How does liability insurance differ from property insurance?

Liability insurance is specifically designed to cover legal obligations that an individual or business has to third parties for bodily injury or property damage they cause. This type of insurance provides protection in the event that the policyholder is found legally responsible for an incident that affects others, which could include accidents, injuries, or damages. For example, if a driver causes a car accident that injures another person, their liability insurance would cover the injured party’s claims.

In contrast, property insurance primarily focuses on protecting the policyholder’s own property from risks such as fire, theft, or damage. It does not extend to cover legal liabilities to third parties. The distinction is significant because liability insurance addresses the financial responsibilities arising from harm to others, whereas property insurance relates to safeguarding one’s own possessions.

This fundamental difference makes the first answer the correct and relevant aspect of how liability insurance differs from property insurance, illustrating the core purpose and function of these two distinct types of insurance coverage.