Registered Insurance Brokers of Ontario (RIBO) Practice Exam

What is a primary role of Third Party Liability coverage in automobile insurance?

1. To cover physical damages to one's own vehicle

2. To cover damages or injury to another party

3. To manage costs of legal defenses only

4. To provide health benefits

The correct answer is: To cover damages or injury to another party

The primary role of Third Party Liability coverage in automobile insurance is to cover damages or injuries caused to another party. This type of coverage is essential as it protects the insured driver from financial liability if they are found to be at fault in an accident that results in harm or damage to someone else's property or person. This coverage typically pays for medical expenses, property repairs, and other damages that the insured is legally responsible for after a car accident. It is a critical component of auto insurance, as it safeguards entire financial stability by ensuring that costs resulting from accidents involving other people are covered, thus fulfilling the legal and ethical responsibilities of drivers on the road. The other options do not align with the main purpose of Third Party Liability coverage. For instance, covering physical damages to one's own vehicle falls under collision or comprehensive coverage, while managing costs of legal defenses speaks to liability coverage in a broader sense without tying it directly to third party implications. Providing health benefits is a category that would fall under health or accident insurance, not automobile liability insurance.