What does "liability coverage" provide in an insurance policy?

Liability coverage in an insurance policy is designed to protect the insured from claims arising due to injuries and damages that they may cause to other people or their property. This form of coverage is essential in various types of insurance, particularly in auto and homeowners insurance, as it helps cover legal costs, settlements, or judgments that may result from lawsuits or claims.

When a situation arises where someone else suffers damage or injury because of the insured’s actions or negligence, liability coverage steps in to provide financial support. This ensures that the insured is not personally responsible for paying large sums out of pocket, which could otherwise lead to significant financial strain.

The other choices do not accurately reflect the primary function of liability coverage. Protection against personal injuries mainly pertains to personal injury policies, while coverage for theft of personal property is related to property insurance. Reimbursement for lost wages is generally associated with different types of insurance, such as disability or workers' compensation insurance, rather than liability coverage.