An Overview of Property and Casualty Insurance

Are you preparing for your state's property and casualty licensing exam? Or perhaps you're thinking of adding it to your portfolio. Here's what you need to know about the basics of property and casualty insurance.

What Is Property and Casualty Insurance?

Property and casualty insurance refers to two distinct types of insurance. Property insurance deals with property losses, while casualty insurance is more complex because it deals with legal liabilities. Read on to discover the basics of both types of insurance, the different types of insurance that fall under these umbrellas and other key details

Property Insurance

Property insurance is relatively simple to define. It includes many types of insurance designed to cover property losses—the risks that we will suffer financial losses because things we own are damaged or destroyed.

There are three basic types of property loss:

• Loss of or damage to the article itself: Examples of this type of loss are the theft of a valuable painting or damage to an automobile caused by an accident.

• Loss of income from the use of the article: For example, suppose a hotel burns to the ground. In the year required to rebuild, the hotel loses more than $2 million in room rentals. This loss of income that arises from the damage to the hotel is a type of property loss.

• The extra expense incurred due to the loss of the article: Suppose a large fire destroys a city newspaper building. To continue publishing, its owners rent another press at one-third additional cost. The extra expenses required to remain in business following a loss is a type of property loss.

If you’re interested in learning more about the different types of property and casualty insurance, the section below covers some common kinds of insurance that fall into these categories.

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Casualty Insurance

Casualty insurance is more difficult to define because it includes a wide variety of basically unrelated insurance products.

One of the most important types of casualty insurance is liability insurance. Liability losses are losses that occur as a result of the insured’s interactions with others or their property. Probably the best example of this would be an auto accident. Let’s say Arthur is backing out of his driveway and hits Beatrice’s parked car, resulting in $600 of damage. Because Arthur was at fault, he is legally responsible, or liable, for those damages, and he must pay to have Beatrice’s car repaired. Liability insurance would protect Arthur from having to pay for those damages out of his own pocket.

To be legally liable, the individual must generally be guilty of negligence—the failure to use proper care in personal actions. If negligence results in harm to another, the individual is liable for the resulting damages.

People in the insurance industry often call liability losses third-party losses.

The insured is the first party. The insurance company is the second party. The person to whom the insured is liable for damages is the third party.

Just as you can purchase property insurance to protect yourself from financial loss if your property is damaged, you can purchase liability insurance to protect yourself from financial loss if you become legally liable for injury to another or damage to another’s property.

Although insurance for liability risks is an important casualty coverage, there are many other types of insurance that have traditionally been considered casualty insurance.

Types Of Property and Casualty Insurance

There are various types of property and casualty insurance, including:

Types Of Property Insurance

• Dwelling

• Homeowners

• Commercial property

• Crime

• Equipment breakdown protection (also known as boiler and machinery)

• Inland marine

• Ocean marine

Types Of Casualty Insurance

• Aviation

• Auto

• Workers’ compensation

• Surety bonds

Interested in getting your property and/or casualty insurance license? Or do you want to learn more about the basics of property and casualty insurance for CE credit? Check out our insurance license study options for your state here or our Property and Casualty Principles, 4th Edition insurance continuing education course for your state here.