Texas Property and Casualty License Practice Exam 2025 – All-in-One Guide to Exam Success!

Liability insurance is best described as insurance that protects against legal claims. This type of insurance provides coverage for damages or injuries that one may be legally responsible for causing to another party. It is designed to cover legal costs as well as any judgments or settlements that arise from such claims. This protection is essential for individuals and businesses alike, as it mitigates the financial risk associated with lawsuits and can help safeguard one's assets from being seized in the event of a liability claim.

The other choices do not adequately capture the full scope of what liability insurance entails. For example, insurance covering only physical damage focuses on property, while personal assets coverage is limited and doesn't address liability. Additionally, claiming that liability insurance is not necessary for businesses overlooks the critical role that such protection plays in the overall risk management strategy of any business operation.