What is the primary purpose of liability insurance?

Liability insurance primarily serves to protect individuals and businesses from legal claims that may arise as a result of their actions or negligence. It provides a financial safety net, ensuring that if someone is sued for causing harm to another person or their property, the insurance policy can cover legal defense costs, settlements, or judgments up to the policy limit. This type of insurance is essential in managing the risk associated with potential lawsuits, helping to safeguard assets and maintain financial stability.

While the other options mention important aspects of insurance, they do not capture the core function of liability insurance specifically. Medical expense coverage, income replacement, and property damage are typically addressed by different types of insurance policies, such as health insurance, disability insurance, and property insurance, respectively. Thus, the definition and purpose of liability insurance focus primarily on mitigating the risks associated with legal claims.