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

Workers' compensation insurance covers employees who sustain work-related injuries or illnesses, paying medical expenses and a portion of lost wages. In Maryland, most employers with one or more employees are required by law to carry workers' compensation coverage.

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

General liability insurance covers third-party bodily injury and property damage caused by the contractor's operations. Damage to the homeowner's car from a falling ladder is a classic third-party property damage claim covered under GL. Employee injuries are covered by workers' comp, not GL.

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

A surety bond is a three-party agreement in which a surety company (the guarantor) promises the homeowner (obligee) that the contractor (principal) will fulfill their obligations. If the contractor defaults, the surety compensates the homeowner up to the bond amount.

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

Builder's risk (also called 'course of construction') insurance covers physical damage to a building and its materials during the active construction period, including losses from fire, wind, theft, or vandalism before the project is complete and handed over to the owner.

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

Maryland requires MHIC licensees to maintain general liability insurance as a condition of licensure. Workers' compensation is separately required by state law for contractors who employ one or more workers. Both protect the public and workers in the event of an on-the-job accident.

(MHIC) Maryland Home Improvement Contractor Practice Test

(MHIC) Maryland Home Improvement Contractor Practice Test

MHIC Managing Risk