What does "liability coverage" in an insurance policy provide?

Liability coverage in an insurance policy primarily provides protection for injuries and damages that the policyholder may cause to other individuals or their property. This type of coverage ensures that if the insured is found legally responsible for an accident or incident that results in bodily injury or property damage to others, the insurance company will cover the related costs. This can include medical expenses, legal fees, and compensation for lost wages of the injured parties, up to the policy limit.

This type of coverage is essential for mitigating financial risk, as it helps shield the insured from having to pay out-of-pocket for these potential liabilities. It is a fundamental aspect of many insurance policies, including auto insurance, homeowners insurance, and general liability insurance for businesses. The other options provided do not accurately represent the scope of liability coverage, as they pertain to different types of insurance protections.