What does liability coverage in an insurance policy protect against?

Liability coverage in an insurance policy is specifically designed to protect the insured from financial loss resulting from injuries or damages they may cause to other individuals or their property. This type of coverage typically covers legal fees, medical expenses, or any court-ordered settlements that may arise if the insured is found legally responsible for causing harm to another person or their possessions.

For example, if someone is involved in a car accident and is determined to be at fault, liability coverage would pay for the medical costs of the injured party and any damage to their vehicle. This allows the insured to safeguard themselves against significant financial burdens that could arise from lawsuits or claims made against them.

In contrast, the other options listed do not fall under the typical scope of liability coverage. Environmental disasters primarily relate to property damage which might be covered under different forms of property insurance. Loss of business income is generally covered under business interruption insurance, and damage to the insured's own vehicle would be addressed by comprehensive or collision coverage, not liability. Thus, liability coverage is fundamentally about protecting the insured from claims made by others due to accidents or injuries they cause.