The term property and casualty insurance is probably one that you have heard often, however,  are you aware of exactly what it means? Basically, property and casualty insurance are kinds of insurance coverage which help protect your belongings, for example your car or home. They also provide liability coverage which can help protect someone if they were to be found responsible for an accident which caused another person injury or damage to someone else´s belongings.

Here is a brief explanation of the basics of property and casualty insurance:

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Property Insurance

It is relatively easy to define property insurance. It includes various kinds of insurance which are designed for coverage of property losses, what this means is the risks of suffering financial losses due to property that you owned being damaged or destroyed.

When it comes to property loss, there are three basic types:

  • Loss of Income from the Article Not Being Able to Be Used: let’s say that a hotel were to burn down. The time that it would take for the hotel to be rebuilt, let’s say about a year, it would lose over two million dollars in room rentals. The loss of the income due to the hotel being damaged is a type of property loss.
  • Damage to or Loss of the Article Itself: for this type of loss, example are the damage to a vehicle due to an accident or the theft of a valuable item.
  • An Extra Expense That is Incurred Due To the Loss of an Article: For example, if a large editorial business were to be destroyed in a fire, in order to continue working the owners, at one-third additional cost, would have to rent another press. The extra expenses needed to keep the business running after a loss is another form of property loss.

The following are some types of insurance which are usually considered as property insurance:

  • Commercial Property
  • Dwelling
  • Homeowners
  • Ocean Marine
  • Inland Marine
  • Protection of Equipment Breakdown (also known as machinery and boiler)
  • Crime

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Casualty Insurance

It is more difficult to define casualty insurance because a wide of insurance products that are basically unrelated are included in it. Liability insurance is one of the most important kinds of casualty insurance. Losses that occur because of the interactions of the insured with others, or the property of others are liability losses.

A car accident is probably one of the best examples of this. Let’s say that as John backs out of his parking spot, he hits Jane´s parked vehicle, the damages turn out to cost $600. Because this was John´s faulty, legally he is liable, in other words responsible for said damages, it is his responsibility to have Jane´s car repaired. With liability insurance, John would be protected from having to cover the damages out of his own pocket.

Generally, in order to be legally liable, the person involved must be guilty of negligence, this means that he or she did not practice proper care with their personal actions. If another person is harmed due to negligence, the resulting damages are the responsibility of the person. Oftentimes people in the insurance industry refer to liability losses as third-party losses. The first party would be the insured, the second party is the insurance company and the third party is the person whom the insured is liable for the damages.

Much as someone would purchase property insurance to protect themselves from financial loss if their property were to be damaged, liability insurance can be purchased as protection from financial loss in case you were to become legally liable for the damage to someone’s property or the injury of another person.

There are insurance types other than insurance for liability that traditionally have also been considered casualty insurance. The following types of insurance can also be considered casualty insurance:

  • Auto
  • Aviation
  • Surety bonds
  • Workers´ Compensation