Do Contractors Really Need Insurance? Here’s Why the Answer is Yes.
Why Every Contractor Needs Insurance: The Reasons Behind the Requirement.
One of the first questions we get from contractors and tradesmen at Dragonfly is: Why do I even need insurance?
The skepticism is understandable. Insurance is a big expense. And in many cases, you don’t end up “using” it—meaning you can go years without filing a claim.
So why do you need it?
At Dragonfly Insurance, we focus exclusively on providing contractors and tradesmen with the insurance they need to do business. From that experience, here’s our answer to that question.
There are five main reasons you need insurance. (Notice I don’t say “probably.” You do need it.) Here’s a preview:
You face risks that could destroy your business
Your GC requires it
Your clients and their partners require it
Regulators may require it
It helps you win work
Reason #1: You Face Risks That Could Destroy Your Business
Contracting is full of hazards that can wipe you out overnight. Compared to companies where employees work behind desks, you’re exposed to dangers that can be catastrophic—not just inconvenient.
Imagine this: One of your guys finishes up late, accidentally drills a tiny hole in a hidden water line behind a wall. No one notices. Overnight, water gushes through the space. By morning, there’s tens of thousands—or hundreds of thousands—of dollars in water damage. The drywall is ruined. Electrical systems are soaked. The job stops. The property owner wants to sue. You’re suddenly responsible for costs you can’t afford.
Or a fire starts because of faulty wiring on the job site. A worker falls and suffers a life-changing injury. A trench collapses, and you’re liable for emergency response costs and fines.
These aren’t rare horror stories. They happen every day in this industry. And when they do, they don’t just threaten your cash flow—they can end your business and put your livelihood, your employees’ jobs, and your reputation on the line. This is why, as a contractor, you need liability insurance.
Insurance is what stands between a single mistake and losing everything you’ve worked to build. It’s there to cover costs when things go seriously, irreversibly wrong.
Reason #2: Your GC Requires It
Almost every general contractor expects their subcontractors to have insurance. Why? Because if you don’t, the GC is usually stuck with the bill.
For example, if you’re a plumber and one of your employees gets hurt on a job site, the GC could end up paying for the injury and any fines if you – the plumber – don’t have insurance. That’s why most GCs simply won’t let you work without insurance.
It’s best to confront this requirement head on. Simply ask your GC (or prospective GC): what are your insurance requirements for subcontractors?
Reason #3: Your Client and Their Partners Require It
The same applies to your clients. If a wall collapses, a fire breaks out, or a flood damages property, someone has to pay for the loss. Your client wants to make sure it’s not them. So it’s you – or better yet, your insurance company.
Their lenders feel the same way. They’re financing the project, and the last thing they want is to lose their money if something goes wrong.
Reason #4: Regulators Require It
Requirements vary by state and town, but many local building departments demand proof of insurance before you can start work. From their perspective, it protects the public. If something goes wrong, there needs to be a way to pay for the damage.
Reason #5: It Helps You Win Work
Carrying insurance shows you’re professional and reliable. It signals to clients, partners, and employees that you take your business seriously. In many cases, having solid coverage helps you compete for better contracts and build trust.
For reasons #2 through #4, the exact requirements are spelled out in contracts and regulations. These set the minimum coverages you need. Then you have to think about Reason #1 and how much risk you’re comfortable carrying on your own.
That’s where a good insurance broker comes in. Your broker can help you:
Make sense of the requirements.
Find policies that meet them.
Decide whether you need additional protection beyond the minimum.
If you’re building a real construction business, you’re going to need insurance. But there are better and worse ways to handle it. If you’d like help reviewing your options, one of the brokers at Dragonfly is ready to talk.
