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What Is Property and Casualty Insurance?

by Guylaine Cadorette | Dec 28, 2020
A homeowner signing a homeowners insurance policy

What Is Property and Casualty Insurance and What Does It Cover?

Property and casualty (P&C) insurance is a general term that describes various forms of insurance that can help protect you and your physical property. This includes the types of insurance that typically cover items like your car, home, and even businesses, as well as situations in which you are found responsible for an accident that causes injuries to another person or their belongings.

While P&C insurance includes many specific types of insurance, it does not generally include health or life insurance. Health and life insurance only cover the insured individual, not any property damage they own or liability for damage to others. For instance, life insurance covers the expenses associated with death (funeral and burial, lost income support for dependents, etc.) while P&C insurance focuses on damage to/loss of property or someone determined to have caused a loss of/damage to property.

What Does Property and Casualty Insurance Cover?

P&C insurance primarily covers your physical property and liability for damages to people and their belongings. Coverage can vary significantly depending on the type of property or casualty insurance you obtain. There are three kinds of property insurance coverage to be aware of:

  • Replacement cost, which covers repairing or replacing property
  • Actual cash value, in which the owner is compensated for the current market value of the lost or damaged property, which may be less than the cost to fully replace the covered items
  • Extended replacement cost, which pays the recipient more than the coverage limit; for instance, if construction costs have risen and repairing or rebuilding a piece of real estate would cost more than the original price paid for the building.

Property insurance typically covers the following scenarios:

  • Damage caused by fire, smoke, wind, hail, snow, and lightning
  • Vandalism
  • Theft

Casualty insurance generally deals with liability. As stated above, liability coverage can help cover losses resulting from the insurer's interactions with another person and their property. For instance, if you were to back out of a parking space, hit another parked car, and inflicted damage to that property, liability insurance can help cover the out-of-pocket expenses. Other examples include:

  • A customer slips and falls at your place of business
  • You are found at fault in a car accident that resulted in injuries to another person or their vehicle
  • Your business sold an item that was found to have caused a personal injury to the customer who purchased it

To be held legally responsible, you must be found guilty of negligence, which means you would have failed to use proper care in your actions.

Types of Property and Casualty Insurance

There are many types of P&C insurance—some you may already be familiar with.

Car Insurance

Car or auto insurance is an agreement between you and an insurance company that can help protect you if you are in an auto accident or your car is stolen. By paying a premium, the insurance company agrees to pay for the losses that are outlined in your policy. Car insurance policies typically cover:

  • Property damage
  • Liability for others
  • Medical expenses

Many car buyers are familiar with car insurance, as it is required by most states. Most policies are customizable, and allow you to add the coverage you think you need. Additionally, you can cover other people that drive your car often, like a friend or family member. It's important to note that car insurance only covers personal driving—if you are using your car for commercial purposes, you will have to obtain another insurance policy.

Condo Insurance

If you own a condo, you may find it prudent to obtain condo insurance. This type of insurance typically coincides with the policy carried by your condo association. All condominium developments have associations that provide insurance policies for the common areas, like the lobbies, pools, common hallways, and sidewalks. The association's policy may also cover your condo's structure. However, a personal condo insurance policy also offers:

  • Personal liability
  • Medical for guests
  • Building property protection
  • Personal property coverage

Keep in mind that the association's insurance policy may affect your policy. Owners should research what the association's policy covers before obtaining one of their own.

Home Insurance

Homeowners insurance helps protect your home from damage, theft, or vandalism. The standard policy covers the structure of the house and all the belongings inside. This type of insurance will also come with liability coverage, so if anyone is hurt at your home, you have insurance to help pay their medical expenses. While there are many options for homeowners insurance, homeowners insurance covers the following:

  • Damage caused by natural disasters, including fire, hurricanes, hail, and lightning
  • Water damage
  • Detached structures like garages and tool sheds
  • Personal belongings, like furniture, clothes, electronics, and equipment
  • Damage caused by pets
  • Additional living expenses for time away from home due to damage
  • Bodily injury to another person or damage to their property while in your home

One common misconception about homeowners insurance is that it covers all natural disasters. This is not true. Homeowners insurance will not cover damage caused by earthquakes or floods. For many insurance companies, flood damage is considered a gradual event rather than accidental.

You often must purchase a separate flood policy for protection in the event of a natural disaster that causes flood damage. Regarding coverage for damages caused by earthquakes, insurance companies simply don't include it in their policies.

Again, this type of coverage is typically available as an add-on to your policy. You should research home insurance policies in your area to ensure you are getting the correct coverage. It's important to note that these types of insurances are only required in high-risk areas.

Landlord Insurance

If you own a rental property that generates income, then you will benefit from landlord insurance. This type of insurance is offered to protect the landlord from any damage that happens to their property. It can also help landlords if they are liable for any injury their tenants sustain while staying in their rental.

Landlord insurance generally covers:

  • The rented home, apartment, or condo
  • Detached garages, sheds, or fences that are on your property
  • Personal property you use to service the rental
  • Medical bills from injuries sustained by the tenant on your property
  • Legal expenses if a tenant decides to sue due to the sustained injuries

Landlords can also expand their policy to cover the following:

  • Vandalism
  • Burglary
  • Rental property that is under construction
  • Updated building codes

Maintenance issues are not covered under landlord insurance and are typically paid out-of-pocket by the landlord or tenant. Additionally, tenant belongings are not covered. If your tenants want coverage for their belongings, they should invest in renters insurance.

Renters Insurance

Renters insurance was designed to protect the tenant's belongings in a rental property. Nowadays, many landlords require renters insurance because they can avoid liability claims, relocation expenses, and damages caused by pets. Renters can benefit significantly from this type of insurance because it covers:

  • Personal property damages and theft
  • Liability in case someone is injured in your home
  • Additional living expenses if the property is unlivable

Another benefit of renters insurance is that it is customizable. Renters can adjust their policy to ensure it covers the expense of their belongings. That is why it's important to take inventory of all personal belongings before signing up for renters' insurance.

"Toys" Insurance

"Toys" refers to assets like boats, recreational vehicles (RVs), motorcycles, all-terrain vehicles (ATVs), snowmobiles, golf carts, and valuable and luxury collections. These assets can be expensive, and many owners can benefit from this insurance if their belongings are damaged or stolen. Toy insurance generally covers:

  • Burglary
  • Fire
  • Flood
  • Loss
  • Natural disasters
  • Theft
  • Liability
  • Collision
  • Vandalism
  • Uninsured drivers

People who operate these types of assets can cause accidents and damage to other people's property. Toy insurance can help pay for medical bills and repairs, similar to auto insurance.

How Much Is Property and Casualty Insurance?

The cost of P&C insurance can vary greatly. Insurance companies determine your premium based on the insurance policy you obtain. Four factors determine the premium:

  1. The type of coverage: Generally, the more coverage you get, the more you pay in your premium.
  2. Amount of coverage: Like the factor above, your premium will be higher if you choose a higher coverage amount.
  3. Personal information: Your life factors, including where you live and your insurance history, is used by the insurance company to determine your premium.
  4. Insurance company competition: Some insurance companies may offer lower rates, either temporarily or permanently, to compete with other companies.

Keeping these factors in mind is essential when shopping for insurance policies and can help you determine the best rates for your lifestyle.

Properly insuring your assets is a necessity and shouldn't be avoided. It's best to contact insurance experts or reputable insurance companies to go over your specific needs.

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