What is covered under liability coverage in a personal auto policy?

Liability coverage in a personal auto policy is designed to protect the policyholder against financial responsibility for damages and injuries they may cause to others while operating their vehicle. This includes any damage to another person's property (such as their vehicle or other property) and medical expenses for injuries inflicted on another person as a result of an auto accident.

Choosing the option that states "damages to a third party" aligns perfectly with the purpose of liability coverage. Essentially, if the policyholder is found to be at fault in an accident, liability coverage ensures that expenses resulting from that claim, such as repair costs and medical bills for third parties, are covered, helping to protect the policyholder's assets from being at risk due to potential legal claims or lawsuits.

In contrast, liability coverage does not extend to damages incurred by the policyholder's own vehicle, any personal medical expenses, or losses related to personal belongings in the vehicle, which are typically covered under different parts of an insurance policy. Hence, focusing on the definition and intention behind liability coverage clearly supports why "damages to a third party" is the correct answer.