Leasing License Practice Exam

What does liability insurance protect against?

1. Natural disasters

2. Accidents at the property

3. Theft or property damage

4. Market depreciation

The correct answer is: Accidents at the property

Liability insurance is designed to provide protection against injuries or accidents that occur on a property for which the insured is responsible. This type of coverage ensures that if someone is injured while on the premises, the insurance will cover legal expenses and any financial compensation that may be awarded in a lawsuit. Liability insurance is particularly important for landlords and property owners, as it helps protect them from potential claims made by tenants or visitors who may suffer an injury as a result of negligence on the property. While natural disasters, theft, and property damage are legitimate concerns for property owners, these are typically covered under separate policies such as property insurance or specialized coverage for specific perils. Market depreciation is also not something liability insurance would cover, as it relates to changes in the value of property over time rather than incidents of injury or negligence. Thus, the focus of liability insurance is squarely on accidents and injuries, making the protection it offers in that context crucial for property owners and tenants alike.