Property and casualty insurance is a term describing two forms of broad coverage that financially protect you if the property you own is damaged, lost or stolen (representing the “property” portion of the phrase) or if you cause injury to another person or damage to their property (the “casualty” portion). There are several types of property and casualty insurance, with policies available for individual or business needs. Understanding what this insurance covers and how to secure a policy can help you protect yourself and your assets.
What is property and casualty insurance?
Property and casualty insurance, also known as P&C insurance, isn’t a single type of insurance. It’s an umbrella term that describes many types of insurance policies, including auto, homeowners, renters and condo insurance. As the name suggests, P&C insurance contains two parts — property coverage and casualty coverage:
- Property coverage covers things like your house, car, clothing, furniture, electronics and valuables. If your personal property is damaged or destroyed by a covered peril, your personal property coverage can help pay to repair or replace them.
- Casualty insurance covers your liability. For instance, if a delivery driver slips and falls on your icy driveway, the liability portion of your home insurance may pay for your legal fees if the driver takes you to court. If you cause a car accident, your car insurance liability coverage helps you pay for the other driver’s expenses.
Although property coverage and casualty coverage are technically different types of insurance, they aren’t sold separately because most common insurance policies bundle them together. Even the most basic homeowners, auto and renters insurance policies include both property and casualty coverage.
Types of P&C insurance
There are many types of insurance that fall under the P&C insurance umbrella. All of these policies include personal property and liability coverage.
Car insurance covers the damage to your vehicle after an accident. If your car is stolen, your insurance will help you pay for a replacement. It also covers your liabilities as a driver. If you hit another car, your liability insurance will help pay for the other driver’s damage, including vehicle repairs and medical expenses.
Home insurance covers the personal items inside your home — like clothing and furniture, as well as the home’s structure itself — from common perils. For example, if your entire wardrobe was destroyed in a fire, your personal property coverage would help cover the cost of new clothes. Home insurance also covers liabilities. If a guest was injured on your property and you were found responsible, your legal fees would be covered up to the policy limits.
Condo insurance is similar to home insurance in that it covers your personal items, as well as liability to others. Condo insurance also covers damage to your condo unit. However, dwelling coverage is where homeowners and condo policies differ. The condo association purchases a master policy that covers the building exterior, while your personal condo policy provides coverage for the interior walls and any improvements made that are not covered by the master policy.
Like home insurance, renters insurance also covers your personal property and liabilities. If an electrical fire burns some of your furniture, your insurance policy will help you replace the damaged items with new ones. The same goes for liability. If you accidentally damage someone’s property and they decide to sue you, the casualty portion of your renters insurance will help pay for the cost. Unlike condo or home insurance, renters insurance policies do not cover damage to the exterior or interior of the dwelling.
Landlord insurance covers the building itself. If you are a landlord and a windstorm damages the roof of an apartment building you own, your landlord policy may help finance the repairs. It can also cover your liabilities if a tenant accidentally gets injured on the property.
Business owners purchase property and casualty insurance for the same reason individuals do. A business insurance policy provides financial protection for damage and losses to the business property and assets. Casualty coverage is typically broader and protects against claims made by third parties — usually clients or customers who get injured on the premises. It also helps cover damage you or your employees cause to clients’ property while performing work.
Additionally, such policies may include unique protections such as business interruption coverage. This can help pay for business expenses and provide lost income replacement if the business temporarily closes because of a covered loss, like a fire.
Power sports insurance
If you have a boat, ATV, golf cart or snowmobile, this type of policy can be beneficial. Power sports insurance policies cover the cost of repairs to your vehicle from damage and provide financial liability coverage for the operator. For instance, if you accidentally rode your snowmobile through someone’s backyard fence, the casualty portion of your power sports insurance would pay for the repairs.
Umbrella insurance is a broad form of liability coverage that extends your limits of casualty coverage and is applicable to both personal and business coverage. Umbrella coverage can be an important part of any insurance plan, particularly in modern society with increasingly unpredictable lawsuits with large damage claims. Normal limits don’t always come close to addressing this risk, but for an additional cost, you can raise limits on all phases of your liability coverage with an umbrella policy.
How does P&C insurance work?
P&C insurance works like any other type of insurance. If your personal property is damaged or destroyed by a covered peril, you can file a claim with your insurance company to get reimbursed for the losses. The same goes for liability claims, where someone is suing you for damage and seeking compensation for their losses.
In either scenario, you are only covered up to your policy’s property limit and casualty limit. For example, if your house burns down and you lose everything you own, you will only be compensated for the losses up to your policy’s personal property coverage limit. Valuables and electronics are usually subject to specific coverage limits, which tend to be low.
When you purchase any type of P&C insurance, make sure your coverage limits are appropriate for your situation. For instance, if you have $200,000 worth of belongings in your home, your coverage limit should match that. If your coverage limit is too low, you risk paying money out-of-pocket toward a loss.
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