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IRMI Update Quiz

Contract or Coverage? Put Your Risk Transfer Knowledge to the Test

Which one of the following statements is incorrect?

A. General liability insurance is among the most commonly required insurance coverages in commercial contracts.

B. Commercial contracts involving leases, construction projects, or the sale of goods often require one or more parties to carry general liability insurance.

C. The primary purpose of requiring general liability insurance is to guarantee that all future lawsuits are fully covered and defended by the insurer.

D. Uninsured liability claims can negatively affect both a company's finances and its business relationships.

Correct Answer: C. Requiring insurance reduces risk, but it is not a guarantee that every lawsuit, defense cost, or damages award will be covered. Risk professionals need to understand where contractual requirements and actual insurance coverage intersect and where gaps may exist.