Casualty Insurance

What Is Casualty Insurance?

Casualty insurance is a broad category of insurance that protects individuals, employers, and businesses from property loss, damage, and other liabilities. Vehicle insurance, liability insurance, and theft insurance are all examples of casualty insurance. Liability losses occur as a result of the insured's interactions with others or the insured's property. It is critical for homeowners and car owners to have casualty insurance because damage can be costly. In addition to auto and liability insurance, casualty insurance is a catch-all term for many other types of insurance, such as aviation, workers' compensation, and surety bonds.

How Casualty Insurance Works

Just as you can buy property insurance to protect yourself from financial loss, you can buy liability insurance to protect yourself from financial loss if you become legally liable for another person's injury or property damage. To be legally liable, one must have shown negligence—the failure to exercise proper care in personal actions. If negligence causes harm to another, the negligent party is liable for the resulting damages. In the insurance industry, liability losses are frequently referred to as third-party losses. The first party is the insured. The second party is the insurance company. The third party is the person to whom the insured is liable for damages.

Real World Example

A car accident is probably the best example of how casualty insurance works. Consider the following hypothetical situation: Assume Maggie backs out of her driveway and collides with Lisa's parked car, causing $600 in damage. Maggie is legally liable for the damages because she was at fault, and she must pay to have Lisa's car repaired. Maggie would be protected from having to pay for the damages out of her own pocket if she had liability insurance.

Casualty Insurance and Business

Depending on what you do, you should consider a few different types of casualty insurance if you own a business. Workers' compensation insurance is an important type of casualty insurance for businesses because it protects the company from liabilities that arise when a worker is injured on the job. Policies are also available for cyberfraud, employee theft, and identity theft (to name a few). Check to see if your policies cover your website if you do most of your business online. If you rely on computers to run your business, you should consider insuring the computers separately.

Most business owners require casualty insurance coverage because if you produce something, it is possible that it will cause harm to someone. Even if you are a sole proprietor, it is a good idea to carry industry-specific insurance. For example, if you're a freelance auto mechanic who works from your shop, you probably don't need workers' compensation insurance, but you should have insurance that covers you if a repair you made injures a customer.