What happens if a contractor does not maintain insurance coverage?

When a contractor does not maintain insurance coverage, they face significant legal and operational consequences, primarily in the form of penalties and the potential inability to operate legally. In Arizona, contracting laws require that licensed contractors carry specific types of insurance, such as liability insurance, to protect both themselves and their clients from financial losses due to accidents, damages, or incomplete work.

Failing to maintain this coverage can lead to disciplinary action from the Arizona Registrar of Contractors, which may result in fines, suspension, or revocation of their contracting license. Without a valid license, a contractor cannot legally perform any contracting work or accept new clients. This creates a substantial risk to the contractor's business operations and reputation, as they could be found in violation of state laws governing the construction industry. Therefore, maintaining insurance coverage is not only a best practice but also a legal requirement to ensure that a contractor can continue to work and operate within the legal framework of their profession.