Why do people commonly purchase liability insurance?

People commonly purchase liability insurance primarily because it is often mandated by legislation. Many jurisdictions require individuals and businesses to carry specific types of liability coverage to protect against claims resulting from bodily injury, property damage, or other legal liabilities. For instance, auto insurance laws typically mandate liability coverage for drivers, ensuring that those who cause harm to others can cover the damages through their insurance. This legal requirement encourages compliance and helps maintain a level of financial responsibility within the community.

The other options do not accurately capture the primary motivation for purchasing liability insurance. While liability coverage does help manage specific risks, it does not reduce all types of risk. Furthermore, liability insurance does not guarantee full compensation for all claims; there are often limits and exclusions that apply. Lastly, while some people may view insurance as a type of investment in their future security, its primary purpose is to provide financial protection against unforeseen events rather than to generate returns.