What does personal liability insurance cover?

Personal liability insurance is designed to provide financial protection to the insured in the event they are held legally responsible for causing injury to another person or damaging someone else's property. It typically includes coverage for legal costs associated with lawsuits, as well as any damages that might be awarded in a court judgment. This aspect of liability insurance is critical because it helps cover expenses that can arise from accidents or incidents where the insured is deemed negligent or at fault.

The other options relate to various aspects of insurance coverage but do not accurately reflect what personal liability insurance specifically covers. For example, replacement costs of damaged property pertain more to homeowners insurance or property insurance, which address physical damage to one's own property rather than liabilities to others. Loss of income from rental properties is typically covered under landlord or rental income insurance, which is concerned with preventing financial loss from the inability to rent out properties. Home repair costs after a disaster fall under property insurance, covering repairs to the insured’s own dwelling as a result of certain perils, rather than covering liabilities to third parties.

Thus, personal liability insurance is focused on protecting the insured from risks associated with legal liability, making it an essential component of a comprehensive insurance plan.