Contractor License Practice Exam

Should prime contractors verify that their subcontractors have secured their own insurance for general liability and workers compensation?

1. Yes

2. No

3. Only in high-risk projects

4. It's optional

The correct answer is: Yes

Prime contractors must verify that their subcontractors have secured their own insurance for general liability and workers' compensation to mitigate risk and ensure compliance with legal and contractual requirements. This verification is essential because if a subcontractor does not have adequate insurance coverage, the prime contractor may become liable for any accidents, damages, or legal claims arising from the subcontractor's work. By ensuring that subcontractors have proper insurance, prime contractors can protect themselves from financial loss and legal consequences. Additionally, many contracts between parties stipulate that proof of insurance is required, making it not just a best practice but a necessity in construction projects. This adherence to verification processes fosters a safer work environment and contributes to maintaining industry standards. The other options suggest varying degrees of disregard for this practice; implying that insurance verification is not mandatory can expose both the prime contractor and the project to unnecessary risks.