What is the primary purpose of liability coverage in insurance?

Liability coverage is designed primarily to pay compensatory damages on behalf of the insured when they are found legally responsible for causing harm to another person or their property. This type of coverage is essential as it helps safeguard the insured from financial loss that may arise from lawsuits or claims for damages due to negligence or unintentional actions.

The primary function of liability coverage is to ensure that any legal judgments or settlements the insured is required to pay are covered up to the policy limits. This includes not only damages awarded for bodily injury but also for property damage, making it a crucial component in protecting an individual’s financial well-being.

While there are various types of insurance coverages available, such as those that protect against property theft or cover medical expenses for the insured, these options do not encapsulate the primary purpose of liability coverage, which is centered on compensatory damages arising from third-party claims.