It is about covering you if you are found responsible of damages/injury (material or physical) caused to others. It must be unintentional of course!
When you are in your home country, this benefit is included in your comprehensive home insurance. It is compulsory.
When you go overseas for more than 90 days, you are no longer covered. This is why it is included in the insurance.
This answer only relates to: Cap Working Holiday, Cap Student, Cap Volunteering, Cap Adventure.