MHIC Managing Risk

Question 1

Which type of insurance covers medical expenses and lost wages for a contractor's employee who is injured on the job?

Accepted Answer

Workers' compensation insurance

Answer

General liability insurance

Answer

Builder's risk insurance

Answer

Professional liability insurance

Question 2

A contractor's general liability insurance policy would most likely cover which of the following scenarios?

Accepted Answer

A homeowner's car damaged when the contractor's ladder falls on it

Answer

An employee who breaks their ankle falling from scaffolding

Answer

Theft of the contractor's tools from a locked job-site trailer

Answer

A subcontractor who abandons the project without completing their work

Question 3

A surety bond in home improvement contracting primarily protects:

Accepted Answer

The homeowner if the contractor fails to complete the work or meet contractual obligations

Answer

The contractor against losses from employee theft

Answer

The contractor's tools and equipment on job sites

Answer

The contractor's vehicles against accidents during the project

Question 4

Builder's risk insurance is specifically designed to cover:

Accepted Answer

Physical damage to the structure and materials while the project is under construction

Answer

Injuries sustained by workers during construction

Answer

The contractor's liability for defective workmanship discovered after project completion

Answer

Loss of business income if the contractor is unable to work due to illness

Question 5

As a condition of maintaining an active MHIC license in Maryland, a licensee is required to carry:

Accepted Answer

General liability insurance, and workers' compensation if they have employees

Answer

A performance bond of at least $50,000

Answer

An escrow account equal to 10% of their annual gross revenue

Answer

A fidelity bond covering all employees who handle client funds

Question 6

What is the key difference between a performance bond and a payment bond?

Accepted Answer

A performance bond guarantees project completion; a payment bond guarantees subcontractors and suppliers will be paid

Answer

A performance bond covers material costs; a payment bond covers labor costs

Answer

A performance bond is required by Maryland law; a payment bond is always optional

Answer

A performance bond protects the homeowner; a payment bond protects only the contractor