Which insurance covers losses to a third party caused by the insured?

Liability insurance is designed to cover losses that the insured may cause to a third party. This means that if an individual or business is held legally responsible for damages or injuries to someone else, liability insurance will help cover the costs associated with those claims. This type of insurance is crucial in scenarios such as car accidents, property damage, or personal injury incidents where the insured's actions result in financial loss or harm to others.

Indemnity insurance, on the other hand, generally refers to a type of insurance that compensates the insured for losses they incur, rather than covering third-party claims. Disability insurance provides financial support to individuals who are unable to work due to illness or injury but does not address liability to others. Comprehensive insurance typically covers damage to the insured’s own property, such as in cases of theft or natural disasters, rather than third-party liability. Therefore, the distinguishing characteristic of liability insurance is specifically its focus on covering losses to third parties caused by the insured, making it the accurate choice in this context.