Washington Contractor Insurance Requirements: Bond and Comp

Short answer: To register in Washington you must show L&I a surety bond — $30,000 for a general contractor, $15,000 for a specialty contractor, for registrations issued or renewed on or after July 1, 2024 — plus liability insurance of $200,000 public liability and $50,000 property damage, or a $250,000 combined single limit. Workers’ compensation is required only once you have workers, and it can only be bought from L&I; Washington does not allow private workers’ comp policies. Owners are not automatically covered.

Washington bundles three things that contractors elsewhere buy separately, and one of them cannot be bought on the open market at all. The regulator for all of it is the Department of Labor & Industries, which sets the bond, checks the liability policy, and is itself the only source of workers’ compensation coverage in the state. Your tax authorities are the IRS and the Washington Department of Revenue, whose rules on charging tax are covered in Washington sales tax for contractors; the registration these policies feed into is in Washington contractor license requirements.

Is workers’ compensation mandatory for Washington contractors?

It depends entirely on whether you have workers, and Washington defines that word more broadly than you might.

L&I’s rule is that if you are hiring employees, you must get a workers’ compensation account by applying for or updating your state business license. There is no minimum headcount, no part-time carve-out, and no small-payroll floor. One employee for one week means an account.

What makes Washington different from nearly every other state is where the policy comes from. L&I states it flatly: Washington State does not allow private workers’ compensation coverage — you must purchase your coverage from L&I or be a certified self-insured employer. There is no shopping for a carrier, no broker comparison, and no bundling comp with your general liability policy. If an agent offers you a Washington workers’ comp policy, something is wrong with the conversation.

Can a one-person Washington business skip workers’ comp?

Yes, and for a sole proprietor it is the default rather than something you apply for. RCW 51.12.020 excludes “sole proprietors or partners” from mandatory industrial insurance outright. If you have no workers, you have no mandatory account.

Corporate officers are the part contractors get wrong, and the reason is manual labor. RCW 51.12.020(8)(a) exempts a bona fide officer only where that person is also a bona fide director and a shareholder — and then narrows it hard: “Only such officers who exercise substantial control in the daily management of the corporation and whose primary responsibilities do not include the performance of manual labor are included within this subsection.”

Read that against a two-person construction company. An owner-officer who is on the tools most days has primary responsibilities that do include manual labor, so the ordinary officer exemption does not reach them. Washington’s answer is the alternative route in RCW 51.12.020(8)(b): a corporation that is not a public company “may exempt eight or fewer bona fide officers… from coverage under this title without regard to the officers’ performance of manual labor if the exempted officer is a shareholder,” or any number of officers where all of them are related by blood within the third degree or by marriage. That is the provision a working contractor-officer actually relies on, and it is shareholder status, not job title, that carries it.

LLC members are exempted by reference to those same tests under RCW 51.12.020(13), depending on whether the company is member-managed or manager-managed. In every one of these cases “I’m an officer, so I’m exempt” is not a safe assumption in Washington — confirm your own structure with L&I before you skip an account.

That default cuts both ways. Nothing covers you if you fall off a roof. Washington offers an opt-in: L&I’s form F213-042-000, the Application for Elective Coverage — Sole Proprietor, Partners, For Profit Corporate Officers, or Member-Managers of Limited Liability Company (LLC). Filing it buys you into the state fund voluntarily. It is not free-form: the form states that a business electing coverage “must report and pay premiums for 480 hours or the actual hours worked by covered sole proprietors, partners, LLC members or corporate officers each quarter,” under WAC 296-17-31007, and must keep reporting those hours until the election is cancelled.

