What is the purpose of liability insurance?

Liability insurance is designed specifically to provide financial protection against claims that may arise from injuries or damage you cause to other individuals or their property. It serves a critical role in safeguarding the policyholder from potential legal and monetary consequences stemming from accidents or negligence. For instance, if you accidentally injure someone or damage their property, liability insurance will help cover the costs associated with the damages, including legal fees and settlement costs.

This type of insurance is essential for both individuals and businesses as it can help protect assets and provide a layer of security against lawsuits. By having liability insurance, the insured can focus on their well-being or business operations without the constant fear of financial ruin due to unforeseen accidents or incidents involving others. This underscores the importance of liability insurance in risk management strategies in personal and business contexts.

In contrast, the other options describe coverage for different types of insurance (like health or property insurance), which do not align with the specific purpose of liability insurance.