State Farm Auto Insurance Practice Test

What is the main purpose of liability insurance in auto insurance?

1. To cover damages to the insured vehicle

2. To cover medical expenses for the insured

3. To provide coverage when the customer is at fault

4. To protect against theft and vandalism

The correct answer is: To provide coverage when the customer is at fault

Liability insurance in auto insurance is designed primarily to provide financial protection when the policyholder is found to be at fault in an accident. This type of coverage typically helps pay for damages or injuries that the insured person causes to other people or their property while operating their vehicle. For instance, if the insured driver causes an accident that results in significant damage to another vehicle or medical expenses for other parties, liability insurance will cover these costs up to the policy limits. This coverage is crucial not only because it fulfills legal requirements in many states, where drivers must carry a minimum amount of liability insurance, but also because it protects the insured's financial stability. Without liability insurance, the policyholder may be personally responsible for paying out-of-pocket for damages that could easily reach thousands of dollars, thereby exposing them to substantial financial risk. In contrast, the other options focus on different aspects of coverage that are not the main purpose of liability insurance. For example, damages to the insured vehicle and protection against theft and vandalism relate more to comprehensive and collision coverage, while medical expenses for the insured are usually covered by personal injury protection or medical payments coverage rather than liability insurance.