When hiring a contractor to do any kind of work around your home, you should always make sure that the contractor has sufficient insurance coverage.  At a minimum, a contractor should have both liability insurance and workers compensation insurance. 

Workers compensation insurance will cover claims for injuries to the contractor’s workers that happen while the worker is at your home.  Some types of home improvement projects are inherently more dangerous than others, but any work that a contractor is hired to do involves some risk of injury to the worker.

If your contractor is hired for a roofing project or light construction, the risk of injury is pretty obvious, but workers can be injured on any type of home improvement projects such as an interior renovation or home theater installation.  Hazards posed by exposed electrical wiring, use of power tools, or any physical exertion such as heavy lifting or hammering can cause a worker to be injured. 

Liability insurance covers damage to property caused by the contractor or his workers.  For example, if the contractor cut a tree down that fell on the neighbor’s car or accidently started a fire while performing electrical work, the contractor’s liability insurance would cover any claims. 

Your homeowner’s insurance would probably cover most types of claims if the contractor was uninsured or underinsured, but you would be responsible for any deductible and also for dealing with the insurance company. 

A reputable contractor will have good insurance coverage and will be happy to provide you with proof of insurance.  Good insurance coverage is also a good sign that the contractor is a legitimate, professionally operated business.  Before you hire any contractor, be sure that they have proper insurance coverage.