Utah Contractor Practice Exam

Must I keep paying for liability insurance while not actively contracting?

1. Yes

2. No

3. Only if the bids exceed $10,000

4. Only if the bids exceed $50,000

The correct answer is: Yes

Liability insurance is an essential component of risk management for contractors, as it protects against claims arising from accidents, injuries, or damages that could occur during the course of their work. Even when not actively contracting, maintaining this coverage is advisable because risks can still arise from past or future work, and being caught without insurance could lead to significant financial liabilities. In Utah, as with many other states, contractors often have contractual obligations or licensing requirements that necessitate having active liability insurance coverage at all times to uphold their business responsibilities. If a contractor is not insured while not actively contracting, they may face substantial difficulties in regaining coverage when they decide to resume work, including higher premiums or denial of coverage due to a lapse in insurance. Furthermore, many contractors operate under licenses that require proof of general liability insurance to remain in good standing, which reinforces the need to maintain this coverage continuously, regardless of current contracting activities. Thus, maintaining liability insurance even during inactive periods is a proactive strategy crucial for protecting one’s business and ensuring compliance with legal and industry standards.