Utah Contractor Practice Exam

Which type of insurance provides coverage for third party bodily injury and property damage?

1. Risk insurance

2. Compensation insurance

3. Liability insurance

4. Contractual insurance

The correct answer is: Liability insurance

Liability insurance is specifically designed to cover claims made by third parties for bodily injury and property damage. When an individual or a business is found legally responsible for causing harm to someone else or damaging their property, liability insurance helps cover the costs associated with those claims, including legal fees and settlements or damages awarded. This type of insurance is essential for contractors and businesses, as it protects them from the financial impact that can arise from lawsuits or claims made against them due to accidents or negligence that lead to injury or damage. In contrast, risk insurance generally involves various strategies for managing potential risks, compensation insurance typically relates to protecting workers and covering workplace injuries, and contractual insurance focuses on fulfilling contractual obligations in terms of coverage. Each of these has its own specific purposes but does not provide the same direct protection against third-party claims as liability insurance does.