What Happens If a Contractor Is Not Insured

Table of Contents

• Why Contractor Insurance Matters
• Risks of Hiring an Uninsured Contractor
  • Workers' Compensation and Workplace Injuries
  • Property Damage and General Liability
  • Personal Liability and Lawsuits
• Understanding Contractor Liability Insurance
• How to Verify Contractor Insurance
  • Stage 1: Collect the Right Documents
  • Stage 2: Read the Certificate Line by Line
  • Stage 3: Confirm Directly With the Insurer or Broker
  • Stage 4: Match Coverage to the Work
  • A Quick Pre-Hire Checklist
• Requesting a Contractor Insurance Certificate
• What to Do If You Discover a Contractor Is Uninsured
  • Scenario A: You Find Out Before Work Begins
  • Scenario B: You Find Out Mid-Project, No Incident Yet
  • Scenario C: An Injury or Damage Has Already Occurred
  • What Happens to the Contractor
  • The Paper Trail That Protects You
• Protecting Yourself: Contract Language and Risk Transfer
• Conclusion
• Frequently Asked Questions

Last Updated: October 16, 2026

Why Contractor Insurance Matters

What happens if a contractor is not insured is a question every homeowner should ask before signing a contract.

At Timeless General Contracting, 25 years in the industry provide a deep understanding of the potential costs associated with uninsured hires.

Contractor insurance comes in two main forms. Workers' compensation covers medical bills and lost wages if a worker is injured on your property.

Risks of Hiring an Uninsured Contractor

Hiring an uninsured contractor creates financial and legal exposure most homeowners don't anticipate.

Workers' Compensation and Workplace Injuries

If a worker is injured on your property and the contractor has no workers' compensation coverage, you may be liable for their medical bills and lost wages, even if the injury was the worker's fault. The injured worker can sue you directly for medical expenses, rehabilitation costs, and lost income, lawsuits reaching tens of thousands of dollars.

Property Damage and General Liability

Accidents happen on job sites, a worker might damage your roof, plumbing, or electrical system. Without general liability insurance, the contractor has no coverage for these mistakes, leaving you to pay for repairs out of pocket. Recovering money is difficult once you've paid for the work, and a single mistake like a nail through a water line can trigger thousands in damage and remediation.

Personal Liability and Lawsuits

If a contractor or their worker injures someone else on your property, a delivery person tripping over tools, a neighbor struck by debris, the injured party can sue both the contractor and you as property owner. Your homeowner's insurance may not cover it because the contractor was uninsured, so you'll need a lawyer and a court defense. Legal costs alone can reach $10,000 to $50,000 even if you win; if you lose, damages can be much higher.

Understanding Contractor Liability Insurance

Contractor liability insurance covers work-related risks through two primary components. General liability insurance covers property damage and bodily injury caused by the contractor's work, paying repairs and medical bills up to the policy limit. Workers' compensation insurance covers employees injured while working, paying medical treatment and a portion of lost wages; in most provinces, contractors with employees must carry it by law. Sole proprietors without employees may carry only general liability, while others carry both.

How to Verify Contractor Insurance

Verification determines whether you or the contractor absorbs the cost of an injury or mistake. Most homeowners glance at the proof and move on, that's where exposure begins.

A proper verification has four stages: collect the documents, read them line by line, confirm them directly with the insurer, and match the coverage to the actual work.

Stage 1: Collect the Right Documents

Ask for a certificate of insurance (COI) and, for workers' compensation, the clearance letter or account in good standing from the provincial workers' compensation board. A COI alone is a snapshot, not a guarantee, it can be issued before a policy lapses or is cancelled for non-payment.

Request the documents in writing, not as a photo texted from a job site. A legible PDF from the broker is standard.

Stage 2: Read the Certificate Line by Line

Every COI contains the same core fields. Check each one:

• Named insured. The legal business name on the policy must match the name on your contract. A policy issued to 'J. Smith' does not cover 'Smith Renovations Ltd.' if those are separate legal entities.
• Policy type. General liability (CGL) and workers' compensation are different policies. One does not substitute for the other.
• Policy period. Confirm the effective and expiration dates bracket your entire project, including any weather delays. A policy expiring next month leaves the back half of your renovation uncovered.
• Limits. Look at both the per-occurrence limit and the general aggregate. A $2,000,000 per-occurrence limit with a $2,000,000 aggregate can be exhausted by a single serious claim, leaving nothing for a second incident.
• Coverage territory. Confirm the policy applies in your province.
• Additional insured and waiver of subrogation. If you are named as an additional insured, the certificate will list you. If it does not, you are relying on the contractor's goodwill, not their policy.

Stage 3: Confirm Directly With the Insurer or Broker

Call the broker or insurer listed on the certificate, use the number on the certificate or the insurer's published number, never one the contractor gives verbally. Ask three questions: Is this policy active today? Has any cancellation or non-renewal notice been issued? Does the policy cover the specific work I am hiring this contractor to perform?

