Alberta General Insurance Level 1 Practice Exam

What is the primary purpose of Liability Insurance?

1. To cover medical expenses only

2. To indemnify against theft and robbery

3. To indemnify the insured for sums required by law to pay as damages

4. To provide coverage for personal items only

The correct answer is: To indemnify the insured for sums required by law to pay as damages

Liability insurance serves to protect the insured from being required to pay damages for harm done to others. This is not limited to medical expenses, as option A suggests, which only covers injury and not property damage. Option B is also incorrect as liability insurance only covers damages resulting from negligence, accidental harm or injury. Option D, providing coverage for personal items only, is incorrect as liability insurance pertains to damage caused to others, not personal items.