CUNA Insurance Producer Practice Test

The primary difference between liability insurance and property insurance is that liability insurance is designed to protect against legal claims and damages for injuries or damages that the insured party may cause to others, as well as covering the legal costs associated with those claims. This means that if someone is held responsible for an accident that results in bodily injury or property damage to a third party, liability insurance will help cover the financial repercussions of that incident.

On the other hand, property insurance specifically covers physical damages to the insured's own property, such as a home or business premises, due to events like fire, theft, or natural disasters. This type of insurance reimburses the insured for losses they incur to their own assets.

Understanding this distinction is crucial, as liability insurance protects one from claims made by others, while property insurance focuses on the protection of one's own belongings.