Stage 4: Match Coverage to the Work

Ask the contractor's broker to add you as an additional insured and, where available, include a waiver of subrogation in your favor. This is routine for a legitimate contractor; refusal, delay, or vagueness is itself information.

For workers' compensation, confirm the contractor's account is in good standing with the provincial board via a clearance letter, which can be checked directly. If the contractor has employees and cannot produce this, treat it as a stop signal.

A Quick Pre-Hire Checklist

• Certificate of insurance received as a PDF from the broker
• Named insured matches the contract
• Policy period covers the full project timeline
• Per-occurrence and aggregate limits reviewed
• Coverage territory includes your province
• You are listed as additional insured
• Waiver of subrogation confirmed, if available
• Workers' compensation clearance letter obtained
• Policy confirmed active by phone with the insurer or broker
• Exclusions for the specific scope of work reviewed

provincial workers' compensation board clearance letter lookup

Verification takes an afternoon. Skipping it can take years to resolve.

Requesting a Contractor Insurance Certificate

A contractor insurance certificate proves coverage exists. Request it in writing before signing any contract.

The certificate should list:

• The contractor's name and business address
• The insurance company name and policy numbers
• Coverage types (general liability, workers' compensation)
• Coverage limits for each policy
• Policy expiration dates
• Your name as the certificate holder (additional insured)

Request to be named as an additional insured on the general liability policy, so you're protected under their coverage if the work causes damage.

Ask for the certificate to be dated and signed by the insurance agent. This confirms it's official and current.

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Keep a copy with your project records for any future claim or legal defense.

What to Do If You Discover a Contractor Is Uninsured

Discovery can happen at three moments, each requiring a different response: before work starts, mid-project with no incident yet, and after an injury or damage has already occurred.

Scenario A: You Find Out Before Work Begins

This is the easiest case: do not sign, pay a deposit, or let anyone on the property.

Send a written request for proof of insurance with a firm 48-hour deadline, stating no work begins until a valid certificate and, if applicable, a workers' compensation clearance letter are verified. If the deadline passes, move on, an uninsured contractor is not a bargain at any price.

Scenario B: You Find Out Mid-Project, No Incident Yet

This is the most common and uncomfortable situation: work is underway, money has changed hands, and you now know the contractor is not covered.

Step 1: Pause work in writing. Send written notice instructing the contractor to stop immediately until proof of insurance is provided.

Step 5: Decide whether to continue. If valid coverage arrives by your deadline, you may proceed.

Scenario C: An Injury or Damage Has Already Occurred

If a worker is injured or property damaged and the contractor is uninsured, this is now a claims problem, not a contract problem.

• For a worker injury: The injured worker may file a claim with the provincial workers' compensation board. If the contractor isn't registered, the board may pursue the hiring party, and in some provinces the property owner can be assessed for the claim. Contact the board and, if exposure is significant, a construction liability lawyer.
• For property damage: Photograph everything before repairs, get written estimates from licensed trades, and notify your homeowner's insurer promptly, late notice can itself void coverage.
• For a third-party injury: Notify your insurer immediately, preserve incident reports, witness names, and photographs, and do not admit fault or discuss liability with the injured party.

What Happens to the Contractor

An uninsured contractor exposes more than you. Where workers' compensation is mandatory, operating without it can trigger penalties, back assessments, and stop-work orders. Licensing bodies may also require proof of insurance, meaning an uninsured contractor may be operating outside their license.

That matters for two reasons: it strengthens your position if you terminate or recover money, and it reveals how the contractor runs their business.

The Paper Trail That Protects You

Whatever scenario you are in, build a written record:

• Dated notice to stop work
• Copy of the contract and the insurance clause
• Copies of any certificates or clearance letters received
• Notes from every phone call, with date, time, and the name of the person you spoke to
• Photographs of the project at the point of discovery
• Written confirmation from your own insurer of what is and is not covered

If the dispute escalates, this file is what a lawyer, insurer, or tribunal relies on. Memory is not evidence; documentation is.

Protecting Yourself: Contract Language and Risk Transfer

Smart contract language protects you before problems start. Include specific insurance requirements in your written agreement.

Require workers' compensation insurance if the contractor has employees, naming the specific coverage and minimum limits.

Include a clause requiring proof of insurance before work starts and maintained coverage throughout the project.

Require the contractor to name you as an additional insured on their general liability policy, extending their coverage to protect you.

Conclusion

Hiring an uninsured contractor creates financial, legal, and safety risks most homeowners underestimate until it's too late. Workers' compensation gaps leave you liable for medical bills, general liability gaps mean you pay for property damage, and lawsuits can drain your savings.

At Timeless General Contracting, our Red Seal certification and 25 years of industry experience mean we meet every professional standard. Our Client Project Portal keeps you informed every step of the way.