Chapter 4

Question 1

What type of property insurance covers property owners and builders for buildings under construction?

Answer 1

All-Risk Builders’ Risk Insurance

Question 2

What is not covered under an All-Risk Builders policy?

Answer 2

Major construction defects such as poor workmanship and faulty design.

Question 3

What type of policy can cover things such as fire, lightning, wind damage, explosion, water damage, terrorism, or earthquakes?

Answer 3

Named Peril Builders’ Risk Insurance

Question 4

What type of policy can cover tools and equipment?

Answer 4

Inland Marine/Equipment Theft Insurance

Question 5

What type of policy can cover mobile equipment?

Answer 5

Equipment Floater Policy

Question 6

What type of policy protects the transporter against damage that occurs to freight during transport?

Answer 6

Transportation Floater Policy

Question 7

What type of policy protects the transporter in the event of damaged or lost freight?

Answer 7

Motor Truck Cargo Insurance

Question 8

What type of insurance is designed to protect against third-party claims that arise from alleged negligence resulting in bodily injury or property damage?

Answer 8

Liability Insurance

Question 9

What type of policy covers bodily injury, damage or loss to property, personal injury, and advertising injury?

Answer 9

CGL (Commercial General Liability)

Question 10

What type of insurance protects directors and officers from liability due to actions connected with their corporate positions?

Answer 10

Director’s and Officer’s (D and O) Liability Insurance

Question 11

Does D and O insurance cover intentional or illegal acts?

Answer 11

No

Question 12

What type of policy can bundle property and liability coverage together?

Answer 12

Business Owner’s Policy (BOPs)

Question 13

What type of insurance is used to cover criminal acts of burglary and theft by employees?

Answer 13

Fidelity Bond

Question 14

Can Workers’ Compensation Insurance be paid for by employees or deducted from their pay?

Answer 14

No

Question 15

If you are a sole proprietorship, partnership, or LLC, you are required by law to carry workers’ compensation coverage if you have how many employees?

Answer 15

3 or more

Question 16

Are sole proprietors, partners, managers, or members of the LLC included in the headcount for amount of employees necessary to qualify for worker’s compensation coverage?

Answer 16

No

Question 17

Employers must pay both state and federal unemployment taxes if they pay wages to employees totaling ____________ or more in any quarter of a calendar year.

Answer 17

$1,500

Question 18

Employers must pay both state and federal unemployment taxes if they had at least one employee during any day of a week during _______ weeks in a calendar year, regardless of whether or not the weeks were consecutive.

Answer 18

20 weeks

Question 19

What is considered a transfer of employees between businesses for the purpose of obtaining a lower unemployment compensation tax rate?

Answer 19

SUTA dumping

Question 20

Is SUTA dumping legal or illegal?

Answer 20

Illegal

Question 21

What type of bond is a risk transfer mechanism between a bonding company, the contractor, and the project owner?

Answer 21

Surety Bond

Question 22

What type of bond guarantees that the contractor, if awarded the job, will do work at the submitted bid price, enter into a contract with the owner, and furnish the required performance and payment bonds?

Answer 22

Bid Bond

Question 23

What type of bond guarantees that the contractor will complete a contract within its time frame and conditions?

Answer 23

Performance Bond

Question 24

What type of bond guarantees subcontractors and suppliers that they will be paid for work if they perform properly under the contract?

Answer 24

Payment Bond

Question 25

What type of bond guarantees that for a stated period, typically for one year, no defective workmanship or material will appear in the completed project?

Answer 25

Maintenance Bond

Question 26

What type of bond provides assurance to the financial backers of a construction project that it will be completed on time?

Answer 26

Completion Bond

Question 27

What type of bond covers business owners for losses due to dishonest acts by their employees?

Answer 27

Fidelity Bond

Question 28

What type of bond guarantees that liens cannot be placed against the owner's property by contractors for payment of services?

Answer 28

Lien Bond

Question 29

What type of bond protects the general contractor in the event that the subcontractor does not fully perform the contract and/or pay for labor and materials?

Answer 29

Subcontractor's Bond

Question 30

A ____________________ is not a bond but is a cash guarantee to the owner. It is not a guarantee of performance but can be converted to a payment to the owner by a bank or lending institution.

Answer 30

Bank Letter of Credit

Question 31

How much does a bank letter of credit typically cover of the contract?

Answer 31

5% to 10%

Question 32

What is the current law requiring performance and payment bonds on all federal construction projects valued at greater than $100,000?

Answer 32

The Miller Act of 1935

Question 33

State public projects meeting the following criteria require the contractor to obtain a performance and payment bond. The total amount of contracts awarded exceeds _______________(1). The contractor or construction manager's contract exceeds ___________(2) on the project.

Answer 33

(1) $300,000 (2) $50,000

Question 34

State departments, state agencies, and the University of North Carolina and its constituent institutions require a performance and payment bond if the total amount of construction contracts awarded for any one project exceeds ___________.

Answer 34

$500,000