Final answer:
Liability is being legally responsible for something while coverage is the protection granted by an insurance policy. Liability coverage pays for legal costs and payouts if the insured is found liable. The terms are related but describe different concepts within insurance and legal frameworks.
Step-by-step explanation:
The terms liability and coverage are often used in the context of insurance and have distinct meanings. Liability refers to the state of being legally responsible for something, such as an action or an accident. When someone is liable, they are legally obligated to compensate for the loss or damage caused. Coverage, on the other hand, refers to the protection provided by an insurance policy, which outlines what the insurance company will pay for in the case of a loss or damage.
Liability coverage is a part of an insurance policy that protects the insured against claims resulting from injuries and damage to people and/or property. It covers legal costs and payouts that the insured would be responsible for if found legally liable. For instance, in the context of auto insurance, if you are at fault in a car accident, liability coverage would help pay for repair costs of the damaged vehicle or medical bills of injured parties.
To directly address the question, the correct answer is that liability is a legal doctrine and coverage is a contractual obligation. Therefore, these terms describe different aspects of insurance and legal responsibilities.