The Liability policy primarily pays for:

The Liability policy primarily pays for compensatory damages, which are designed to compensate the injured party for actual losses suffered due to the insured's actions or negligence. This type of damage focuses on making the injured party "whole" again by covering medical expenses, lost wages, property damage, and other tangible losses that can be quantified and proven.

Compensatory damages are critical in liability insurance because they relate directly to the financial impact of the injury on the claimant, making it essential for a liability policy to cover these expenses. In contrast, punitive, exemplary, and nominal damages serve different purposes. Punitive and exemplary damages are intended to punish the wrongdoer and deter future misconduct rather than to compensate the victim. Nominal damages recognize a legal wrong occurred, but they do not involve significant financial loss, as the aim is more about acknowledging harm than compensating for it.

By ensuring that compensatory damages are covered, a liability policy maintains the focus on providing necessary financial relief to those who have suffered actual harm, reflecting the primary goal of liability insurance in protecting against risks associated with legal obligations for damages incurred by the policyholder's actions.