A one million dollar liability policy is common. In my state a one year warranty is mandatory. Worker's Compensation insurance is a separate policy. You can have your contractor's insurance company send you a certificate of insurance, call the insurance company to verify that they issued it.

One mil is required by our state in ordered to become a registered contractor. However, 3 mil is the recommended coverage most builders carry. But make sure they aslo carry workers comp coverage in addition to the liability coverage. Many low budget contractors do not carry this VERY expensive coverage allowing them to underbid the competition, but if someone gets hurt while working on your home they could seek compensation through your insurance.
Additionally, a wise builder will ask you to carry builders risk insurance to cover their investment in the event of loss caused by conditions beyond their control such as: if a hurricane comes along and wipes out your home taking all the building materials installed or not, the builder would be covered by your policy, or if your home burns down through no fault of the builder, he would still get paid for the materials allocated to the project to that point.

Seconding Norm, we carry a $1M/$2M aggregate liability insurance policy as do all of our subs. The State requires Worker's Comp and a$12,500 bond. Carrying adequate homeowner's insurance is important as well...everybody makes mistakes! We are often asked to purchase a Builder's Risk policy for an individual project, an "umbrella" policy to cover anyone that come on the site or to increase our liability insurance for the duration of a major job. Since these expenses are direct job costs as opposed to overhead, the entire cost is included in the estimate....and for a single job any one of these can add some $10-$15K....we typically end up taking it back out. Lawyers are big on adding the additional insurance to a contract in their review of the documents....

Again our state mandates that the warranty for remodeling work be one year. I offer five. However, manufacturer warranties are stipulated by the companies that manufacture the product. 35 year shingles for example. The builder only covers defects in craftsmanship. If the shingle fails, the manufacturer covers the materials but you still need to pay to have them replaced unless the failure is due to improper installation. I am proud to say that I have never had a warranty claim.

Oops! Warranties! My experience from a few different states has been that a blanket one year warranty for materials and workmanship is standard. Roofing in California carries an automatic 5 year warranty and we also have a 10 year warranty for construction defect (structural only, no finishes or equipment). Laws vary from state to state. Your building department can fill you in on the particulars in your area.