You have probably heard of ‘property and casualty insurance. The property aspect is all about the physical things you own including houses, cars, among others. But what is casualty insurance and how does it work? Who gets the compensation when loss or damage occurs in casualty insurance?
Let’s find out!
Table of contents
What Is Casualty Insurance?
Casualty insurance typically protects you when you’re liable for someone getting hurt or their belongings getting damaged.
If you cause damage, loss, or injury to other people’s property, having casualty insurance provides you with the coverage to pay for them. In casualty insurance, you are not the one to benefit from the compensation, other people do. And they must have been directly affected by the damage, loss, or injury and sue you for that.
Moreover, casualty insurance is a key player in auto and homeowners insurance in that most of the relevant policies cover liability to others.
How Do I File a Casualty Insurance Claim?
The claim process is handled differently by each insurance. If you’re at blame for the damage or injury, the other party will usually file a claim with your insurance. Liability claims for your home and car normally don’t have a deductible, so your insurance will cover all costs for accepted claims up to your limits.
If you were injured or your property was damaged, you’ll almost certainly have to deal with the other person’s claim representative. Your claim may be paid directly to you or to another company, such as a collision repair shop, by their insurer.
In the area of car insurance, auto insurance companies analyze police records, images, information acquired from you and the policyholder, and more. It’s critical to acquire as much evidence as possible to support any insurance claims involving injuries, such as quick medical assessments, photos and videos of what caused your injury, and witness accounts.
If the problem arises with a homeowner and they have no-fault medical coverage, you may be able to send bills straight to their insurance company without filing a claim.
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How Does Casualty Insurance Work?
While you purchase property insurance to protect you from financial loss, casualty insurance protects you from financial loss if you become responsible for the damage or injury caused to the property. For you to be legally liable, you must have shown negligence or failure to use proper care in personal actions. Therefore, if this negligence leads to harm to another, you will be liable for any damage or injury thereof.
The losses arising from casualty insurance can be called third-party losses. As the insured, you are the first party, the insurance company taking up the risk is the second party while the person to whom you are insured is the third party. The person is called the third party because they are not privy to the insurance contract. They only came into the contract by accident and that accident is what led you to take up the casualty insurance.
A real-world scenario is when you mistakenly hit another car while returning from work. If you have casualty insurance in force, you will transfer the risk of the damage or injury to the insurance company which in turn, pays for the exact financial loss the damage or injury may cause. The payment made by the insurance company is called indemnity.
In your auto or homeowners’ insurance policies, you will typically find casualty insurance under them. For homeowners’ insurance policies, casualty insurance may appear as personal liability, personal injury liability, and medical payments to others. Similarly, in your auto policy, this type of insurance may appear as bodily injury liability and property damage liability.
In the same way, if you are a business owner, you can purchase casualty insurance like workers’ compensation, general liability, and employer’s liability insurance.
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Property Casualty Insurance
Also known as P&C insurance, property and casualty insurance are types of insurance that can protect the policyholder and their property.
Property insurance is more focused on covering the property that belongs to you or that you own, such as your car, residential building, business building, business inventory, and others.
These insurance contracts may have an open or named peril. By open peril, it means that the clause covers losses for reasons that are clearly excluded in the policy. Such exclusions include fire, earthquake, lightning, explosion, theft, flood, terrorism, war, or other acts beyond human limitations. In such a case, the named peril must be mentioned in the policy.
On the other hand, casualty insurance is the coverage you take to transfer your liability to an insurance company in a situation whereby you cause an accident that results in another person or their property getting injured or damaged. It covers losses that you may cause to another person. If you are sued because of the harm you caused another person, the casualty insurance policy will cover it.
Most of the time, both casualty and property insurance are bundled together into one insurance policy. Thus, the policy protects you and your property as well as the third person and their property. You can purchase this type of insurance as an individual or a business owner. if you are worried that your asset may diminish or you may lose your property in the course of running your business and incurring a third-party liability, you may consider purchasing this type of insurance.
