Property and Casualty Insurance Practice Exam

What does business liability coverage protect the insured against?

1. Property damage from natural disasters

2. Legal liability from bodily injury and personal injury claims

3. Loss of income from business interruptions

4. Equipment failure

The correct answer is: Legal liability from bodily injury and personal injury claims

Business liability coverage primarily protects the insured against legal liabilities arising from bodily injury and personal injury claims. This type of coverage is designed to address the financial impact of lawsuits or claims brought against a business due to accidents or injuries that occur on its premises or as a result of its operations. If a customer is injured on-site or if the business is accused of causing harm to someone's reputation, this coverage will help defend against legal claims and cover the associated costs, including court fees, settlements, or judgments. The focus of this protection is crucial in a business setting, as even a single incident can lead to significant financial ramifications. Businesses can be held liable for various incidents, and without adequate liability coverage, they risk facing overwhelming expenses that could threaten their financial stability. Other options, like property damage from natural disasters or loss of income from business interruptions, pertain to different types of insurance products, such as property insurance or business income insurance. Equipment failure also falls under specialized coverages that focus on asset protection and operational continuity.