I have a freind who has refinishing business and he has 1 million dollars insurance. Does a person really need so much insurance?

A one million dollar general liability insurance policy is pretty standard. Many contractors with more assets have greater amounts. The reason for a policy of this amount is varied:
1) If he works as a subcontractor for other general contractors, they probably require it. All my GC's do.
2) General liability insurance is for being sued for personal and property damage; not insuring the work or material. With awards being in the multi-millions, many feel a million dollar policy is too low.
3) You can get an umbrella policy with your homeowners for less sometimes.
4) Also, form an LLC to limit your personal liability and protect your personal assets.

Gary is right, a one million dollar liability policy is not an extreme and it does not cover any issues with the guys work or his/her workmanship. You need to be bonded to cover that aspect. But that also depends on which state you operate in.... my state requires me to pay into a fund that covers me on that part.

Thanks

Bonded has been explained differently to me. It was my understanding that Becoming "bonded" covers the contract, not the workmanship. For example, If I enter into a contract with a customer, then for any reason I can't fulfill my obligations (I die, or break my legs, or go out of business) the bonding company will take over the same contract and fulfill it by placing a new contractor on the job.

Is that not right?

Josh Joyce

There are different types of bonds one can get. In CA, to be licensed, you must purchase a performance bond. It costs about 80 to 100 bucks a year and covers a contractor's failure in worksmanship or materials. It's funny but the CSLB doesn't require us to notify our customers about how our bonds work and that the customer can file a claim with the bonding company should the contractor's work fail, for any reason. But a bond isn't insurance. Here, IF the bonding company pays out a claim, the contractor must reimburse the company or he cannot get bonded again and loses his license. Other types of bonds are also performance bonds and may be required for certain larger projects or for a government job. Those are bonds that are purchased for a specific project and if required, the contractor typically adds the cost of the bond to the contract amount.