Therefore, when you are considering the insurance contract to go for, make sure you lay all your cards on the table and weigh your options before making your decisions. This type of insurance package is in diverse forms and they include:
- Homeowners insurance
- Car or auto insurance
- Condo insurance
- Renters insurance
- Landlord insurance, etc.
Casualty Insurance and Business
As a business owner, it is necessary for you to consider a few different kinds of casualty insurance, although it will depend on what you do. One of the major types of casualty insurance is the worker’s compensation liabilities. This type of insurance protects the company from liabilities that take place when a worker is injured while carrying out his or her duty at the workplace.
You could also purchase insurance against cyber fraud, employee theft, and identity theft. If your prime business takes place online, it is good to check for policies that cover your website. You may also want to insure the computers in separate insurance.
Most business owners should consider purchasing casualty insurance because there is the possibility of your business posing a risk to another person or their property. Even if you are running a one-man business, make sure to get a policy that specifically targets your line of business to protect another person that may be harmed on your business premises.
You may want to find out What Is General Liability Insurance? Overview and Coverage
Why Do You Need Casualty Insurance?
Casualty insurance tends to cover you for any risk arising from damage or loss to another person’s property or injuries on a person you are legally responsible for. By having casualty insurance, you may be saved from bankruptcy as you pay for the debt incurred in the process. This is especially if the person sues you in a lawsuit.
The Primary purpose of casualty insurance is the transfer of risk. That is, once the insurance contract is sealed and premium paid, you as a policyholder have automatically transferred your business risk to the insurance company. Thus, it focuses on reducing the financial risk and making accidental loss manageable. In everything, ensure you pay your premium and renew your insurance contract as and when due.
In the event of a liability to a third party, you can confidently, alert the insurance company following the steps involved.
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1. Getting the Right Insurance
Finally, what is more in everything is getting the right insurance coverage for you when third parties are involved. The essence is that you can sleep soundly when something goes wrong while the insurance company gets to work to ensure the third part is duly compensated.
If you upgrade your business, it is also wise to update your insurance contract that covers the type of business you run. You need a good insurance company that will help you go through your business features and then, determine what is best for you. Experts will be willing to help you find the right casualty insurance coverage to enable you to sustain your business even when you need to pay a third party for any injury or damage they encounter while using your business premises.
2. Structure of a Policy
Although there are different types of casualty insurance, the composition of casualty insurance coverage is the same irrespective of the insurance company that issues it as well as the exact type of casualty policy provided. There are four components of a policy and they are:
- Declaration page: This identifies the person and risks insured, the limits on what the policy will pay, and the period of the policy.
- Insuring agreement: This specifies the agreement between you and the insurance company which includes your responsibility towards the policy and the responsibility of the policy towards you as long as the policy is in force. Your responsibility includes payment of the premium in exchange for the insurance coverage for the policy period.
- Exclusions: This specifies what the policy will not cover. It may include types of risks like an earthquake, war, and so on. It may also exclude coverage for certain types of property like cars used for racing. Again, it may exclude certain types of losses like losses resulting from wear and tear.
- Conditions: This includes the requirement an insurance company imposes on the policyholder or the insured and this must be met before the enforcement of the policy. Before you will be made to pay the premium, you must meet all the conditions and contract signed by both parties.
Conclusion
Casualty insurance is a policy that enables the insurance company to stand in the gap for you if you cause damage or injury to happen to another person’s property. Whether you are a car owner, business owner, or house owner, you need casualty insurance to enable you to have something to fall back to.
References
- bankrate.com – What is property and casualty insurance?
- study.com – Casualty Insurance Policy: Definition & Uses
- thebalance.com – What Is Casualty Insurance?
- investopedia.com – Casualty Insurance
- forbes.com – What Is Casualty Insurance And Why Should You Care?
- iii.org – Growth and role of property/casualty insurance
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