Contractor License Practice Exam

What type of insurance must contractors maintain as a minimum?

1. Workers' compensation insurance

2. General liability insurance

3. Property insurance

4. Professional liability insurance

The correct answer is: General liability insurance

The correct answer focuses on the requirement for contractors to maintain general liability insurance as a fundamental component of their business insurance portfolio. General liability insurance offers essential coverage that protects contractors against claims of bodily injury, property damage, and personal injury that may arise during the course of their work. This type of insurance is crucial because it helps cover legal costs and settlements if a third party files a lawsuit over an incident related to the contractor's operations. While workers' compensation insurance is also vital, particularly if a contractor has employees, it specifically addresses workplace injuries and is mandated by law in many jurisdictions. Property insurance protects physical assets, which is important but does not specifically cater to liability claims. Professional liability insurance, on the other hand, is more relevant to professionals offering certain types of services (e.g., consultants, architects) for claims related to negligence or failure to deliver services. Thus, maintaining general liability insurance is a critical minimum requirement for contractors to ensure that they are protected against the diverse risks associated with their work.