Alabama Property and Casualty Practice Exam

Liability insurance protects the insured by covering legal expenses and damages that arise from claims made against them for bodily injury or property damage they may have caused to others. This type of insurance is crucial because it provides financial security and peace of mind, allowing individuals or businesses to defend themselves against lawsuits or claims without bearing the full burden of legal and settlement costs on their own.

When an insured is found liable for causing injury or damage, liability insurance steps in to handle legal fees, court costs, and any judgments or settlements that may result from the claims. This protection is essential for anyone who could potentially face litigation, whether from accidents, negligence, or other liability exposures.

Other options, while relevant to different forms of insurance, do not pertain specifically to the core function of liability insurance. For instance, vehicle repairs or theft reimbursement are covered under different types of insurance like collision or comprehensive coverage, while routine maintenance costs are typically the responsibility of the property owner and not covered by insurance.