $100–$200 per year (1–2% of the bond amount for a clean applicant). It does not substitute for general liability insurance and it does not cover property damage or bodily injury the way GL does.

Getting Your First Certificate of Insurance

Once your policies are bound, you can request certificates of insurance immediately. A certificate is a one-page summary (ACORD 25 form) that confirms your coverage is in force and lists the holder. When a GC asks for a certificate naming them as an additional insured, your broker adds the additional insured endorsement to your policy and issues a certificate reflecting it.

Common certificate requirements you'll encounter as a new contractor:

• GL with $1M/$2M limits — standard for most residential and light commercial work
• Additional insured endorsement — the GC named on your policy, protecting them from claims arising from your work
• Waiver of subrogation — your carrier agrees not to pursue the GC after paying a claim on your behalf
• Commercial auto liability at $1M CSL — especially if you're driving to their sites or hauling materials
• Workers' comp with waiver of subrogation — if you have employees

We issue certificates in 15 minutes. For a new contractor working through a first-job checklist, that means you're not waiting two days for paperwork to get work authorized. See our guide on how to get a COI fast and the full Certificate of Insurance Guide for a detailed walkthrough of the ACORD 25 form.

What to Tell Your Broker Upfront

The more accurate information you provide at application, the better your pricing and coverage will be. Things that matter most for new contractors:

• Your trade classification — be specific. "Contractor" is not a classification. "Interior painting" and "commercial roofing" are different trades with different rates and carrier appetites.
• Your estimated annual revenue — GL is often rated on revenue or payroll. Underestimate and you'll have a large audit bill at year-end.
• Whether you'll use subcontractors — uninsured subs can be included in your GL audit as if they were employees, dramatically increasing your premium. Always get certificates from subs.
• The types of projects you'll do — residential vs. commercial vs. industrial affects both price and carrier appetite.
• Your vehicle count and types — commercial auto is rated per vehicle based on class, use, and driver history.