A Michigan contractor is forming an LLC. What is the minimum general liability insurance coverage required for residential builders under Michigan law?
Correct Answer
C) $500,000
Michigan requires residential builders to maintain minimum general liability insurance of $500,000.
Why This Is the Correct Answer
Michigan's Residential Builder and Maintenance and Alteration Contractor Act requires residential builders to maintain a minimum of $500,000 in general liability insurance. This requirement protects consumers from financial harm caused by contractor negligence or defective work, and is a licensing prerequisite enforced by the Michigan Department of Licensing and Regulatory Affairs (LARA).
Why the Other Options Are Wrong
Option A: $100,000
$100,000 is far below the statutory minimum. This amount is insufficient for residential construction liability exposure and does not meet Michigan's licensing requirements. Choosing this option suggests underestimating the required coverage level.
Option B: $1,000,000
$1,000,000 is a common general liability policy limit in commercial construction and is often seen in contract requirements, but it exceeds the Michigan statutory minimum for residential builders. While contractors may carry this amount voluntarily or at a client's request, the law requires $500,000.
Option D: $250,000
$250,000 is between the minimum and common commercial limits but is not the amount specified under Michigan law. This is a plausible distractor but is not the correct statutory requirement.
Memory Technique
Michigan = 'Half a million for the mitten.' The state of Michigan is shaped like a mitten, and the minimum GL coverage is $500,000 — half a million. This visual association ties the state's identity to the specific number.
More Michigan Questions
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What is the minimum general liability insurance coverage amount required for Michigan residential builders?
Under Michigan Act 299, what is the consequence for a contractor who performs work outside the scope of their license classification?
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Under Michigan Act 299, what happens if a contractor continues to work without a valid license after it expires?
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