What Is Casualty Insurance And Why Should You Care?

What Is Casualty Insurance And Why Should You Care?

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You’ve likely heard of “property and casualty insurance.” The property part refers to physical things you own like your car, house and furniture. But what is casualty insurance, and why should you care about it?

What Is Casualty Insurance?

Casualty insurance provides liability coverage in case you’re responsible for other people’s property damage or injuries. It pays other people who make claims against you or sue you for issues covered by your policy.

Workers compensation insurance, which is purchased by businesses to cover worker injuries, also falls under casualty insurance.

How Is Casualty Insurance Connected to Auto and Home Insurance?

Casualty insurance plays a key role in the auto and homeowners insurance you buy. Both of these important policies include casualty insurance, which covers your liability to others.

Here’s an example of how casualty insurance works as part of a car insurance policy:

Kevin puts his SUV in reverse and pulls out of the driveway at his home. As Kevin backs out of the driveway, his SUV hits a pickup truck belonging to his next-door neighbor, Jason. Since the crash is Kevin’s fault, he’s legally liable for the $1,000 in damage caused to Jason’s truck. The casualty component of Kevin’s auto insurance pays for the damage.

What about casualty insurance included in a homeowners policy? Here’s an example:

Jill falls down the front steps at the home of her friend Debbie. Debbie had put off repairing the railing of the steps, causing Jill’s tumble down the stairs and a broken ankle. Because Debbie neglected to repair the railing, she bears at least some legal responsibility for the accident. In this instance, the casualty section of Debbie’s homeowners insurance will cover Jill’s hospital bills and even pay Debbie’s legal fees if Jill sues her friend (which likely ends the friendship, but that’s not covered by insurance).

Why You Need Liability Coverage

Liability coverage protects you from expenses that arise from damage to somebody else’s property or injuries that you’re legally responsible for. In cases of large and expensive claims, your liability insurance can save you from bankruptcy by paying settlements or count judgments against you.

This is why it’s important to buy enough liability insurance to cover what you could lose in a lawsuit. For example, if your liability coverage limit is less than a court judgment against you, you’re still responsible for paying the remainder.

With home insurance, a typical liability amount is $300,000 (check your policy what amount you have). You can raise that limit and pay extra.

With auto insurance, you’ll have three liability amounts listed in your policy. For example, the minimum required California car insurance is 15/30/5, meaning:

•  $15,000 for injury/death to one person
•  $30,000 for injury/death to more than one person in one accident
•  $5,000 for damage to someone else’s property

You can easily add extra liability coverage to both your auto and home insurance by buying umbrella insurance. Umbrella coverage is an expensive way to buy additional liability insurance and also covers some extra problems, such as libel and slander claims against you.