Updated October 2026

If you operate a small contracting business in Ontario, having the right insurance is an important part of protecting your livelihood.

Whether you are an electrician, plumber, painter, carpenter, landscaper, roofer or general contractor, the work you perform can expose you to significant financial risks.

An accidental fire, water damage, stolen tools or a liability claim could result in expenses that are difficult for a small business to absorb.

Many contractors purchase insurance because a customer, general contractor or property manager requires proof of liability coverage.

However, there is an important distinction between having an insurance policy and having insurance that properly covers the work you perform.

At L.D. Dermody Insurance Brokers, we encourage contractors to review their insurance arrangements regularly, particularly when their operations change.

Here are some of the most important issues Ontario contractors should understand.

1. Does Your Insurance Company Know What Work You Actually Do?

When arranging commercial insurance, your broker will ask questions about the nature of your business.

For a contractor, this may include:

• The trades or services you provide.

• Whether you work on residential or commercial properties.

• The types of buildings you work on.

• Your annual gross revenue.

• Your annual payroll.

• Whether you hire subcontractors.

• The percentage of work involving different activities.

• Whether you perform work at heights.

• Whether you use heat-producing equipment.

• Whether you work on new construction, renovations or repairs.

These questions are important because insurance companies evaluate different contracting operations differently.

For example, a contractor performing interior painting may present a different risk from a contractor installing roofing systems or performing structural alterations.

Some insurers specialize in particular trades, while others restrict or decline certain operations.

Your insurance company needs an accurate description of the work you perform.

If your business begins performing additional types of work, your existing policy should be reviewed before you undertake those operations.

Do not assume that every activity described as contracting is automatically included.

2. What Is Commercial General Liability Insurance?

Commercial General Liability insurance, commonly called CGL, is one of the most important coverages for contractors.

It generally provides protection against certain claims involving bodily injury or property damage suffered by third parties arising from covered business operations.

For example:

• A plumber accidentally causes water damage to a customer's property.

• An electrician's work is alleged to have caused a fire.

• A contractor damages a neighbouring building while performing work.

• A visitor is injured because of a hazardous condition associated with the contractor's operations.

Depending on the circumstances and policy wording, CGL insurance may cover legal defence costs and damages for which the contractor is legally responsible.

However, CGL insurance is not a guarantee that every accident, lawsuit or construction-related loss will be covered.

Policies contain exclusions, limitations and conditions that must be considered.

The actual operations insured are also important.

3. Is $2 Million in Liability Insurance Enough?

Many contractors carry $2 million in Commercial General Liability insurance.

This is a common limit requested by customers, property managers and general contractors.

However, the appropriate amount depends on the nature of the work and the potential severity of a claim.

For example, a contractor working on a large commercial building may have substantially greater liability exposure than someone performing minor residential repairs.

Certain contracts may require $5 million or higher liability limits.

The amount of insurance should be considered in relation to:

• The types of projects undertaken.

• The value of properties being worked on.

• The potential for bodily injury.

• The possibility of damage to surrounding property.

• Contractual insurance requirements.

• The contractor's overall financial exposure.

A higher liability limit does not eliminate exclusions or expand the types of operations covered.

A contractor with $5 million in liability insurance could still encounter a coverage issue if the claim arises from an excluded activity.

4. What Happens if Your Work Causes Damage After the Job Is Finished?

Not every problem becomes apparent while the contractor is on the job site.

Consider these examples:

• A plumbing connection fails several weeks after installation.

• An electrical installation is alleged to have caused a fire months later.

• A roofing installation allows water to enter a building after the project has been completed.

• A component installed by a contractor fails and damages other property.

Commercial General Liability policies may include products-completed operations coverage for certain claims arising from completed work.

This coverage can be important because contractors may face liability allegations long after leaving a job site.

However, completed operations coverage is subject to policy terms, exclusions and other requirements.

It is not a general workmanship warranty.

Contractors should understand whether their policy includes completed operations coverage and whether any restrictions apply to the work they perform.

5. Does Liability Insurance Cover Faulty Workmanship?

This is one of the most misunderstood areas of contractor insurance.

Suppose a roofing contractor installs shingles incorrectly.

