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Contractor Insurance in Ontario: A Complete Guide for Trades
Contractors face a combination of risks that many standard business insurance policies are not designed to cover.
You may be working at a customer’s home, transporting expensive tools, supervising subcontractors or completing work that could cause damage months after the job is finished. One mistake, theft or injury can create a significant financial loss.
That is why contractor insurance in Ontario needs to be built around the work you actually perform. An electrician, plumber, HVAC contractor and general contractor may all need liability insurance, but the details of their policies should not be identical.
This guide explains the main types of coverage Ontario contractors should consider, including commercial general liability, tools and equipment insurance and WSIB requirements.
What Insurance Does a Contractor Need in Ontario?
Most contractors should begin with three areas:
- Commercial general liability insurance
- Tools and equipment coverage
- WSIB coverage, where required
Depending on the business, you may also need commercial auto, installation coverage, builders risk, pollution liability, professional liability or cyber insurance.
The right policy will depend on your trade, annual revenue, payroll, use of subcontractors, job size, service area and whether you perform residential, commercial or industrial work.
Commercial General Liability Insurance
Commercial general liability, commonly called CGL insurance, protects your business if your operations cause bodily injury or property damage to someone else.
Examples could include:
- A customer tripping over your equipment
- A pipe connection failing and causing water damage
- Accidental damage to a customer’s building
- Debris from your work damaging a nearby vehicle
- A completed job later causing injury or property damage
- Legal costs associated with defending an insured claim
Many contractors carry at least $2 million in liability coverage. Some commercial contracts, municipalities and general contractors may require a $5 million limit.
The appropriate limit should be based on the work you perform and the size of the losses that could result—not only the minimum required to obtain a contract.
Faulty Workmanship Versus Resulting Damage
Contractors often misunderstand how liability insurance responds to faulty workmanship.
A CGL policy is not a warranty for your work. It will not normally pay simply because the work was completed incorrectly and must be redone. However, there may be coverage when faulty work causes resulting property damage or bodily injury, depending on the policy wording and exclusions.
For example, the cost to replace an incorrectly installed pipe may not be covered. The resulting water damage to the customer’s building may be.
This is one reason contractors need to understand the difference between faulty workmanship and products-completed operations coverage.
Products-Completed Operations Coverage
Products-completed operations coverage applies to certain liability claims that arise after your work has been completed or a product has left your possession.
This is particularly important for plumbers, electricians, HVAC contractors, roofers and other trades whose work could cause damage after they leave the job site.
Your broker should confirm whether products-completed operations coverage is included, what limits apply and whether there are exclusions related to your particular trade.
Do not assume that every contractor liability policy provides the same protection. Some policies may restrict work involving roofing, hot work, excavation, structural work, heights, fuel tanks or other higher-risk operations.
Tools and Equipment Insurance
Commercial general liability does not insure your own tools simply because they were stolen or damaged.
Contractors normally need separate tools and equipment coverage. This may insure portable tools, machinery and equipment while they are:
- At your shop
- In transit
- Stored in a vehicle
- At a job site
- Temporarily away from your main location
The policy limit should reflect the total replacement cost of the equipment you could lose in one incident.
Contractors frequently underestimate this amount. It does not take long for power tools, testing equipment, compressors, generators and specialized machinery to add up.
You should also ask how theft from an unattended vehicle is handled. Some policies require evidence of forced entry, have lower theft limits or exclude equipment left in a vehicle overnight.
Larger equipment such as skid steers, excavators, trailers and lifts should be specifically listed when required. If equipment is financed or leased, the lender or leasing company may also need to be shown on the policy.
Installation Floaters
An installation floater protects materials and property that will become part of a completed project.
This could include:
- Furnaces and air-conditioning units
- Electrical panels and fixtures
- Plumbing materials
- Windows and doors
- Flooring
- Custom cabinetry
- Other materials awaiting installation
Coverage can apply while the property is in transit, temporarily stored or located at the job site.
An installation floater is different from tools insurance. Tools are used to complete the work. Installation materials are items that will become part of the finished project.
Commercial Auto Insurance
If a vehicle is owned by the business or regularly used for contracting work, it may require commercial auto insurance.
A personal auto policy may not be appropriate for a vehicle used to transport tools, carry materials, visit multiple job sites or perform business operations.
Contractors should tell their broker:
- Who owns the vehicle
- Who drives it
- How it is used
- Where it travels
- Whether it carries tools or materials
- Whether it tows a trailer
- Whether employees take it home
- Whether it has permanent modifications
Trailers and equipment transported on them may also require separate coverage.
