Colorado Cosmetology Written Practice Exam

What type of insurance protects a salon owner from financial loss due to an employee's negligence?

1. Health insurance

2. Liability insurance

3. Malpractice insurance

4. Property insurance

The correct answer is: Malpractice insurance

The correct answer is liability insurance. This type of insurance is designed to protect business owners, including salon owners, from financial losses that can arise from claims of negligence made by clients. If an employee's actions result in harm to a client—whether through an injury during a service or misuse of equipment—liability insurance helps cover the costs associated with legal fees, settlements, and any medical expenses incurred by the client. While malpractice insurance is often referenced in medical and specific professional services to protect against claims of inadequate or negligent care, liability insurance serves a broader function in the business context, making it more applicable for salons as a whole. Health insurance is focused on medical costs for employees, and property insurance covers physical assets of the salon rather than liabilities arising from employee actions, which is why they do not provide the necessary coverage for the concern addressed in the question.