Which type of insurance is mandated by law to protect consumers and third parties?

Statutory insurance refers to insurance that is required by law to provide financial protection for consumers and third parties. This type of insurance is often established to ensure that certain risks and liabilities are covered, such as in the case of motor vehicle policies that protect other drivers, pedestrians, and property owners in the event of an accident caused by the insured party.

The fundamental purpose of statutory insurance is to create a safety net for the public, ensuring that individuals and businesses can claim compensation or benefits in specific situations, like workplace injuries or auto accidents, without having to rely solely on voluntary participation.

In contrast, voluntary insurance is not mandated by law and is typically purchased by individuals or businesses to cover various risks that are not required but may provide additional financial security. Mandatory coverage may seem close to statutory insurance; however, it is more general and does not specifically denote the legal requirement aspect inherent in statutory insurance. Supplemental insurance provides additional coverage on top of a primary insurance policy, but it is not a legal requirement.

Thus, statutory insurance is the correct answer because it specifically refers to laws that protect consumers and third parties by making certain types of insurance mandatory.