Rhode Island Insurance Adjuster Exam

Why do insurers write liability insurance?

1. To increase their profits

2. To provide coverage for damages caused by their insured

3. To protect the insured from legal obligations

4. To reduce premiums for comprehensive policies

The correct answer is: To protect the insured from legal obligations

Liability insurance is designed primarily to protect the insured from legal obligations that arise from damages or injuries they may cause to others. The intention behind this type of coverage is to ensure that policyholders have financial protection and legal representation when they face claims for damages. By providing this coverage, insurers help policyholders handle potentially costly legal claims or lawsuits brought against them. This allows the insured to manage their risk exposure effectively without facing overwhelming financial consequences that could arise from such liabilities. While it's true that providing liability insurance may contribute to an insurer's profitability and help cover damages caused by the insured, the core purpose remains focused on safeguarding the insured's financial well-being regarding their legal responsibilities.