Utah Contractor Practice Exam

What is a key factor in determining general liability insurance premiums?

1. Puzzle-solving abilities

2. Claims history

3. Construction materials used

4. Number of employees

The correct answer is: Claims history

One of the primary factors influencing general liability insurance premiums is claims history. Insurers assess the risk associated with a contractor based on past claims. A history of frequent or significant claims can indicate a higher risk profile, leading to increased premiums. Conversely, a clean claims history suggests lower risk, which can result in more favorable premium rates. Insurance companies analyze this data carefully, as it helps them predict future claims and manage their risk exposure effectively. In the context of construction, while other aspects like construction materials used or the number of employees can influence premiums in specific scenarios, they do not directly reflect the likelihood of potential claims in the same way that an established claims history does. Puzzle-solving abilities, although important for a contractor in project management and construction, have no relevance when determining insurance premiums.