Class A vs. Class B HVAC contractor insurance in Texas: which license needs what coverage.

The TDLR licensing structure — Class A vs. Class B

Texas regulates HVAC contracting under the Texas Department of Licensing and Regulation (TDLR) Air Conditioning and Refrigeration program. The governing statute is Texas Occupations Code Chapter 1302, and the rules live in 16 Texas Administrative Code Chapter 75.

There are two contractor license classes, distinguished entirely by the size of the equipment you are licensed to work on:

Those minimums are the floor that TDLR will accept on a Certificate of Insurance to issue or renew the license. They are not what your customers will accept on the next bid.

Why TDLR minimums rarely match customer COI requirements

The TDLR floors were last adjusted years ago and are now well below what the commercial insurance market — and commercial customers — treat as standard. Here is what we see on real COI requests across our Texas trade-contractor book:

• Commercial property managers (single-tenant, retail strip centers, office): $1M per occurrence / $2M aggregate GL is the default ask, often with a $5M umbrella for larger portfolios.
• General contractors on commercial tenant improvement, restaurant build-outs, and medical office work: $1M/$2M minimum, additional insured endorsements for ongoing and completed operations (ISO CG 20 10 + CG 20 37), waiver of subrogation, and primary and non-contributory wording.
• Multi-family and institutional (apartment complexes, schools, churches, municipal): $1M/$2M GL plus a $1M-$5M umbrella, with extended completed operations endorsements often required.
• Higher-end residential (custom-home builders, GCs serving $1M+ home markets): $1M/$2M GL is now common, especially for HVAC where a faulty install can cause $200K+ in water damage to interior finishes.

Practically, if you hold a Class A license and bid anything beyond owner-occupied residential, expect to need $1M/$2M minimum. The math: stepping up from the $300K/$600K TDLR floor to $1M/$2M typically costs an additional 20-40% on the GL premium. For a Class A contractor whose GL package would otherwise be $3,500/year, that's $700-$1,400 of extra premium that unlocks substantially more bid opportunities.

Cross-trade comparison: HVAC, electrical, and plumbing

If you sub-contract or run a small services holding company that touches multiple trades, the licensing minimums are similar but the agencies differ:

The point of the table is the consistency: $300K per occurrence is roughly the trade-license floor across the board, and customer COI requirements push all three trades to $1M/$2M in commercial work. Bundling multiple trades (HVAC + electrical + plumbing service company) does not increase the regulator floor — but it usually means you'll want a single GL policy that covers all three classifications, plus a single tools/equipment schedule that lists every truck's inventory.

Workers' compensation realities for HVAC crews

Texas is the only state where private-sector workers' compensation is optional under Texas Labor Code Section 406. HVAC contractors can technically operate as "non-subscribers." In practice, here is the honest take:

• Most commercial customers require it. Property managers, GCs, schools, and institutions almost universally require subcontractors to carry workers' comp before issuing a purchase order. Going non-subscriber removes you from those customer pools.
• HVAC is a high-injury trade. Rooftop ladder falls, refrigerant exposure, attic heat injuries, electrical contact, and cuts during sheet-metal work all show up frequently in HVAC loss data. A single severe ladder fall can produce a $300K-$1M claim.
• Non-subscriber liability has no statutory cap. If you go non-subscriber and an employee is injured, they can sue you in civil court. Damages are not capped. A jury verdict on a back injury or amputation can dwarf what workers' comp would have paid.
• Texas Mutual remains the carrier of last resort. If voluntary carriers decline your account due to claims history or experience modifier, Texas Mutual is required to write you. Premium will be higher, but coverage is available.

Typical 2026 HVAC workers' comp pricing in Texas: 5-9% of payroll, depending on classification code (commercial vs. residential), claims history, and experience modifier. For a three-technician shop at $55K/tech, that's roughly $8,000-$15,000/year. Class A contractors doing rooftop commercial work often land at the higher end of the range; residential service-only shops often come in lower.

For the deeper trade-off between subscribing, going non-subscriber, and using occupational accident plans, see our earlier piece on non-subscriber vs. workers' comp.

The four coverages most HVAC policies under-buy

When a new client sends an existing trade contractor policy for review, the gaps repeat. None of these are obscure — they're standard HVAC exposures that get under-bought because the previous agent built a generic small-business policy rather than a trade-specific one.

1. Tools and equipment (contractor's equipment / inland marine)

HVAC trucks routinely carry $15K-$40K in tools per vehicle: refrigerant recovery machines, vacuum pumps, micron gauges, tubing benders, brazing torches, leak detectors, manifold sets, and a stack of hand tools. A standard business owner's policy provides limited off-premises tool coverage — often capped at $1,000-$5,000 per occurrence with a small overall sub-limit. That doesn't begin to replace what gets stolen out of a service van overnight.

