Casualty Insurance

Article byGayatri Ailani
Edited byRaisa Ali
Reviewed byDheeraj Vaidya, CFA, FRM

What Is Casualty Insurance

Casualty insurance refers to the insurance component that primarily protects a person or business when held liable for their negligence. In other words, it covers the insured entity’s liabilities to others. It generally includes liability, vehicle, theft, and worker’s compensation insurance.

Casualty Insurance

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It offers protection from the risk of liabilities. For example, it protects if the insured are held accountable for the injuries or property damage to a third party. In addition, it compensates third parties who file lawsuits or make formal claims against the insured for problems their insurance covers.

Key Takeaways

  • Casualty insurance definition portrays it as insurance that protects the insured if he is held legally liable for the injuries or property damage caused by him to others, such as a car crash caused by the insured’s negligence.
  • It mainly includes liability insurance, vehicle insurance, and theft insurance.
  • It often covers insurance unrelated to life, health, or property insurance. It is a crucial component of homeowners insurance and vehicle insurance.
  • It doesn’t cover any property or assets. Instead, it shields the insured from being held liable if someone else sues them for injury or property damage.

Casualty Insurance Explained

Casualty insurance is primarily helpful to settle the legal liabilities of the insured towards others that occured due to negligence. It includes insurance not specifically related to life, health, or property. However, it is a significant or vital component of homeowners insurance and vehicle insurance. No asset or building is covered by casualty insurance. Instead, it protects the insured from legal liability if a third party sues him for causing harm or property damage.

The insurer is the casualty insurance company, the insured is the person who has taken insurance coverage, and the third party is the entity suffering due to the insured’s negligence at the time of the accident or unfortunate event. 

Casualty insurance is becoming more popular. The chance of a loss and income are strongly and favorably correlated with purchasing casualty insurance. As a result, there is a significant positive correlation between property protection and its rights and insurance usage.

Types

The important casualty insurance types are explained below:

  • Commercial General Liability: It is a form of insurance policy that provides cover to a business for the actual injury, personal injury, and property damage brought on by the functioning or operations of the business, its goods, or accidents that happen on the business premises.
  • Professional Liability Insurance: Professionals like accountants and attorneys are insured against client-initiated allegations of negligence and other wrongdoing using this policy.
  • Workmen’s Compensation Insurance: The policy helps employers compensate employees who get injured while working. It covers injuries, disabilities, and death of employees caused by accidents occurring at the workplace.
  • Pollution Legal Liability Insurance: It offers pollution liability coverage for environmental hazards connected to the ownership or leasing of real estate and the use of a specific space, building, or site.
  • Vehicle Insurance: The vehicle insurance policy offers financial protection against property damage or personal harm brought on by vehicle accidents and against liability that can come from related events.
  • Home Insurance or Property Insurance: It protects the policyholders during damage to property that may arise due to theft, burglary, fire, or various other kinds of incidents. 

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Examples

Let us look at the casualty insurance examples to understand the concept better: 

Example #1

John didn’t take good care of the trees in his yard. As a result, the trees were unhealthy and had several overhanging branches. One day a branch from his tree damaged his neighbor’s property. To seek payment for the damage, the neighbor filed an insurance claim. Since the damage is shown to be the result of John’s negligence, John was held legally responsible, and his property or home insurance’s casualty coverage component paid for the damage.

Example #2

Joe was taking his car out of his driveway at home. But due to overspeeding, his car crashed into the neighbor’s house. Generally, the party at fault for an accident is liable for any damage caused by that accident. So Joe is on the hook for the damage caused to his neighbor’s home, and the casualty component of Joe’s auto insurance comes into play here, up to the limit set in the policy.

Casualty Insurance vs Liability Insurance

Let’s look at the difference between casualty insurance and liability insurance.

 Liability Insurance Casualty Insurance 
Definition An insurance policy known as liability insurance offers insurance against lawsuits brought about by accidents that cause harm to other persons or their property. It mainly includes liability insurance, vehicle insurance, and theft insurance.
Types Types are public, product, employer, and third-party liability Insurance.Generally, covers property protection and liability insurance.

Frequently Asked Questions (FAQs)

What would a casualty insurance policy cover?

Casualty insurance contains liability coverage to aid in protecting the insured in the event they are held legally accountable for an accident that results in someone else’s injuries or property damage.

Is casualty insurance the same as life insurance?

No, it is different from life insurance. Casualty insurance explains that it is not directly concerned with life, health, or property insurance. Instead, casualty insurance is mainly liability coverage of an individual or organization for negligent acts or omissions.

How to file a casualty insurance claim?

Each insurer handles the claim process differently. The other party generally files the claim with the insured’s insurance company if the insured is at fault for the damage or injury. Home and auto liability claims aren’t usually deductible, so the insured’s insurance covers all costs for approved claims up to the limits. If the insured is the one who was hurt or had property damage, the insured will most likely work with the other person’s claim representative or insurance adjuster. Their insurer may pay the insured’s claim directly to the insured or another entity, such as a collision repair shop.

This has been a guide to What is Casualty Insurance. We explain its types and examples and comparison with liability insurance. You may also find some useful articles here –

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