Texas Property and Casualty License Practice Exam 2025 - Free Practice Questions and Study Guide

Liability coverage is specifically designed to protect individuals from the financial consequences of liability claims. This type of coverage responds to situations where a person is held legally responsible for causing harm to another person or their property. If a claim is made against the insured for damages, liability coverage would handle the legal defense costs and any awarded damages up to the policy limits.

For example, in the case of an automobile accident where the insured is at fault, liability coverage would help pay for medical expenses and property repair costs of the other party involved in the accident. It serves as a crucial financial safeguard, ensuring that policyholders can manage potential legal and financial repercussions of their actions.

The other options do not provide the same level of financial protection for liability claims. Property damage coverage mainly focuses on damage to tangible property, health coverage addresses medical expenses, and disability coverage pertains to loss of income due to injury or illness, rather than liability issues.