Contractor coverage and compliance, built for California.

Two California contractors can do identical work and face opposite insurance requirements. A sole proprietor holding a B license has no state liability insurance requirement. The same operation structured as an LLC must carry at least $1 million, scaling to $5 million by headcount, under B&P 7071.19. The trade did not change. The entity did.

Who this page is for

Contractors licensed by the California State License Board, and contractors weighing whether to run their business as an LLC in California. That second group needs to read the insurance section carefully, because California is one of the few states where the legal structure you choose changes your insurance requirement by seven figures.

The $25,000 bond, and the three other bonds nobody mentions

The contractor license bond is $25,000, raised from $15,000 effective January 1, 2023 under SB 607. That is the one everybody knows. There are three more that come up often enough to plan for.

The Bond of Qualifying Individual catches people. If you qualify your own license and own at least 10 percent of the voting stock, you file an exemption certificate instead. If you brought in a responsible managing employee to qualify the license, that is another $25,000 bond, and if multiple qualifiers are on the license each one owes their own.

General liability: not required, unless you are an LLC

This is the single most misunderstood requirement in California contracting, and it runs opposite to what most contractors assume.

For most license classifications, CSLB does not require general liability insurance at all. It strongly recommends it. The $25,000 bond is the only financial responsibility condition of holding the license. A sole proprietor with a B license can be fully compliant with the state and carry no liability policy whatsoever.

For a limited liability company, the requirement is the opposite of absent. Business and Professions Code 7071.19 requires an LLC licensee to carry liability insurance of $1 million where the LLC has five or fewer personnel of record, plus $100,000 for each additional person, capped at $5 million. The policy must be written by an insurer admitted in California or an eligible surplus lines carrier.

So a two-person sole proprietorship in California has no state insurance requirement, and a two-person LLC doing identical work must carry a million dollars. If you are choosing an entity structure, that belongs in the decision, and if you converted to an LLC without adjusting your policy, your license is out of compliance right now.

Workers compensation, and the 2028 change already on the books

The general rule is the familiar one: workers compensation is required from the first employee, and an owner-only business can file a zero-employee exemption with CSLB.

Five classifications cannot use that exemption at all. Regardless of whether they have a single employee, these must carry workers compensation:

• C-8 Concrete
• C-20 Warm-Air Heating, Ventilating and Air-Conditioning
• C-22 Asbestos Abatement
• C-39 Roofing
• C-61 / D-49 Tree Service

Now the part worth planning around. Under SB 216, as delayed by SB 1455, the zero-employee exemption goes away for every classification on January 1, 2028. CSLB is required to have an exemption verification process running by January 1, 2027. If you are an owner-operator who has never carried workers compensation because you have no employees, that is a scheduled change to your cost structure, not a rumor. It is worth pricing before it arrives rather than in the renewal that follows it.

Licensing, experience, and what it costs

California requires four years of journey-level experience within the last ten, though up to three years can be substituted with education or training and at least one year must be hands-on. Every classification except C-61 requires two exams: Law and Business, plus a trade exam. Current fees run $450 to apply, $200 or $350 for the initial license depending on entity type, and $450 or $700 to renew on the two-year cycle.

The classification structure is A for general engineering, B for general building, B-2 for residential remodeling, and roughly 43 C specialty classifications. B-2 is worth knowing about if you do multi-trade remodeling on existing wood-frame homes and do not want a full B license.

Home Improvement Salesperson registration

If anyone sells or negotiates home improvement contracts on your behalf, they need their own HIS registration, regardless of the contract amount. There is no dollar threshold on this one. It is $200, no exam. Officers, general partners and qualifiers are exempt, along with a few narrow categories like appointment schedulers and retail floor sales.

Working unlicensed just got more expensive

The threshold moved. As of January 1, 2025, work requiring a license starts at $1,000 in combined labor and materials, up from $500, under AB 2622. Administrative fines run to $15,000. A first misdemeanor offense carries up to six months and $5,000; a second brings mandatory 90 days plus the greater of $5,000 or 20 percent of the contract price. Minimum civil penalty floors rose again on July 1, 2026 under SB 779.

Retainage on private jobs is now capped at five percent

A genuinely new one. Public works retainage in California has long been capped at 5 percent. As of contracts entered on or after January 1, 2026, SB 61 extends a 5 percent cap to private works as well, through new Civil Code section 8811. Small residential projects of four stories or fewer remain outside the statutory cap.

If you are still signing private contracts with 10 percent retention on new work, that is worth a conversation with whoever drafts your agreements.

Ten years of exposure, tiered by component

California sets a ten-year statute of repose from substantial completion under Code of Civil Procedure 337.15, the longest among the states we serve and nearly double Washington's six. Inside that window, the Right to Repair Act sets component-specific periods: roughly four years for plumbing, electrical and stucco, five for exterior paint, two for wood posts and landscaping, and the full ten for structural and water intrusion components.

This is why completed operations matters more in California than almost anywhere. Work you finish today can generate a claim a decade from now, and the policy that responds is the one in force when the claim is made, not the one you had when you built it.

What your contract will require regardless

None of the above is what gets you onto a jobsite. General contractors, owners, public agencies and lenders in California commonly require $1 million per occurrence and $2 million aggregate, plus additional insured, waiver of subrogation, and primary and non-contributory wording. That is the number most of our California contractors carry, and it is the number to plan around whether or not CSLB requires anything of you.

Note also Civil Code 2782: broad-form indemnity clauses that would make you responsible no matter whose fault it was are void in California construction contracts, and for residential work after 2009 the protections go further. A clause being in the contract does not make it enforceable here.

State minimum versus what your contracts require