Property and Casualty Insurance

Insurance is an excellent form of risk management to protect your assets either by covering the costs of damage or replacement or by covering you for any liability as a result of unforeseen events. However, most people are unaware of the different types of insurance policies available and they end up paying significantly more than they should.

Looking at property and casualty insurance, it can be difficult to understand the difference between the two because they often overlap.

Property Insurance

Property insurance is not solely made up of home insurance policies as you may believe. This type of insurance covers damages to all forms of property that are the result of theft, fire or weather damage. Fire insurance, flood insurance and earthquake insurance are some of the different types of policies that fall under general property insurance.

Even though property and casualty insurance both offer coverage for damages as a result of theft, casualty insurance will also cover damages that result from the theft. In other words, while property insurance will cover the cost of replacing the stolen item, casualty insurance will cover the cost of replacing the broken window as well, for example.

Types of Property Insurance

There are three main categories of property insurance. The first offers full replacement costs of the property, with no concern for appreciation or depreciation. So, if you paid $250,000 for your house but the property’s value dropped to $210,000 due to the recession, you will still receive the full $250,000.

Other property insurance policies offer extended replacement, which means that you will receive a certain amount over the coverage value to cover any increase in construction costs. In this case, the maximum extended coverage is usually around 25% more than the initial amount.

You can also receive only the cash value of the property meaning that you will receive replacement costs after deducting depreciation.

Casualty Insurance

Casualty insurance is often considered the same thing as liability insurance. However, it is not quite the same thing because the former will cover damages both to property and people. It does not offer coverage for fires or weather related damages, but is designed more for unforeseen events such as burglary, fraud and terrorist attacks.

Casualty insurance acts as liability insurance when someone is injured on your property in that it will cover the person’s medical costs. It is also very useful for business owners because it will cover them for any liability when someone gets injured at their place of business.

Property and casualty insurance are essentially complementary policies because while property insurance can be bought on its own, casualty insurance should be considered a supplemental policy. Essentially, a casualty insurance policy will do nothing to help you if your property has burned down but it will be quite useful if someone was injured in the fire. So, you won’t be able to rebuild your home but you won’t be liable for medical costs and damages either. Therefore, the best option is to get both property and casualty insurance tailored to your specific needs.

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