Property and Casualty Insurance Practice Exam

Which type of insurance primarily covers liability claims against the insured?

1. Property insurance

2. Life insurance

3. Liability insurance

4. Auto Insurance

The correct answer is: Liability insurance

Liability insurance is specifically designed to cover claims for which the insured may be held legally responsible. This type of insurance provides financial protection against legal liabilities resulting from injuries or damages to others. It essentially covers legal fees, settlements, and judgments associated with claims made against the insured for actions such as negligence, personal injury, or property damage. While property insurance focuses on covering damages to the insured's own property and life insurance provides financial benefits upon the insured's death, these do not address liability claims. Auto insurance, while it can provide some liability coverage (specifically liability for bodily injury and property damage to others resulting from vehicle accidents), it is fundamentally a broader category that includes coverage for damages to the vehicle itself and other components as well. Therefore, liability insurance stands out as the insurance type that primarily emphasizes protection against claims made by third parties.