What type of insurance indemnifies a third party for damages caused by the insured's negligence?

• A. Workers' Compensation Insurance
• B. Liability Insurance
• C. Property Insurance
• D. Health Insurance

Answer: (B)

Liability insurance is designed to protect the insured against claims resulting from injuries and damage to people or property that occur due to the insured's negligence. This type of insurance provides financial coverage for legal costs and settlements or awards paid to the third party in the event of a lawsuit.

For instance, if a business's employee accidentally causes property damage or injury while performing their duties, liability insurance would help cover the costs associated with that claim, thereby indemnifying the third party affected by the incident. This is crucial for businesses and individuals alike, as it helps ensure that they are protected from significant financial losses that could arise from unforeseen accidents or negligent acts.

Other types of insurance mentioned, such as workers' compensation, property insurance, and health insurance, serve different purposes. Workers' compensation provides benefits to employees injured on the job, property insurance covers damage to the insured's assets, and health insurance covers medical expenses for the insured individual. None of these directly indemnify a third party for damages caused by the insured's negligence, which underscores why liability insurance is the correct answer in this context.