Which type of insurance is commonly required for service contracts?

• A. General liability and professional liability (errors and omissions) insurance.
• B. Vehicle liability only.
• C. Life and health insurance.
• D. No insurance required.

Answer: (A)

Service contracts usually involve the risk that something could go wrong during the work, potentially causing injury to someone, damage to property, or mistakes in the service provided. Having appropriate insurance helps manage those risks for both parties. General liability covers third-party bodily injury and property damage that may occur as a result of the service provider’s operations. Professional liability, also known as errors and omissions insurance, covers claims that arise from mistakes, negligence, or failure to perform as agreed in the contract. Together, these two types of coverage address the main financial risks tied to delivering services, which is why this combination is commonly required in service contracts.

Vehicle liability is only relevant if the services involve operating vehicles; life and health insurance protect individuals, not the business against operational or professional risks; and saying no insurance is required would leave the client exposed to potential losses and is not typical in service agreements.