What type of damage is covered by a liability policy?

A liability policy is designed to provide coverage for damages that occur as a result of your negligence, which includes damage to tangible property and any loss of use that arises from that damage. This means that if you are found legally liable for damaging someone else's property, your liability insurance would cover the costs associated with repairing or replacing that property, as well as any associated loss of use that the property owner might experience due to the damage.

Liability policies specifically focus on providing protection against claims resulting from injuries or damage that you may cause to others, rather than covering your own personal property or damages resulting from natural disasters. Thus, the correct answer highlights the core purpose of liability insurance in relation to property damage caused by negligence.