Michigan Residential Builders License Practice Test

Which type of insurance protects construction projects and materials from external forces?

1. General liability insurance

2. All risk builders insurance

3. Commercial property insurance

4. Professional liability insurance

The correct answer is: All risk builders insurance

The type of insurance that specifically protects construction projects and materials from external forces is all risk builders insurance. This coverage is designed to safeguard the construction site, materials, and the project as a whole against a wide range of risks, including theft, vandalism, fire, and other perils that may occur during the construction phase. All risk builders insurance typically provides comprehensive protection, ensuring that if any major incident occurs, such as damage from extreme weather or accidental damage caused during construction, the costs of repairs or replacement are covered. This insurance is crucial for construction projects as it addresses the unique vulnerabilities associated with construction sites, where materials and work in progress are particularly susceptible to various risks. In contrast, the other types of insurance listed have different scopes and purposes. General liability insurance covers legal liabilities and bodily injury claims arising from accidents on the job site, but it does not specifically insure against property damage to the project itself. Commercial property insurance protects business property, which may include equipment and tools, but does not typically extend to the materials or projects under construction. Professional liability insurance, on the other hand, focuses on claims relating to professional errors and omissions, not on physical project assets. Thus, all risk builders insurance is the most comprehensive option for protecting the various risks