Louisiana Contractors License Practice Exam

What is Liability Insurance designed to provide protection against?

1. Damage to property

2. Claims arising from injuries to people or damage to property

3. Property loss from theft

4. Accidental business losses

The correct answer is: Claims arising from injuries to people or damage to property

Liability insurance is specifically designed to provide protection against claims that may arise from injuries to people or damage to property. This form of insurance covers legal fees and payouts for claims or lawsuits that could arise when a contractor is found liable for causing harm to individuals or damage to someone else's property during the course of work. This is particularly important for contractors, as they often work on sites where accidents can happen, leading to potential injuries to workers or bystanders, and damage to the client's property or surrounding properties. Having liability insurance helps avoid financial ruin from the costly implications of such claims. The other options do not reflect the comprehensive protection that liability insurance offers. While they address valid concerns—such as property damage, theft, and accidental business losses—they are not the primary purpose of liability insurance. Instead, liability insurance focuses on the legal and financial responsibilities that arise from incidents involving bodily injury or property damage.