What does liability insurance cover?

Liability insurance primarily covers the legal obligations an insured person or entity has for injuries or damages incurred by third parties. This type of insurance is essential because it protects the policyholder from financial loss in the event that they are found responsible for causing harm to someone else's property or bodily injuries to another person. The coverage typically includes legal fees, settlements, or judgments that arise from these claims, thereby providing a safety net against unexpected liabilities.

In contrast, other options describe forms of coverage that are typically provided by different types of insurance policies. For instance, loss or damage to property owned by the insured would fall under property insurance, while the cost of repairing personal property is not typically included in liability insurance but rather covered by specific property policies such as homeowners or auto insurance. Loss of income due to a covered event would usually be addressed by business interruption insurance or disability coverage, rather than liability insurance, which focuses on damages to third parties rather than the insured's own losses.