Several months later, water enters the home and damages the ceilings, insulation and interior finishes.

There may be two different types of loss.

The cost of correcting the defective roofing work

Commercial General Liability insurance generally is not intended to function as a warranty for the quality of the contractor's work.

The cost of removing and replacing defective work may be excluded or otherwise not covered.

The resulting damage to other property

Depending on the circumstances and policy wording, resulting property damage may be covered.

The distinction can become complicated, particularly when determining what constitutes the contractor's own work and what constitutes other damaged property.

Coverage must be assessed using the specific policy wording and facts of the claim.

Contractors should not promise customers that their liability insurance will pay to correct any workmanship problem.

6. Are Your Tools and Equipment Properly Insured?

For many small contractors, tools and equipment represent a significant investment.

Consider the cost of replacing:

• Power tools.

• Hand tools.

• Ladders.

• Compressors.

• Generators.

• Specialized trade equipment.

• Surveying or measuring equipment.

• Portable machinery.

A contractor may own thousands or tens of thousands of dollars' worth of equipment.

Unfortunately, tools are also attractive targets for theft.

Commercial property insurance arranged for a workshop or office may not automatically provide adequate protection for tools while they are being transported or used at job sites.

Contractors may need specific tools and equipment coverage, sometimes arranged under a contractors' equipment or inland marine policy.

What About Tools Stolen From a Vehicle?

Do not assume that tools stolen from a truck or van will automatically be covered by the automobile policy.

Automobile insurance generally is not designed to insure a contractor's portable tools and equipment.

Separate coverage may be necessary.

Even where tools are insured, theft from an unattended vehicle may be subject to conditions, limitations or exclusions.

Ask your broker about the circumstances in which your tools are covered, including overnight storage and theft from vehicles.

7. What About Equipment You Rent or Borrow?

Many contractors rent specialized equipment for particular projects.

Examples include:

• Excavators.

• Scissor lifts.

• Skid steers.

• Generators.

• Compressors.

• Other construction machinery.

A rental agreement may make the contractor responsible for damage to the rented equipment.

However, the contractor's existing insurance may not automatically cover rented or borrowed machinery.

Coverage may depend on the type of equipment, its value, the rental arrangement and the policy wording.

Before renting expensive equipment, review the rental contract and confirm the available insurance.

Do not assume that your Commercial General Liability policy will pay for damage to equipment in your care, custody or control.

8. Do You Hire Subcontractors?

Hiring subcontractors can create additional insurance considerations.

For example, a general contractor renovating a home may subcontract the electrical, plumbing, roofing or flooring work.

If a subcontractor causes damage, questions may arise concerning:

• Who is legally responsible.

• Whether the subcontractor has appropriate insurance.

• Whether the general contractor's policy responds.

• Whether the work falls within the insured operations.

• What the contracts require.

Some insurance policies contain specific provisions concerning subcontracted work.

The insurer may require information about the amount and type of work subcontracted.

Contractors should disclose subcontracting arrangements accurately.

Should Subcontractors Have Their Own Insurance?

In many situations, it is prudent to require subcontractors to maintain appropriate insurance.

Depending on the project, this may include Commercial General Liability insurance and other relevant coverages.

A general contractor may also require a certificate of insurance and, where appropriate, additional insured status.

However, a certificate alone does not guarantee that a claim will be covered.

For more information, see our article Why It's Critical to Vet Contractors and Request a Certificate of Insurance.

9. What About WSIB Coverage?

Ontario contractors should understand their obligations under the Workplace Safety and Insurance Act and the requirements of the Workplace Safety and Insurance Board (WSIB).

Many businesses operating in the construction industry are required to register with WSIB and maintain applicable coverage, subject to certain exemptions.

Requirements can depend on the business structure, operations and circumstances.

WSIB coverage is different from Commercial General Liability insurance.

A CGL policy does not replace required workplace insurance.

Similarly, having WSIB coverage does not mean that a contractor has insurance for third-party property damage or liability claims.

Contractors should confirm their obligations directly with WSIB.

More information is available at www.wsib.ca.

