What Insurance Do You Need for Construction Arbitrage?

The insurance you need for construction arbitrage is general liability coverage for your own business plus a current certificate of insurance from every subcontractor you use. You hold the client contract - the client's liability runs to you, so your cover needs to be right before you take a job.

How insurance works in construction arbitrage#

This is the piece people miss when they first come to the model.

In construction arbitrage, you win the work, sub it out, and keep the spread. The client is not in a contract with the plasterer or the electrician - they are in a contract with your company. So when something goes wrong on site - an injury, damage to a neighbour's property, defective work that needs redoing - the client's first call is to you.

That exposure is real. It is also fully manageable, provided you carry the right cover before you take your first job.

The insurance stack for a construction arbitrage operator has three core layers: your own general liability (called public liability in the UK, Australia, and similar markets), workers' compensation or employer's liability if you have staff, and a firm requirement that every subcontractor carries their own insurance. Professional indemnity is a fourth layer, but most pure arbitrage operators do not need it.

General liability insurance - the baseline you cannot skip#

General liability insurance covers injury to people and damage to property arising from your business's work. It is the foundation everything else sits on.

Without it, you cannot get licensed in most US states. Without it, you will not pass the prequalification check on any commercial project, regardless of how solid your subcontractors are.

In the US: State licensing minimums vary - some accept as little as $50,000 in general liability for a contractor's licence, and each state's licensing board sets its own schedule. But the commercial market standard is higher: $1 million per occurrence and $2 million aggregate is the minimum most clients and project owners will accept. On larger or higher-value commercial work, umbrella or excess liability of an additional $1 million to $5 million is commonly required on top of the base policy. Being "technically compliant" with a state minimum while carrying limits well below what your projects require still leaves you exposed.

In the UK: Public liability insurance is not a statutory requirement for all contractors, but it is effectively mandatory by contract. Standard JCT and SBC/Q construction contracts default to £10 million. Most larger clients and all public sector organisations demand at least £5 million, with many major commercial clients and frameworks requiring £10 million. Operating with less than £5 million cover in the UK construction market means you cannot bid on most serious work.

In Australia: There is no single legislated minimum across all states. In practice, commercial clients and principal contractors routinely require $10 million to $20 million in public liability before work begins. Public sector construction contracts in Australia typically set $10 million as a floor, rising to $20 million for higher-value or higher-risk projects. If you are holding main contractor agreements in Australia, $10 million is the realistic entry point for commercial work.

In Canada: No federal law mandates general liability insurance for contractors, but $2 million per occurrence is the standard commercial requirement in most provinces. Larger commercial and government projects typically require $5 million to $10 million. In Quebec, the Régie du bâtiment du Québec (RBQ) regulates contractor licensing and carries its own conditions around coverage. The RBQ is the licensing body to check for Quebec-specific requirements.

Workers' compensation and employer's liability#

If you have employees, this is not optional and the rules are strict.

In virtually every US state, workers' compensation is legally required the moment you hire your first W-2 employee. Operating without it can trigger stop-work orders, substantial fines, and personal liability for any on-site injury claim. Workers' comp is managed at the state level, so the exact rules vary - check your state's labour department for the threshold in your jurisdiction.

In the UK, employer's liability insurance is a legal requirement under the Employers' Liability (Compulsory Insurance) Act 1969 as soon as you employ anyone - including part-time and temporary staff. The statutory minimum is £5 million, though nearly every policy is written at £10 million.

If you run the business without employees - all work done by self-employed subcontractors - you typically do not need workers' comp for your own payroll. There is still a risk to manage though: if a subcontractor with no workers' comp of their own is injured on your site, many US states will reclassify them as your employee for insurance purposes and require your policy to cover the claim. That is why requiring every sub to carry their own workers' comp is a direct protection for your position, not just a formality.

Professional indemnity - when you need it and when you don't#

For a standard construction arbitrage operation - you take the brief, coordinate the quote, sub the work out, manage delivery - professional indemnity is generally not required. You are acting as a main contractor, not as a designer or consultant.

Professional indemnity becomes relevant when you move into design-build territory: if you specify materials, provide drawings or engineering input, offer technical advice the client relies on, or take on any design obligation in your contract. In those situations, professional indemnity covers claims that your advice or design caused financial loss.

Keep the model clean - win the work, sub it out, manage delivery, never hold yourself out as an engineer or designer - and professional indemnity stays optional. The moment you start giving technical advice that clients act on, add it.

Your subcontractors' own insurance - the piece beginners get wrong#

Your general liability policy covers your business's exposure. It does not automatically cover an independent subcontractor's actions on site.

Every subcontractor you use must carry their own public liability or general liability insurance. Before any sub starts work on a job you are running, you get their certificate of insurance, confirm the policy is current, and verify the coverage level is appropriate for what they are doing. Keep a copy of every COI in the job file.

If a sub causes damage to a client's property or injures someone on site, your insurer may pay the client claim first and then pursue the sub for reimbursement. If the sub has no coverage, that recovery fails - and the loss sits with your business.

I carry over 1,400 subcontractors in my database. Every one of them on a live job has a current COI on file before they set foot on site. It is a ten-minute check that removes a significant exposure.

The insurance document that most often gets skipped is the sub's COI. That is exactly where the claims originate.

What it costs you versus what it covers#

The annual premium on a general liability policy is typically recovered in the margin on a single mid-size job. For most small operators - regardless of market - the premium is not the constraint. The constraint is finding and booking the work, not paying for the cover that lets you hold main contractor agreements.

Running without adequate insurance on a live project is not a calculated risk - it is an unquantified one. A single property damage claim on a renovation job can run into six figures. A serious injury claim can reach seven. Without coverage at the right level, those costs land directly on your business, and because you hold the main contract, the client has a clear legal line to pursue.

Get the cover in place before you take your first job. Adjust the limits upward as the projects get larger. Keep sub COIs current on every live job. That is the whole system.

Where to go from here#

For the full licensing picture by country and state, the do you need a contractor licence for construction arbitrage post covers the requirements in detail. The legal overview for the full global picture is on the is construction arbitrage legal page. For the broader risk picture - including sub failures, defect liability, and cash flow - see what are the risks of construction arbitrage.

For the mechanics of the client and subcontractor contracts that sit alongside the insurance, see contracts, insurance and staying legal.

If you want to build this alongside people who are already running it, the room is Construction Arbitrage Players on Skool - the community where this gets done, not just discussed.

And for the full picture of how I built this from the inside, I am writing THE FAMILY SECRET - How Construction Arbitrage Really Works. Not out yet, but coming.

Last checked: 5 July 2026.