Workers compensation is mandatory with zero exceptions—CSLB suspension follows any lapse. Maintain general liability and commercial auto continuously, add property owners/GCs as additional insured, and keep current certificates on every job.
Key Takeaways
Why This Matters on the Exam
Insurance requirements are critical to protect your plumbing business and are tested on the C-36 exam. California law requires specific insurance coverage for contractors with employees. Failure to maintain required insurance can result in CSLB license suspension and significant fines. You must understand what types of insurance are mandatory, what's recommended, and how insurance lapses affect your licensing status.
What You Must Know
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Workers compensation insurance is MANDATORY for all California employees; CSLB automatically suspends license upon lapse discovery; no exceptions exist
General liability insurance minimum typical limits: $1 million per occurrence / $2 million aggregate; covers third-party bodily injury and property damage only
Commercial auto insurance required for any vehicle used for business purposes; personal auto policies exclude business use
Contractor bond: $25,000 CSLB requirement; renewed annually; costs typically $187–$375 per year ($0.75–1.5% of bond amount)
Additional insured endorsement: property owner and general contractor must be named on your general liability policy before work begins
Certificate of insurance must be current, provided before starting work, and updated annually; outdated certificates prove no coverage
Workers compensation lapse penalties: automatic license suspension, fines up to $10,000+, personal liability for employee injuries, back premiums with interest
Professional liability insurance recommended (not mandated); covers claims of negligent diagnosis, poor workmanship, and errors/omissions
Builder's risk insurance covers physical damage to property under construction and on-site materials; typically required by owners and lenders
Bonding guarantees contract compliance with surety recovery rights; insurance pays claims directly—both required for different legal purposes
Workers compensation insurance is MANDATORY for all employees in California (no exceptions)
General liability insurance protects against property damage and bodily injury claims
Commercial auto insurance is required if you use vehicles for business
Bonding requirements for contractors include contractor bonds (typically $25,000)
Professional liability insurance protects against claims of negligence or poor workmanship
Builder's risk insurance covers property during construction
Additional insured requirements mean the property owner/general contractor is named on your policy
CSLB can suspend your license if workers compensation coverage lapses
Certificates of insurance prove you have coverage; often required by customers