Which of the following best describes "liability coverage" in an insurance policy?

Liability coverage is an essential component of many insurance policies, and it specifically pertains to the insured's legal obligations toward third parties. This type of coverage protects the insured from potential financial losses that may arise if they are found responsible for causing injury or damage to another person or their property.

For instance, if someone is injured on your property or if you accidentally damage someone else's belongings, liability coverage would address the costs associated with legal claims, medical expenses, and any settlements or judgments that may arise. In this way, it provides crucial financial protection, ensuring that the insured is not personally liable for significant out-of-pocket expenses that could result from legal actions.

The other options illustrate different aspects of insurance coverage but do not fit the definition of liability coverage. Coverage for damages to the insured's property focuses on protecting the insurer's own assets rather than liability towards others. Coverage for losses caused by natural disasters pertains to specific perils rather than broad liabilities. Finally, compensation for lost income is a different type of coverage typically related to business interruption or disability insurance, not liability. This distinction helps clarify the unique role that liability coverage plays in an insurance framework.