What does the term "liability insurance" cover?

Liability insurance is specifically designed to provide protection against claims that arise from injuries and damages caused to other people or property. This type of insurance is crucial for individuals and businesses alike, as it helps cover legal costs and any settlements or judgments that may be awarded to the injured party. Essentially, liability insurance safeguards policyholders from the financial burdens associated with lawsuits and claims, which can otherwise be exorbitant.

The other options do not accurately reflect the purpose of liability insurance. Coverage for theft pertains to property insurance, protection for lost wages due to workplace injury falls under workers' compensation insurance, and insurance against natural disasters would typically be classified as property insurance or specific disaster insurance rather than liability insurance. Understanding these distinctions is vital for accurately determining the appropriate types of insurance coverage needed in various situations.