Registered Insurance Brokers of Ontario (RIBO) Practice Exam

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What does the term "liability" in insurance typically refer to?

Property insurance coverage
Coverage for medical expenses
Legal responsibility for injuries or damages caused
Insurance for personal belongings

The correct answer is: Legal responsibility for injuries or damages caused

The term "liability" in insurance specifically pertains to legal responsibility for injuries or damages caused to another party. This concept is foundational in various types of insurance policies, particularly in fields like general liability and auto insurance, where the insured party may be held accountable for harm they unintentionally cause to others or their property. Liability coverage is designed to protect individuals or businesses from the financial impact associated with lawsuits or claims that may arise from such incidents. The other choices represent different aspects of insurance coverage. Property insurance coverage focuses on the protection of physical assets, while coverage for medical expenses is primarily concerned with health-related incidents and costs. Insurance for personal belongings covers loss or damage to personal items, but does not relate to legal responsibility for actions that could harm others. Therefore, the definition of liability distinctly aligns with the correct answer regarding legal responsibilities in the context of insurance.