What is the main difference between liability insurance and property insurance?

Liability insurance is primarily designed to cover legal obligations that an individual or entity has to third parties. This encompasses situations where the insured may be held responsible for bodily injury, property damage, or other types of harm caused to others due to their actions or negligence. For example, if a person accidentally injures someone in a car accident, liability insurance would help cover the costs associated with legal claims made against them. This key aspect makes liability insurance fundamentally different from property insurance, which deals with protecting one's own property against risks like damage or loss due to causes such as theft, fire, or natural disasters.

Property insurance provides coverage for the insured's own assets, whereas liability insurance focuses on protecting against claims from others. Understanding this distinction is crucial for anyone involved in insurance as it influences how risks are managed and covered.

The other options present misconceptions: liability insurance does not cover losses to one's property; property insurance is not uniformly mandatory for all individuals or businesses; and property insurance can cover personal homes as well as business properties, not just businesses.