Which of the following best describes the purpose of liability insurance?

Liability insurance serves a crucial role in protecting individuals and businesses from the financial repercussions of their actions that may cause harm to others. It specifically covers legal defense costs and any damages that may arise from claims of negligence or wrongdoing, which could lead to lawsuits. This type of insurance is essential for ensuring that policyholders are not financially devastated by potential legal actions resulting from accidental injuries or property damage they may have caused to third parties.

This definition aligns accurately with the scope of liability insurance, distinguishing it from other types of coverage. For instance, protection against theft of personal property falls under different categories such as homeowners insurance or renters insurance, and reimbursement for business income loss pertains to business interruption coverage, not liability insurance. Additionally, paying for medical expenses regardless of fault typically relates to medical payments coverage or personal injury protection, both of which are separate from liability insurance. Thus, option B accurately encapsulates the primary function of liability insurance.