If you own a home, car, business, or certain valuables, property and casualty insurance helps protect you against financial loss in unexpected circumstances.
A key component of your financial health is protecting your assets — and that's where property and casualty insurance come in. There are many types of insurance that fall within the broad category of property and casualty insurance, but they all have one thing in common: they're designed to protect your physical property and/or protect you from liability from accidents.
In other words, property and casualty insurance can help reduce your risk of a major financial loss. Without this coverage, you could find yourself faced with having to pull cash out of your savings, retirement, or other long-term investments, so it's important to understand what property and casualty insurance is and how it works.
Ahead, we'll explore:
But first, let's look at what property and casualty insurance is—and isn't.
Property and casualty insurance (also known as P&C insurance) is a broad term used for all the types of insurance that are designed to protect your physical assets or cover your liability. Property insurance, specifically, can help you replace or recover value if your assets are damaged due to disaster, theft, vandalism, or an accident. Casualty insurance, specifically, can protect you from legal liability if you're held responsible for injuries or damage caused to others.
Property and casualty insurance are commonly bundled together within insurance policies. Together, they provide comprehensive risk management.
Property and casualty insurance do not include health or life insurance. Health and life insurance cover only the insured individual and not any damage to property they own or liability for damage or harm to other people and their property.
As mentioned above, many different types of insurance fall into the "property and casualty insurance" bucket. Let's explore some of the most common types and what they generally cover.
Homeowners insurance covers your home and the contents of your home, such as appliances, electronics, furniture, and other personal property within policy limitations.
Note that covered perils do not include certain types of natural disasters. A covered loss typically involves fire, smoke, wind, or hail, but common exclusions include floods and earthquakes. Flood insurance, for example, is a separate policy not included under homeowners insurance.
Ideally, your policy should cover the replacement cost of your home. The replacement cost value is the cost to rebuild or replace the home without deducting for depreciation. Some policies will also help you cover temporary housing costs.
The insurance industry has been impacted by the rise of natural disasters, especially wildfires and flooding. Homeowners need to educate themselves on the risks associated with their locale, their policy's coverage limits, and what levels of risk management and types of property coverage they're comfortable with.
If you own a condo instead of a single-family home, condo insurance is an option. Condo insurance covers only the interior of your unit, as opposed to homeowners insurance, which insures both the inside and outside structure of the building. Your condo association should have an insurance policy covering the building itself. Even if your condo association has its own coverage, you may want to consider protection against property damage not covered by the association's policy.
If you rent a home or storage unit, it's a good idea to cover the belongings you keep there for the amount it would cost to replace them. A good renter's policy will cover damaged or stolen clothing, furniture, electronics, and bedding. Some will help you pay for temporary housing.
If you rent out a home to tenants, landlord insurance may offer protection against exposures unique to rentals, since standard homeowners insurance policies do not cover homes that are being rented out.
Most states require at least basic liability insurance to cover any damage you cause to others or their property. You can also add collision or comprehensive coverage to your car insurance policy. Collision covers damage to your car, if you're at fault. Comprehensive covers damage that's not due to a car accident, such as vandalism or a fallen tree. For many individuals with relatively sizeable savings and investments, consider getting more than the basic. Accidents can and will happen. If your insurance isn't enough cover the cost, you'll have to come out of pocket. You may also want to consider uninsured and underinsured motorist insurance if your more risk averse.
If you have valuables, such as jewelry, fine art, collectibles, electronics, or other expensive equipment, consider enough coverage to protect your financial investment. While some valuables (such as family heirlooms) can't be replaced, insurance can help you recover their financial value if they're damaged or stolen.
