What is a liability policy designed to cover?

• A. Personal health-related expenses of the policyholder
• B. Damages for which the policyholder is legally responsible, including bodily injury and property damage
• C. Losses incurred from market fluctuations
• D. Long-term disability benefits

Answer: (B)

A liability policy is specifically designed to cover damages for which the policyholder is legally responsible, including bodily injury and property damage. This type of insurance provides financial protection against claims resulting from injuries and damage to other people or their property due to the policyholder's actions or negligence.

For instance, if an accident occurs where the policyholder is at fault, the liability coverage will help to pay for the medical expenses of the injured party and repairs to their property. This protects the policyholder from having to pay these potentially high costs out of their own pocket, resulting in significant financial support in legal situations.

The other options describe different types of coverage. Personal health-related expenses pertain to health insurance, which focuses on medical costs for the policyholder. Losses due to market fluctuations relate to investment portfolios, not insurance. Long-term disability benefits provide income to individuals who can no longer work due to disability, rather than covering liabilities to others.