What is the purpose of liability insurance for businesses?

Liability insurance for businesses serves a crucial role in mitigating financial risk by protecting the business from claims that may arise due to negligence or harm inflicted on others. This type of insurance is designed to cover legal costs, settlements, and damages if the business is found liable for causing injury or property damage to a third party.

For example, if a customer slips and falls in a store, liability insurance would help cover the medical expenses and legal fees resulting from a lawsuit. This type of coverage is essential for ensuring that the business can operate without the fear of significant financial loss due to unforeseen incidents that may occur during its operations.

In contrast, the other options focus on different aspects of business functionality. Covering employee salaries pertains to payroll and operational costs rather than liability. Insuring business property against theft is related to property insurance, which protects physical assets rather than liability issues. Providing health coverage to employees is an aspect of employee benefits and does not relate to business liability, which is specifically concerned with third-party claims. Therefore, liability insurance maintains the financial health of a business by providing essential protection against various claims and lawsuits.