CSLB Contractor's Law & Business Practice Exam

What is the primary purpose of workers' compensation insurance for contractors?

1. To protect the contractor’s assets

2. To cover employee injuries sustained on the job

3. To ensure project completion

4. To appreciate company reputation

The correct answer is: To cover employee injuries sustained on the job

The primary purpose of workers' compensation insurance for contractors is to cover employee injuries sustained on the job. This insurance is designed to provide financial assistance to workers who are injured or become ill due to their work-related duties. It covers medical expenses, rehabilitation costs, and provides a portion of lost wages during the recovery period. By ensuring that employees receive necessary medical care and financial support, workers' compensation helps maintain a safe and healthy work environment, while also protecting contractors from potential lawsuits related to workplace injuries. This insurance is essential for contractors to comply with legal requirements and regulations regarding employee welfare, promoting a safer workplace culture. Although protecting the contractor’s assets, ensuring project completion, and appreciating company reputation are important considerations in business, they do not directly align with the fundamental purpose of workers' compensation, which is specifically focused on employee welfare and injury management.