Georgia Property & Casualty Practice Exam

For a carpentry contractor to be eligible for a business owners policy, what is the payroll limit condition?

1. annual payroll is $300,000 or less and he does no work at heights greater than three stories

2. the company is a partnership and not a limited liability company

3. he has at least three years of experience as a contractor

4. he is a member of the Better Business Bureau

The correct answer is: annual payroll is $300,000 or less and he does no work at heights greater than three stories

A business owners policy (BOP) is designed to provide a package of insurance coverage for small to medium-sized businesses, and certain eligibility criteria must be met for specific trades, such as a carpentry contractor. The condition regarding the payroll limit is that the contractor's annual payroll must not exceed $300,000. This limit helps to ensure that the risk associated with insuring the business is manageable for the insurer. Additionally, a stipulation is often included that the contractor does not perform work at heights greater than three stories, as this increases the risk associated with the business significantly. Eligibility criteria like payroll limits are put in place to mitigate potential losses and ensure that insurance providers can maintain their risk assessments. The other options related to business structure, experience, or membership in organizations do not directly pertain to the specific payroll limit condition necessary for a BOP. Thus, the correct response aligns with the established guidelines for insurance eligibility in the carpentry industry, focusing on both payroll and the nature of the work performed.