If employees use their own vehicles for business errands, the company should consider non-owned automobile liability.
WSIB Requirements for Ontario Contractors
Insurance and WSIB are not the same thing.
Commercial liability insurance responds to certain third-party bodily injury and property damage claims. WSIB coverage relates to workplace injuries and occupational illnesses.
In Ontario’s construction industry, WSIB coverage is generally mandatory for independent operators, sole proprietors, certain partners and certain executive officers who perform construction work. Businesses must also register within 10 calendar days of hiring their first employee. Some exemptions apply, including limited circumstances involving qualifying home-renovation work performed directly for a homeowner. Contractors should confirm their individual obligations directly with the WSIB. WSIB: Mandatory coverage in construction
A WSIB clearance confirms that a business is registered and in good standing. For construction work, the principal must generally obtain a clearance from the contractor or subcontractor before work begins and keep it valid for the duration of the job. If you hire a subcontractor, you may become the principal responsible for obtaining that subcontractor’s clearance. WSIB: Clearance FAQs
Having a liability insurance certificate does not replace a WSIB clearance, and a WSIB clearance does not replace liability insurance. Many contracts require both.
Ontario Licensing and Insurance Requirements
Ontario does not have one insurance or licensing rule that applies to every type of contractor. Requirements depend on the trade, the work being performed and, in some cases, the municipality.
Certain regulated trades have specific requirements. For example, an electrical contracting business must hold the appropriate Electrical Safety Authority licence. Ontario’s licensing regulation requires an electrical contractor to provide evidence of at least $2 million in public liability and property damage insurance. Ontario Regulation 570/05
Well contractors are another example of a trade with specific provincial licensing and insurance requirements. Other businesses may need municipal licences, permits, trade certifications or additional insurance under their contracts.
Before beginning work, contractors should confirm the requirements that apply to their particular trade and location.
Other Coverage a Contractor May Need
Depending on your operations, your contractor insurance in Ontario may also include:
- Builders risk: Coverage for a building or project while it is under construction.
- Contractors pollution liability: Important when work could involve mould, fuel, chemicals, contaminated soil or other pollutants.
- Professional liability: May be needed if you provide design, engineering, consulting or technical advice.
- Equipment breakdown: Covers certain sudden and accidental mechanical or electrical breakdowns.
- Cyber insurance: Helps protect businesses that store customer information, accept online payments or rely on computer systems.
- Crime coverage: May cover employee dishonesty, theft of money and other crime-related losses.
- Bonding: Some contractors need bid, performance, labour and material payment or licence and permit bonds.
Choosing Trades Insurance in Kitchener
When arranging trades insurance in Kitchener, your broker should ask detailed questions about your work.
Saying that you are a “general contractor” is not enough. Insurers will want to know whether you perform the work yourself, subcontract it, work at heights, do excavation, use heat, complete structural work or take on projects outside Ontario.
Your contracts also matter. Before signing, look for insurance limits, additional-insured requirements, waiver-of-subrogation clauses and indemnity agreements.
We work with contractors throughout Kitchener, Waterloo, Cambridge and the surrounding area. Coverage should reflect your actual operations, not simply the category an online application assigns to your business.
Frequently Asked Questions About Contractor Insurance in Ontario
Commercial general liability insurance is not universally mandatory for every contractor in Ontario. However, it may be required by a trade licence, municipality, landlord, lender, customer or construction contract. WSIB requirements are separate and may be compulsory.
Many Ontario contractors carry $2 million in commercial general liability coverage. Larger commercial contracts may require $5 million. The right limit depends on your work, contracts and potential loss exposure.
It generally does not pay to correct your own defective work. It may respond when that work causes resulting bodily injury or property damage, subject to the policy’s wording and exclusions.
No. Contractors normally need separate tools and equipment coverage to insure their own property against risks such as theft or damage.
Yes. Subcontractors should carry their own liability insurance and provide a certificate of insurance. Where applicable, they should also provide a valid WSIB clearance. Your policy should not be treated as a substitute for the subcontractor’s insurance.
It depends on how the vehicle is owned and used, but regular contracting use may require commercial auto insurance. The insurer must be told how the vehicle is being used.
All-Risks Insurance Brokers Kitchener works with contractors across Kitchener-Waterloo and throughout Ontario. We can review your trade, contracts, equipment, vehicles and job-site exposures before approaching suitable insurance markets.
If you are looking for contractor insurance in Kitchener or want to review an existing policy, contact our office for a contractor insurance quote.