What is liability coverage in a property insurance policy?

Liability coverage in a property insurance policy specifically addresses a policyholder's responsibility for legal claims relating to bodily injury or property damage that they may cause to others. This protection is crucial as it can help cover legal fees and any settlement amounts that the insured might owe as a result of a lawsuit. Essentially, it safeguards the insured from financial loss due to legal actions taken against them, making it a vital component of property insurance.

The other options focus on different aspects of insurance coverage. Coverage for damages to personal belongings pertains to protecting the insured’s own property from damage or loss. Coverage for theft of personal property relates specifically to instances where belongings are stolen, while coverage for the loss of rental income is applicable when an insured property becomes uninhabitable due to a covered loss, affecting the income generated from rentals. Although all these coverages are important, they do not pertain to liability, which is focused on protecting against claims made by third parties.