What is the primary purpose of liability insurance?

Liability insurance is designed to protect individuals and businesses from claims that may arise due to injuries or damage to other individuals or their property. By providing coverage for legal expenses and compensation costs that may result from lawsuits or claims against the insured, liability insurance plays a crucial role in financial risk management.

For instance, if an insured person accidentally causes harm to someone else or damages their property, the liability insurance would cover the costs of the claims made against them. This aspect of liability coverage is essential for individuals and businesses because it helps safeguard their financial stability. It prevents the need for the insured to pay out of pocket for potentially large sums, which can otherwise lead to significant financial hardships.

The other options indicate different types of insurance that serve distinct purposes. Medical expense coverage addresses healthcare costs rather than liability claims. Theft insurance focuses on property loss rather than liability for damages. Income coverage during unemployment pertains to job loss rather than liability issues. Thus, liability insurance specifically targets the risks associated with causing harm or damage to others, making it a fundamental component of personal and commercial insurance policies.