What does liability insurance protect against?

Liability insurance is specifically designed to provide protection in scenarios where an individual or entity is held responsible for causing harm to others or for damaging their property. This form of insurance covers legal costs and payouts for which the insured may be liable, thus safeguarding the insured's financial assets.

When individuals or businesses face claims related to bodily injury or property damage caused to another party, liability insurance steps in to cover these expenses. This includes medical bills, legal fees, and any settlements awarded to the injured party. It acts as a financial safety net, ensuring that the insured does not bear the full burden of liability on their own.

The other options reflect different types of risks that liability insurance does not cover. For example, claims resulting from theft relate to property insurance, while environmental damage typically falls under specialized environmental or pollution liability coverage. Claims resulting from business losses pertain more to business interruption insurance or similar policies, rather than liability coverage. Therefore, the definition of liability insurance aligns closely with claims resulting from injuries and damage to other people or property, making this the correct choice.