Michigan law requires contractors to carry workers' compensation insurance if they have even one employee. General liability insurance isn't legally required, but every client, property owner, and general contractor will demand proof of it. Here's what you legally must carry and what protects your business from the ground up.
What Michigan law requires for contractors
Workers' compensation insurance (required if you have employees)
Michigan Occupational Safety and Health Administration (MIOSHA) law mandates workers' compensation if you have one or more employees. This includes:
- Full-time employees
- Part-time employees
- Seasonal workers
- Family members employed in the business
Sole proprietors with no employees are exempt — but many solo contractors voluntarily carry it to protect themselves (injuries force you to absorb medical bills and lost income from your business revenue).
Workers' comp costs depend on your trade, payroll, and loss history. A general contractor might pay $4,000–$12,000/year on a $100,000 payroll; a roofer might pay $12,000–$25,000/year (higher hazard). Get a free workers' comp quote to see real numbers for your crew size.
Commercial auto insurance (required if you own a vehicle used for business)
If you own a pickup truck, van, or any vehicle used for business (transporting materials, tools, or employees), you must carry commercial auto insurance. Personal auto insurance explicitly excludes business use.
Michigan minimum:
- Bodily Injury Liability: $20,000 per person / $40,000 per accident
- Property Damage Liability: $10,000
Most insurers and clients require higher limits — $100,000/$300,000/$100,000 is common for contractors.
What Michigan doesn't legally require (but clients demand)
General liability insurance (not legally required, but required by law)
Here's the catch: Michigan law doesn't mandate general liability insurance. However, every property owner, general contractor, and lending institution will require proof of it before you step on a job site. It's a practical mandate.
General liability covers:
- Bodily injury — if your crew injures a client, property owner, or bystander.
- Property damage — if you damage the client's building, neighbor's roof, or someone's parked car.
- Products/completed operations — defects in work you completed (e.g., a roof you installed leaks 6 months later).
Typical contractor general liability: $300,000 per occurrence / $1,000,000 aggregate (sometimes written as $1M/$2M). Cost: $500–$2,000/year depending on trade, payroll, and claims history.
Umbrella/excess liability (highly recommended for larger jobs)
If a major accident on your job site injures multiple people or causes significant property damage, liability can exceed your general liability limit ($300K–$1M) in minutes. Umbrella coverage provides an extra $1–$5 million protection for $400–$1,500/year. Required by some GCs for projects over $100,000.
Contractor insurance by trade: what's typical
| Trade | Workers' Comp ($/yr) | Gen Liability ($/yr) | Commercial Auto ($/yr) | Typical limits |
|---|---|---|---|---|
| General Contractor | $6,000–$15,000 | $800–$1,500 | $1,200–$2,000 | $1M/$2M GL, $100K auto |
| Electrician | $3,000–$8,000 | $600–$1,200 | $1,000–$1,800 | $1M/$2M GL, $100K auto |
| Plumber | $3,000–$8,000 | $600–$1,200 | $1,000–$1,800 | $1M/$2M GL, $100K auto |
| Roofer | $12,000–$28,000 | $1,500–$3,000 | $1,200–$2,500 | $1M/$2M GL, $100K auto, umbrella |
| HVAC | $5,000–$12,000 | $700–$1,400 | $1,200–$2,000 | $1M/$2M GL, $100K auto |
Common contractor coverage questions
Do solo contractors need workers' comp in Michigan?
Legally, no — sole proprietors with zero employees are exempt. But if you ever get injured and can't work, your business stops cold. Many solo contractors buy voluntary workers' comp (cost: $2,000–$4,000/year for a single owner) to protect against this. Alternatively, build an emergency fund equal to 3–6 months of income.
What if I hire independent subcontractors?
If subcontractors are truly independent (they set their own hours, rates, and methods, and work for multiple clients), they carry their own insurance and you don't cover them under your policy. However, you must verify they carry their own general liability and workers' comp. Many general contractors won't hire a sub without proof of insurance. If a sub is injured on your job and lacks coverage, the injured worker can sue you — so verification is critical.
Do I need pollution liability for construction work?
If your work involves hazardous materials (lead paint, asbestos, mold remediation, fuel tank removal), yes — pollution liability insurance is essential and often mandatory. Standard general liability policies exclude pollution. Specialized coverage runs $800–$2,000/year depending on the hazard.
What about tools, equipment, and inventory on job sites?
General liability covers damage caused by you to the client's property or others. It does NOT cover theft or damage to your own tools and equipment. For that, you need:
- Inland marine (tools & equipment coverage) — protects tools in your truck, on job sites, or in storage. Typical cost: $500–$1,500/year for $50,000–$100,000 coverage.
- Commercial property insurance — if you have a workshop, yard, or storage facility, this covers the building and equipment inside.
Do I need public liability insurance if I don't have employees?
Not legally — but yes, practically. A solo contractor who damages a client's property, injures a visitor, or causes an accident can face a personal lawsuit. Without general liability, you pay out of pocket. Even a minor injury claim can cost $10,000–$50,000+ in legal fees and damages. Coverage for $500–$1,500/year is far cheaper than that risk.
How to get Michigan contractor insurance
Work with an independent agent who specializes in contractor insurance. They can:
- Match coverage to Michigan law and your trade's specific risks.
- Bundle workers' comp, general liability, commercial auto, and tools coverage for a discount.
- Help you meet client and lender requirements.
- Review your coverage annually as your payroll grows.
View our commercial insurance options or request a quote with your payroll, job types, and trade. We work with carriers that specialize in Michigan contractors.
Frequently Asked Questions
Can I get general liability without workers' comp?
Yes. They're separate policies. However, if you have employees and lack required workers' comp, you're violating Michigan law and face fines ($500–$1,000+ per day). Some insurers will bundle them for a discount.
What if I get hurt on a job and don't have workers' comp coverage?
If you're a sole proprietor (no employees), Michigan's Workers' Disability Compensation Act doesn't cover you anyway — you're not eligible for workers' comp benefits. You'd cover your medical bills and lost income yourself. This is why many solo contractors buy voluntary coverage.
Will my insurance rates go down if I have no claims?
Yes. Most carriers offer a 3–5 year claims-free discount (typically 5–15% off). Your experience modification rate (EMR) for workers' comp also improves with a clean loss history. Ask your agent about discounts you may qualify for.
Do I need insurance if I'm just starting out?
Yes. Day one. A single injury or property damage claim can bankrupt a new business. Many GCs won't hire uninsured subs, and property owners demand proof of coverage. Starting without insurance isn't saving money — it's taking a huge risk on a few hundred dollars/month in premiums.
What happens if I'm caught without required workers' comp?
Michigan's Department of Insurance and Financial Services (DIFS) investigates complaints. Penalties include:
— Fines: $500–$1,000+ per day of non-compliance
— Work stoppage: you can't operate legally
— Civil liability: injured workers can sue you personally
— License suspension: if you're licensed (electrical, plumbing, etc.), lack of coverage can lead to license revocation
The bottom line
Michigan contractors must carry workers' compensation (if they have employees) and commercial auto (if they own a work vehicle). General liability isn't legally mandated but is practically mandatory — every client, property owner, and GC demands it. Bundle these three and you're compliant and protected. Get a quote to see what coverage fits your crew and trade, and we'll make sure you meet Michigan requirements and your clients' insurance demands.