Who is working	Comp account required?	Owner covered?
Sole proprietor, no employees	No	Not unless you file F213-042-000
Sole proprietor with one employee	Yes	Employee yes, owner only by election
LLC members, no employees	No, where the RCW 51.12.020(13) conditions are met	Not unless elected
Corporate officers drawing pay, no other staff	Conditional — an officer doing manual labor falls outside RCW 51.12.020(8)(a) and must rely on the (8)(b) shareholder route; confirm with L&I	Not automatic

For a solo operator the honest framing is that this is a self-funded risk, not an exemption from risk. If you decline elective coverage, an injury that stops you working is a personal balance-sheet event, which is a good reason to treat a reserve the way you would treat money set aside for 1099 taxes — as money that is already spoken for.

What happens when the person you hire is not really a contractor?

This is where Washington quietly turns a solo operator into an employer. If someone you hire fails L&I’s test, they are a covered worker, and you owe premiums on them whether or not you called them a subcontractor.

L&I applies a personal labor test first: the individual is outside coverage if they bring their own employees to do the work and you do not control them, or they bring heavy or costly specialized equipment plus the expertise to run it and you do not control them. If neither applies, the individual must satisfy every part of a six-part test — with a seventh part added for construction:

1. Free from your control or direction.
2. The service is outside your usual business, performed away from all your business locations, or the individual covers the costs of their own principal place of business.
3. Customarily engaged in an independent trade of the same nature, or maintaining a principal place of business eligible for the IRS deduction.
4. Responsible for filing a schedule of expenses with the IRS.
5. Has established an account with the Department of Revenue and other state agencies as required.
6. Maintains a separate set of books or records reflecting all items of income and expenses.
7. Construction only: properly registered as a contractor, or holding a valid electrical contractor license.

Three of the seven are records tests, decided by whether documents exist. And part 7 means an unregistered helper can never pass in construction, however independent the relationship feels. The failure mode is specific: you hire a friend as a “sub,” they get hurt, they were never registered, and L&I bills you as their employer.

Is general liability insurance a condition of registration?

Yes — unusually, it is a condition of being registered at all, not a contract requirement imposed later by a general contractor or a homeowner’s bank. L&I requires proof of either “$200,000 in public liability and $50,000 property damage” or a “$250,000 combined single limit.”

Worth knowing what sits under that summary. RCW 18.27.050 states the underlying minimums as a three-part split: $50,000 for injury or damage to property, $100,000 for injury or damage including death to any one person, and $200,000 for injury or damage including death to more than one person. L&I’s shorthand is what you will see on the registration page, but the per-person figure is the one a certificate of insurance has to satisfy, so hand the statute to your broker rather than the summary.

Those are floors, not recommendations. Commercial generals and public owners routinely demand $1 million per occurrence. Meeting L&I’s number gets you registered; it does not get you onto most commercial job sites. Premiums for the liability policy and the bond are ordinary business expenses, worth tracking with the rest of your self-employed tax deductions.

Do you need a bond, and what does it actually cover?

Yes, and it is not insurance for you. Under RCW 18.27.040 the bond must name “the state of Washington… as obligee with good and sufficient surety in a form to be approved by the department.” Amounts are $30,000 for a general contractor and $15,000 for a specialty contractor, for registrations issued or renewed on or after July 1, 2024 — figures that were more than doubled by the 2023 amendment, so older guides quoting $12,000 and $6,000 are out of date.

The bond stands behind obligations including payment of labor, employee benefits, taxes, materials, equipment, and amounts arising from breach-of-contract claims. When a surety pays a claim, it comes after you for reimbursement. The bond protects your customers, your suppliers, and the state; it protects you only to the extent that having one is what lets you work.

Washington’s registration checklist is that bond, the liability policy, and a UBI number. There is no separate homeowner warranty policy to buy on top. L&I does point homeowners toward a Homeowner Recovery Fund as a route to recourse in eligible cases, which is one more reason the registration your client verifies is the thing that gives them a remedy at all.

What does a lapse actually cost?

More than the reinstatement fee, because a lapse is public. L&I’s verification tool at secure.lni.wa.gov/verify shows whether registration is active and whether bonding and insurance are current, alongside safety history and prior lawsuits. A cancelled policy is visible to the next homeowner who checks.

