What type of risk does liability insurance primarily cover?

Liability insurance is designed specifically to protect individuals and businesses from the financial consequences of claims made against them for injuries or damages they may cause to third parties. This coverage can include legal defense costs, any settlements or judgments if the insured is found liable, and claims related to bodily injury or property damage inflicted on others.

By covering injury or damage caused to a third party, liability insurance helps ensure that the insured does not face significant financial hardship as a result of accidents or injuries occurring on their property or as a result of their actions. This is crucial because such incidents can lead to expensive legal battles and settlements, which could be financially devastating without proper coverage.

The other options relate to different types of insurance needs. Property damage caused by natural disasters is typically covered under property insurance, loss of income due to a business closure may involve business interruption insurance, and damage to the insured’s own property is generally covered by property damage insurance. These distinctions underscore the importance of knowing the specific areas of risk covered by different types of insurance policies.