West Virginia Adjusters Practice Exam

All of the following statements are true of liability insurance, EXCEPT:

1. Liability insurance covers damages to another person's property.

2. Liability insurance provides indemnification for the insured.

3. Liability insurance covers bodily injury to another person.

4. Liability insurance can cover legal defense costs.

The correct answer is: Liability insurance covers damages to another person's property.

Liability insurance is designed to protect the policyholder from claims of damage or injury to other individuals or their property. Therefore, it includes coverage for damages to another person's property, which makes the statement about liability insurance covering such damages correct. The essential aspect of liability insurance is that it provides indemnification, or financial protection, for the insured against claims made by third parties. This means that if the insured is found liable for causing injury or damage, the insurance will cover the costs up to the policy limits. Furthermore, in addition to covering property damage, liability insurance also covers bodily injury claims made by another person, ensuring that the insured is protected from medical expenses or other costs arising from such injuries. Lastly, liability insurance often includes coverage for legal defense costs, meaning if the insured is faced with a lawsuit related to a claim, the insurance may also cover attorneys' fees and related expenses. Given this context, the claim that liability insurance covers damages to another person's property is accurate and substantiates the understanding of liability coverage, indicating that this option cannot be the exception to the true statements about liability insurance.