10. Are Your Commercial Vehicles Properly Insured?

Many contractors depend on trucks, vans and trailers to transport workers, tools and materials.

It is important that the insurance company understands how these vehicles are used.

For example, a pickup truck used for occasional personal transportation may present a different risk from a truck used daily to carry equipment between construction sites.

Depending on the circumstances, commercial automobile insurance may be required.

Your broker should be advised of:

• Business use of vehicles.

• The types of materials transported.

• Employees who drive the vehicles.

• Trailers used for business.

• The geographic area of operations.

• Any significant changes in vehicle use.

Also remember that vehicle insurance and tools coverage are separate considerations.

Insuring the truck does not necessarily mean that everything carried inside it is insured.

11. Does Your Insurance Cover Every Type of Project?

Not necessarily.

Contractors sometimes expand their operations as new opportunities arise.

For example:

• A residential painter begins taking commercial contracts.

• A carpenter starts performing structural renovations.

• A general handyman begins roofing work.

• A landscaping contractor adds excavation services.

• A contractor starts working on buildings under construction.

• A residential contractor begins work on larger commercial properties.

These changes may affect insurance eligibility, pricing and coverage.

Some insurers restrict particular types of work, such as certain roofing operations, demolition, excavation or work involving high-risk premises.

Other insurers may accept the work subject to additional information, underwriting conditions or premiums.

Before taking on a substantially different type of project, contact your insurance broker.

It is better to identify an insurance issue before work begins than after a loss occurs.

12. What About Work Involving Heat?

Some contracting operations involve open flames, torches, welding, soldering or other heat-producing equipment.

These activities can create significant fire risks.

Insurance policies may contain specific conditions or exclusions relating to hot work.

Depending on the policy and operation, requirements may include fire prevention measures, appropriate extinguishing equipment, inspections or fire-watch procedures.

Contractors should understand the requirements applicable to their work.

Failure to comply with relevant policy conditions could create coverage concerns.

The fact that a contractor has performed the same work for years without a fire does not eliminate the exposure.

13. Are Materials at the Job Site Covered?

Contractors often purchase materials before installation.

These might include:

• Lumber.

• Roofing materials.

• Plumbing fixtures.

• Electrical components.

• Cabinets.

• Flooring.

• Heating and cooling equipment.

If materials are stolen or damaged before installation, determining who bears the loss can depend on the contract, ownership arrangements and insurance coverage.

A contractor's standard property or liability policy may not provide the protection needed.

Installation floater coverage or other specialized insurance may be appropriate for certain projects.

For larger construction projects, builder's risk or course of construction insurance may also need to be considered.

The property owner, general contractor and subcontractors should understand who is responsible for insuring the project and materials.

14. What Is a Certificate of Insurance?

Contractors are frequently asked to provide certificates of insurance before beginning work.

A certificate generally summarizes certain information about the contractor's insurance, such as:

• The named insured.

• Insurance company.

• Policy number.

• Type of coverage.

• Liability limit.

• Effective and expiry dates.

Customers and general contractors use certificates to obtain evidence of insurance.

However, a certificate does not automatically guarantee coverage for a particular project.

It does not replace the policy wording, remove exclusions or extend coverage beyond the insurance actually provided.

Contractors should also ensure that certificates are issued by an authorized insurance representative.

Do not alter an insurance certificate yourself.

If a customer requires specific wording or additional insured status, forward the request to your broker for review.

15. What Does Additional Insured Mean?

Some commercial contracts require a contractor to add the property owner, landlord or general contractor as an additional insured.

This may provide specified liability protection to the additional insured for certain claims connected with the contractor's operations.

However, the protection depends on the endorsement wording.

An additional insured endorsement does not necessarily provide the same coverage as the contractor receives as the named insured.

It also does not automatically cover every contractual obligation.

If your contract requires additional insured status, provide the relevant wording to your broker before signing or beginning work.

The insurer may need to approve or issue an endorsement.

16. Be Careful What You Agree to in a Contract

Construction contracts sometimes contain insurance and indemnification requirements that go beyond a contractor's standard insurance policy.

For example, a contract may require the contractor to:

• Carry a specified liability limit.

• Add other parties as additional insureds.

