Utah Contractor Practice Exam

What type of insurance is crucial for contractors to carry?

1. Health insurance for employees

2. Liability insurance

3. Auto insurance for company vehicles

4. Property insurance for tools

The correct answer is: Liability insurance

Liability insurance is essential for contractors because it provides protection against claims that may arise from accidents, injuries, or damages that occur during the course of their work. This type of insurance covers legal fees, medical expenses, and damages awarded to third parties, effectively shielding contractors from potentially catastrophic financial losses due to claims that could arise from their work. For contractors, working on job sites exposes them to various risks, including the possibility of accidents that could injure clients or bystanders, or damage to other properties. Without liability insurance, a contractor facing such claims might have to pay out of pocket, which could jeopardize their personal finances and the viability of their business. The other forms of insurance mentioned, like health insurance for employees, auto insurance for company vehicles, and property insurance for tools, while important, do not provide the same level of protection against the liabilities contractors face from their operational activities. Liability insurance stands out as a critical safeguard for anyone operating in a contracting capacity.