What is covered by liability insurance?

Liability insurance is specifically designed to cover legal costs and claims made against an individual or business for damages incurred by third parties due to the insured's actions or negligence. This type of insurance provides financial protection in case the insured is sued for causing injury or harm to others or for damaging someone else's property. It can cover legal fees, settlement costs, and any awarded damages up to the policy limit.

This makes it distinct from other forms of insurance; for instance, damage to personal property is typically covered under property insurance, not liability. Likewise, insurance that only focuses on medical expenses for the insured falls under health insurance rather than liability coverage. Home repairs related to natural disasters would generally be covered under homeowners' insurance and not liability insurance. Thus, the focus on legal expenses and claims for damages to third parties is what makes this option the correct choice.