Which of the following describes a potential consequence of liability insurance?

Liability insurance serves a fundamental purpose in protecting policyholders from financial repercussions associated with claims made against them for damages or injuries they may cause to others. A key feature of liability insurance is that it not only provides coverage for settlements or judgments related to claims but also offers legal defense against those claims. This means that if the insured faces a lawsuit regarding a covered event, the liability insurance company will handle the legal costs and hire attorneys to defend the insured, thus providing a significant financial safeguard.

The alternative options do not accurately reflect the nature of liability insurance. While it is true that liability insurance provides coverage, it does not grant absolute immunity from responsibility, as policyholders remain accountable for their actions to the extent that liability arises. Additionally, while premiums may increase due to various factors, liability insurance does not inherently increase premiums for all clients across the board. Lastly, liability insurance typically covers a range of claims, including bodily injury, property damage, personal injury, and more, rather than limiting coverage strictly to property damages. Therefore, the correct choice reflects the essential role liability insurance plays in providing both coverage and defense in the face of covered claims.