• Maintain insurance for a particular period.

• Assume responsibility for certain losses.

• Indemnify another party against specified claims.

• Provide specialized coverage.

Some contractual obligations may not be fully covered by insurance.

Before agreeing to significant insurance or indemnification provisions, have the requirements reviewed by your broker and obtain legal advice where appropriate.

Do not assume that signing a contract automatically causes your insurer to provide the coverage required by that contract.

17. What Happens if Your Business Grows?

A contracting business can change considerably over time.

Perhaps you started as a sole proprietor performing small residential repairs.

Several years later, you may have employees, multiple vehicles, subcontractors and much larger projects.

Your insurance should be reviewed as the business evolves.

Important changes may include:

• Increased gross revenue.

• Increased payroll.

• Additional employees.

• New trades or services.

• Different types of projects.

• Increased subcontracting.

• Additional vehicles.

• More expensive tools and equipment.

• New business premises.

• Operations outside your usual geographic area.

Insurers often use revenue, payroll and operational information to assess a contractor's exposure.

Some policies may also be subject to premium adjustments or audits.

Accurate information helps avoid unexpected premium adjustments and potential coverage issues.

18. Why the Cheapest Contractors Insurance Policy May Not Be the Best

Contractors understandably want to control their operating expenses.

Insurance is one of those expenses.

However, the lowest premium does not necessarily provide the most suitable coverage.

Two insurance quotations may differ in important ways, including:

• Types of operations accepted.

• Liability limits.

• Deductibles.

• Completed operations coverage.

• Restrictions on subcontracting.

• Tools and equipment coverage.

• Coverage for rented equipment.

• Exclusions relating to particular activities.

• Contractual liability provisions.

A contractor should understand what is included and excluded before choosing a policy.

Saving a relatively small amount on premiums may not be worthwhile if the coverage does not adequately address the business's actual exposures.

19. What Information Should You Have Ready When Requesting a Quote?

When requesting contractors insurance, be prepared to provide:

• Legal business name and operating name.

• Business address.

• Years in business.

• Detailed description of work performed.

• Percentage of revenue from different operations.

• Annual gross revenue.

• Annual payroll.

• Number of employees.

• Details of subcontracted work.

• Types and values of tools and equipment.

• Information about commercial vehicles.

• Previous insurance and claims history.

• Details of significant contracts or insurance requirements.

Additional information may be necessary for specialized or higher-risk operations.

The more accurately your operations are described, the better your broker can assess the available insurance options.

20. Review Your Insurance Before a Claim Happens

The best time to discover that your insurance needs updating is before something goes wrong.

Consider the following questions:

• Does my insurer know every type of work I currently perform?

• Am I insured for both residential and commercial projects, where applicable?

• Do I have appropriate completed operations coverage?

• Are my tools covered at job sites and while being transported?

• What happens if my tools are stolen from my vehicle?

• Is rented equipment covered?

• Have I disclosed my subcontracting arrangements?

• Does my insurance satisfy the requirements of my contracts?

• Are my business vehicles properly insured?

• Have I advised my broker about changes in revenue, payroll or operations?

If you are uncertain about any of these questions, it may be time for an insurance review.

Protecting Your Contracting Business

Small contractors work hard to build their businesses, establish a reputation and earn the trust of their customers.

An unexpected claim can place that hard work at risk.

Appropriate insurance is an important part of protecting your business, but coverage needs to reflect the work you actually perform.

Having a liability policy is not the same as being properly insured for every job you undertake.

At L.D. Dermody Insurance Brokers, we work with Ontario contractors to help them understand their insurance exposures and review the coverage options available through the companies we represent.

Whether you are starting a contracting business, adding new services, hiring subcontractors or taking on larger projects, it is important to review your insurance arrangements.

If you have questions about your contractors insurance, contact L.D. Dermody Insurance Brokers. We would be pleased to discuss your operations and help you review your coverage needs.

This article provides general insurance information for Ontario contractors as of October 2026. Insurance availability, eligibility, coverage, limits, conditions and exclusions vary by insurer and policy. WSIB obligations and contractual requirements should be confirmed with the appropriate authorities and professional advisers.