The legal consequence is heavier. Under RCW 18.27.080 an unregistered contractor cannot bring or maintain an action in a Washington court to collect compensation for work performed. Washington allows a narrow substantial-compliance finding — but only where the department had the required information on file and the contractor maintained current bonding and security and current insurance throughout, with the court also weighing how long the certificate was invalid. In other words, continuous bond and insurance are the exact facts that determine whether a court will let you sue for your money.

What records keep all of this defensible?

Certificates and dates. The bond renewal date, the effective and expiry dates of the liability policy, the date you filed F213-042-000 if you elected coverage, the registration number of every sub you paid, and an invoice and receipt history clean enough to show a separate set of books if L&I asks whether your helper was independent.

Keel is an iOS app that keeps that history entirely on the phone — no account, no bank connection, no cloud sync, and an App Store privacy label reading Data Not Collected. It generates invoice PDFs with your own numbering, logo, and a payment-link QR code, captures receipts read on-device with Apple Intelligence, logs mileage, and writes everything into an append-only, hash-chained ledger with a whole-year single-file export and an Accountant Pack. Free is $0 with unlimited invoices, receipts, and mileage; Keel Pro is a one-time $249.99 Lifetime purchase.

Keel does not sell insurance, issue bonds, or open a workers’ compensation account. It is a record keeper — but three of the seven parts of Washington’s construction test are about records, and that is a test you pass or fail on paper.

Frequently asked questions

Does a sole proprietor need workers’ comp in Washington?

Not if you have no workers. RCW 51.12.020 excludes sole proprietors and partners from mandatory coverage outright, so a one-person operation has no mandatory account. LLC members and corporate officers are excluded only on conditions, and the condition that catches contractors is manual labor: the ordinary officer exemption reaches only officers whose primary responsibilities exclude it, so an owner who is on the tools relies instead on RCW 51.12.020(8)(b), which lets a non-public corporation exempt eight or fewer shareholder-officers regardless of manual labor. You can opt in voluntarily using L&I form F213-042-000. Hiring even one employee changes the answer immediately: you must open a workers’ compensation account through your state business license.

Can I buy workers’ comp from a private insurer in Washington?

No. L&I states that Washington does not allow private workers’ compensation coverage — you buy from L&I or qualify as a certified self-insured employer. This is one of the few states that runs a monopoly fund. Any quote from a private carrier for Washington workers’ comp is either for something else entirely or for the wrong state.

How much liability insurance does a Washington contractor need?

The registration minimum is $200,000 in public liability plus $50,000 property damage, or a $250,000 combined single limit. That is what L&I checks. It is a floor rather than a market standard: commercial general contractors, public owners and many homeowners’ lenders routinely require $1 million per occurrence, so the limit that gets you registered may not get you the job.

How much is a contractor bond in Washington?

$30,000 for a general contractor and $15,000 for a specialty contractor, for registrations issued or renewed on or after July 1, 2024. You pay a premium to a surety, not the full amount. The bond names the state of Washington as obligee and stands behind labor, employee benefits, taxes, materials, equipment and breach-of-contract claims — and the surety seeks reimbursement from you after paying out.

Does my liability insurance cover the subcontractor I hired?

Not for injury to that person. If your sub fails L&I’s construction test — which includes being properly registered as a contractor — they count as your covered worker and you owe workers’ compensation premiums for them. Check registration on secure.lni.wa.gov/verify before the first day on site, and keep the sub’s registration number with the invoice you pay.

What happens if my bond or insurance lapses mid-project?

Your registration is no longer in good standing, and anyone can see that on L&I’s verification tool. Worse, RCW 18.27.080 bars an unregistered contractor from suing to collect. The substantial-compliance exception a court may apply turns partly on whether you maintained current bonding and insurance throughout, so a gap is precisely what removes your fallback.

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This article is general information, not legal or tax advice. Rules change — confirm with the authority named above.