What insurance term describes a policy that covers damage to a third party caused by the insured?

Insurance covering damage or injury that the insured causes to a third party is called liability insurance.

Liability insurance responds when an insured person or organization is legally responsible for harm to someone else. Depending on the policy, it may cover compensation owed to the injured party as well as legal defense costs.

Auto liability coverage commonly addresses bodily injury and property damage caused to other people in a crash. General liability insurance serves businesses and can cover claims involving premises, operations, products, or completed work.

Liability insurance differs from first-party coverage. First-party insurance protects the policyholder’s own property or interests, while liability insurance primarily protects against claims brought by other people.