Arizona Adjuster Practice Exam

What type of liability insurance is generally designed for businesses to cover third-party claims?

1. Professional liability insurance

2. General liability insurance

3. Error and omissions insurance

4. Product liability insurance

The correct answer is: General liability insurance

General liability insurance is specifically created to protect businesses from third-party claims, which may arise from various incidents that occur during business operations. This type of insurance typically covers claims related to bodily injury, property damage, personal injury, and advertising injury. For example, if someone is injured on a business's premises or if a business accidentally damages a client's property, general liability insurance would cover those claims and any legal defense costs associated with them. This makes it an essential policy for most businesses, as it helps mitigate the financial risks that come from potential lawsuits. Professional liability insurance, on the other hand, is more tailored to professionals providing services to clients, protecting against claims of negligence or inadequate work. Error and omissions insurance is a subset of professional liability that specifically deals with mistakes or failures to perform professional duties. Product liability insurance focuses explicitly on claims originating from product defects that cause bodily harm or property damage. While each of these types of insurance addresses specific risks, general liability insurance is the broadest and most relevant for covering third-party claims across various business contexts.