If you’re a contractor working in or around Chicago, you already know that insurance isn’t optional—it’s the price of admission. But what many contractors don’t realize is that Chicago’s insurance requirements changed in January 2026, and the rules are more specific than most people think.
This guide breaks down what’s required by license class, what the recent changes mean for your bottom line, and how to make sure you’re covered before your next renewal.
Illinois Doesn’t Have a Statewide Contractor License—Chicago Does
Here’s the first thing every contractor needs to understand: Illinois does not issue a state-level general contractor license. Licensing is handled city by city and county by county. The only trades licensed at the state level are plumbing (through the Illinois Department of Public Health) and roofing (through the Illinois Department of Financial and Professional Regulation).
That means your licensing and insurance obligations depend entirely on where you’re pulling permits. Chicago has one of the most structured systems in the state, with five distinct license classifications—each carrying different project limits and insurance thresholds.
The Five License Classes and Their Insurance Requirements
The City of Chicago Department of Buildings issues general contractor licenses in five classes. Here’s what each one requires:
Class A — Unlimited Project Value
$5,000,000 per occurrence (primary or umbrella) for bodily injury and property damage.
Increased in 2026 (first increase since 2003).
Class A holders can also perform both ordinary and complex demolition. If you’re bidding large commercial or institutional projects in the city, this is the class you need.
Class B — Projects Up to $10,000,000
$3,000,000 per occurrence (primary or umbrella).
The 2026 update doubled the project limit for Class B from its previous cap. Class B holders can also perform both ordinary and complex demolition.
Class C — Projects Up to $5,000,000
$2,000,000 per occurrence, combined single limit.
Class C previously required $1,000,000 per occurrence. As of January 6, 2026, the requirement increased to $2,000,000 per occurrence. Current license holders must show proof of the higher coverage when their current policy on file expires.
Class D — Projects Up to $2,000,000
$2,000,000 per occurrence, combined single limit.
Like Class C, Class D also saw its insurance requirement increase from $1,000,000 to $2,000,000 per occurrence. This is a significant jump for smaller contractors.
Class E — Projects Up to $500,000
$1,000,000 per occurrence.
Class E fees did not increase in 2026, and the project limit and insurance threshold remain unchanged. This is the most common entry point for small contractors working in Chicago.
Workers’ Compensation: No Exceptions in Illinois
Regardless of your license class, every contractor with even one employee must carry workers’ compensation insurance. Illinois law classifies construction as “extra-hazardous” work, which means you cannot exempt corporate officers or LLC members from coverage.
The penalties for operating without workers’ comp are severe. According to the Illinois Department of Employment Security, an employer who knowingly and willfully fails to obtain coverage can face fines of up to $500 for every day of noncompliance, with a minimum fine of $10,000. Corporate officers can be held personally liable.
Other Key Requirements to Remember
by A.M. Best Company. Chicago verifies this on your certificate of insurance.
on a primary, non-contributory basis. This is a non-negotiable requirement on every certificate you submit.
If your insurance lapses, your license is immediately at risk.
This means costs will continue to rise, so plan accordingly.
What About Contractors Working Outside Chicago?
Each suburb and municipality sets its own rules. For example, Aurora requires general liability insurance of at least $1,000,000 general aggregate with $500,000 per occurrence, plus workers’ compensation and a $5,000 surety bond. Rockford requires registration plus proof of GL and workers’ comp along with a $10,000 surety bond. Joliet requires contractors to register and provide a certificate of insurance naming the city as certificate holder.
Before you start any job, contact the building or licensing department in that municipality and ask what they require. Don’t assume that what works in one suburb works in the next.
Bottom Line
The 2026 changes hit Class C and Class D contractors the hardest—if you’re in either category, your insurance requirement just doubled. If your current policy doesn’t meet the new thresholds, you’ll need to update it before your next renewal.
If you’re not sure where you stand, or if you’re working across multiple municipalities with different requirements, talk to an agent who understands contractor insurance in Illinois. That’s what we do at Handzel & Associates.