What is the primary purpose of liability insurance?

The primary purpose of liability insurance is to protect against claims resulting from injuries or damage to third parties. This type of insurance is designed to cover legal liabilities that an individual or business may incur if they cause physical harm or property damage to someone else. It provides financial protection by covering the costs associated with legal defense, settlements, or judgments that arise from such claims. This is particularly important for businesses and professionals who face the risk of lawsuits and legal actions in the course of their operations.

Liability insurance is a critical component of risk management as it ensures that policyholders do not face devastating financial consequences from unintentional injuries or damage they cause to others. By having this coverage, individuals and businesses can operate with confidence, knowing they have financial protection against potential legal liabilities. The focus of liability insurance distinctly sets it apart from other types of insurance, which have different objectives, such as personal accident coverage or property insurance, which pertain to the policyholder's own injuries or possessions.