Which insurance coverage typically involves providing defense costs related to liability claims?

Liability insurance is specifically designed to cover claims made against an individual or business for damages caused to a third party. This includes not only the costs that might arise from a liability claim, such as settlements or judgments, but also the defense costs incurred when defending against such claims. This is a critical aspect of liability insurance, as legal defense can often be expensive, and having coverage helps protect the insured from financial burdens related to defending claims, even if those claims are ultimately unsubstantiated.

In contrast, property insurance primarily covers damage to one's own property and does not provide defense costs for liability claims. No-fault insurance relates to personal injury protection and covers medical expenses and lost wages regardless of fault, but it does not cover liability claims or defense. Health insurance is focused on medical expenses related to health care needs and does not apply to liability claims. Thus, the nature of liability insurance uniquely encompasses the provision of both defense costs and compensation for claims, making it the correct answer in this context.