The fix is a separately scheduled contractor's equipment / inland marine policy with a $50K-$100K blanket limit and a per-item schedule for higher-value pieces (recovery machines, large electronic test equipment). Premium impact: usually $300-$700/year for $50K of coverage, more for higher limits.

2. Hired and non-owned auto liability

Almost every HVAC business runs service vehicles. Most policies cover the company-owned trucks under commercial auto. The gap: when a technician runs to the supply house in their personal truck, or a temporary helper drives their own car between job sites, you have non-owned auto exposure. If they cause an accident, the injured party's lawyer will go after the deepest pocket — the employer — and the personal auto policy of the technician will subrogate against the employer's commercial policy.

Hired and non-owned auto liability is usually $100-$300/year as an endorsement to commercial auto, and it's the single cheapest meaningful coverage on a Texas trade contractor policy. Skipping it is a common, expensive mistake.

3. Additional insured endorsements (CG 20 10 + CG 20 37)

Commercial customers don't just ask for proof of insurance — they ask to be named as additional insureds on yours. Standard small-business GL policies do not include blanket additional insured by default. You either need a blanket additional insured endorsement (covers any party you're contractually required to add) or you'll be paying for per-project endorsements every time a new GC asks. The two ISO forms that matter:

• CG 20 10 — covers the additional insured for ongoing operations only. Standard ask from most commercial customers.
• CG 20 37 — covers the additional insured for completed operations after you leave the site. Required by most GCs and property managers because the latent defects show up months or years later.

Buying a blanket form for both costs 5-15% on the GL premium and prevents endless per-project administrative friction. If your current GL doesn't include both, you are quietly losing bids.

4. Waiver of subrogation

The other common COI line item. A waiver of subrogation prevents your insurer from suing your customer to recover claim payouts. Cheap to add (often free or $100-$250/year for blanket waivers), and customers will not waive the requirement. If your policy doesn't include blanket waiver of subrogation, every commercial contract becomes a one-off insurance conversation.

Typical 2026 cost ranges for Texas HVAC contractors

What you actually pay depends on revenue, payroll, claims history, work mix (residential vs. commercial), and the limits you carry. Below is what we see across new Texas HVAC quotes in early 2026, drawing on TDLR contractor data and industry benchmark ranges published by trade insurance specialists serving Texas markets.

Figures are illustrative ranges based on Texas-domiciled HVAC contractors. Actual premium varies by carrier, deductible, claims history, experience modifier, and territory. Workers' comp percentage assumes a clean experience modifier (1.0); credits and debits move that range meaningfully. We re-quote every Intac trade contractor client annually.

The COI request: what to look for before you sign

Every commercial customer sends a Certificate of Insurance request — sometimes a one-page letter, sometimes a 40-page master service agreement with insurance exhibits. Before you sign, the five lines to read carefully:

1. Required limits. If they ask for $2M per occurrence and you carry $1M, you'll need to bump your GL or buy an umbrella to fit.
2. Additional insured endorsement form. CG 20 10 only? Or CG 20 10 + CG 20 37? Some GCs require even broader forms (CG 20 38).
3. Primary and non-contributory wording. This says your policy pays first, before any of the customer's own coverage. Standard ask. Cheap to add. Make sure your GL includes it.
4. Waiver of subrogation. Almost universal. Add blanket waiver and stop having this conversation.
5. Notice of cancellation. Customers often ask for 30-day notice of cancellation, which has gotten harder to provide as carriers have moved away from extended notice provisions. Most carriers will issue 10-day notice for non-payment and 30-day for other reasons — that is the modern standard.

The honest take from an independent Texas agency

We see a lot of HVAC, electrical, and plumbing contractor policies. The patterns that repeat:

1. Most Texas HVAC contractors are under-insured on tools. A blanket $5,000 BOP tool sublimit doesn't cover an after-hours van break-in. Schedule the tools properly with a contractor's equipment / inland marine endorsement.
2. License-floor limits cost you bids. Sitting at the TDLR $300K/$600K minimum disqualifies you from a meaningful share of commercial work without the contractor realizing it. $1M/$2M is the practical floor.
3. Workers' comp is more about customer access than legal requirement. Going non-subscriber is legal in Texas, but it cuts you out of every GC contract and most commercial property manager rosters. For most growing HVAC shops, subscribing is the practical answer.
4. Blanket endorsements beat per-project endorsements. Pay the small annual premium for blanket additional insured (CG 20 10 + CG 20 37) and blanket waiver of subrogation. It pays for itself in administrative time alone.

Common questions