Which of the following is a key principle of liability insurance?

The key principle of liability insurance is that it covers both legal costs and settlements for claims made against the insured. This means that when an individual or business faces a liability claim for negligence, errors, or omissions, the liability insurance policy will help cover the associated legal fees as well as any settlements or judgments that may arise from that claim. This coverage is essential because it protects the insured’s financial resources by ensuring that they do not have to bear the full financial burden of legal actions brought against them.

Liability insurance is designed to manage risks related to various activities or operations that can potentially cause harm to others, whether through accidents, professional mistakes, or other forms of liability. It allows the insured to focus on their core business without the constant worry of the financial ramifications of potential legal claims. This fundamental aspect ensures that businesses and individuals can operate without the fear of devastating financial consequences from claims they may face in the course of their activities.

In contrast, the other options presented do not accurately reflect the main goals and functions of liability insurance and are therefore not key principles associated with it.