Contractor License Practice Exam

What does general liability insurance cover for contractors?

1. Claims by the contractor's employees

2. Claims brought by third parties

3. Equipment damage

4. Workers' compensation claims

The correct answer is: Claims brought by third parties

General liability insurance is designed to protect contractors and businesses from claims made by third parties. This coverage typically includes injuries or damages that occur as a result of the contractor's operations or activities. For example, if a client or a bystander suffers property damage or bodily injury due to the contractor's work, general liability insurance can help cover the legal expenses, medical costs, and potential settlements or judgments arising from these claims. The other options identify scenarios not covered by general liability insurance. Claims brought by the contractor's employees would be addressed under workers' compensation insurance, which provides coverage for job-related injuries or illnesses. Equipment damage is usually covered by specific equipment insurance policies, not general liability. Finally, workers' compensation claims are solely for employee-related injuries and do not fall under general liability coverage, which is focused on third-party claims. Thus, the option concerning claims made by third parties is the correct answer as it accurately reflects the primary function of general liability insurance in the contractor context.