What does liability insurance primarily protect against?

Liability insurance primarily protects individuals or businesses against claims made by others for injuries or damages they may have caused. This type of insurance provides coverage for legal defenses and any settlements or judgments that may arise from lawsuits related to such claims. For example, if someone is injured on your property or if you accidentally cause damage to someone else's property, liability insurance helps cover the costs associated with those claims, ensuring that you are not left financially responsible for those legal expenses.

Contextually, the other options represent different types of insurance needs. Cost overruns on home improvements pertain to project management and budgeting rather than liability. Theft of insured property falls under property insurance rather than liability. Loss of income due to business interruptions is typically covered by business interruption insurance, not liability insurance. Thus, understanding the scope of liability insurance emphasizes its role in protecting against claims from third parties rather than property or personal financial loss from other risks.