What Does Property and Casualty Insurance Cover?

Outside of health and life insurance, property and casualty insurance are at the heart of most insurance policies. Property insurance is a policy that covers you against damage or destruction to your property. Casualty insurance is a policy that covers you against liability for injury to someone else or their property. Typically, these two insurance types come bundled together in single policies and together are referred to as “P&C coverage.” Here’s how it works.

If you’re not sure which types of insurance you need to protect your assets, consider working with a financial advisor.

What Is Property Insurance?

Property insurance is an insurance policy that protects you from damage to property that you own. The scope of this coverage can vary widely, from personal possessions all the way up to an entire house or condo. A standard property insurance policy will specify what property it protects and the maximum value that coverage will reimburse when any covered property is lost, stolen or damaged.

When you take out property insurance, you can define the value of the assets you are choosing to protect. More coverage will typically cost more money in premiums, but you can have a degree of certainty to this coverage. If you want to protect property that would cost you $100,000 to replace, you can take out a policy for that amount of protection. For most property insurance policies, the fault is a key element of the protection.

A standard property insurance policy will not protect you from losses that are considered your own fault. If you intentionally damage something, for example, your insurance will not pay for it. The same may also be true if the insurer believes that you acted negligently or otherwise allowed the damage to occur. For example, many forms of property insurance will not protect you from damage caused by a hazardous situation that you either created or ignored.

This is where property insurance can get very murky. The exact nature of fault and coverage varies based on your specific policy and determining whether damage occurred due to an accident or negligence can sometimes be difficult. For this reason, it’s important to have major property coverage spelled out clearly and specifically.

What Is Casualty Insurance?

Casualty insurance is somewhat more complicated than property insurance. This is an insurance policy that protects you in case you are found liable for harm to someone else. That can mean either damage to their property or personal injury. In this case, a casualty insurance policy would issue payments that would otherwise come out of your pocket.

While casualty insurance is somewhat less common than property insurance, it is absolutely essential for some forms of coverage. For example, auto insurance typically comes with some level of casualty insurance. This protects you in case you are at fault in an accident. The insurance company will reimburse the other party for any damage, which can save you from potentially crippling personal expenses.

Like property insurance, casualty insurance can have limits that cause confusion. In particular, many casualty insurance policies will have limits to the kind of fault or accident that they cover. This can mean that if the insurer decides that you were reckless or otherwise should have prevented the damage, it might not cover your claims. Similarly, if they decide that you caused the damage intentionally, most casualty insurance will not cover you. The details vary from policy to policy and, as with property insurance, it’s important to have the issues clearly defined.

Another concern for casualty insurance is limits. Like with property insurance, when you take out a policy you can define the maximum coverage you receive with casualty insurance. For example, you can purchase up to $500,000 worth of protection, meaning that the insurance company will reimburse someone for up to that amount if you are at fault for their injuries.

However, unlike with property insurance, you cannot know in advance what casualty losses you might face. If you get into a car accident or someone is injured on your property, the liability will be defined by the scope of harm. This can create a problem if your casualty coverage is less than their losses, leaving you personally liable for the remainder. To protect against this, many people take out what is known as “umbrella coverage,” which is a policy that protects you from additional losses beyond the scope of their standard insurance.

What Policies Include Property and Casualty Coverage?

Outside of health insurance and life insurance, most insurance policies include property and casualty insurance. Common forms of P&C insurance include:

For example, say that someone visits your house. They slip and fall on an icy stair and sue you for the resulting injuries. If you are found liable, the casualty insurance in your homeowner’s policy would cover those costs, preventing you from needing to pay out of pocket. For most, if not all, asset-related insurance, property and casualty coverage is at the core of the insurance product itself.

Bottom Line

Property insurance is a form of policy that protects property that you own and reimburses you if it is damaged, lost or destroyed. Casualty insurance is a form of policy that protects you if you are found liable for harm to someone else and issues payment on your behalf. You may want to consult an advisor if you need this type of coverage or which type of coverage is right for you.

Insurance Tips

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While P&C coverage is an essential element of most policies, they are a simple part of the larger insurance world. So let’s take a look at eight types of insurance policies you can buy.