Which statement accurately defines liability coverage?

Liability coverage is designed to protect individuals or businesses from the financial consequences of their legal responsibilities for causing injury or damage to others. Specifically, it encompasses two primary areas: bodily injury and property damage. When an insured individual is found to be legally responsible for causing harm or damage, liability coverage will typically help pay for medical expenses, legal fees, and other costs associated with the incident. This type of coverage is critical in various insurance policies, including auto and homeowners insurance, as it helps ensure that the insured can cover their legal obligations without incurring significant financial burden.

The other options provided do not accurately capture the essence of liability coverage. For instance, protecting against the loss of personal property relates more closely to property insurance, not liability. Reimbursement for lost wages typically falls under a different category of insurance, such as disability insurance or workers' compensation, rather than the scope of liability. Lastly, protection against natural disasters is typically covered under specific types of property or peril insurance policies, rather than under liability coverage itself, which focuses on legal liabilities rather than property risks.