Property/casualty insurance actually refers to two different types of coverage that are both related to homes, cars, and businesses.
The property component has to do with insuring against damages to the policyholder’s own property (e.g.: a house or a car). The casualty component has to do with making sure that insured drivers can compensate other parties for damages that they are legally responsible for.
The following are the major types of property/casualty insurance for individuals, according to the ISO:
- Inland marine
- Personal liability
What is Casualty Insurance
The two main forms of casualty insurance that are related to car coverage are bodily injury liability and property damage liability. These are both considered “casualty” coverage because they compensate other people for their damages if the policyholder or someone insured under the policy is legally responsible for those damages.
Under the U.S. legal system, someone who was injured or had their property damaged in a crash can sue the person responsible for the crash in order to get compensation for things like hospital bills, the cost of repairing their property, and non-economic damages like pain and suffering. With casualty insurance, the coverage provider will pay for the policyholder’s legal representation, if necessary, and compensate the other parties for their damages, up to the monetary limits on the policy. Without casualty coverage, the driver could be left having to compensate the injured parties out of pocket.
What is Property Insurance
The two main forms of property insurance that are related to cars are comprehensive and collision coverage. Rather than pay for other people’s property damages, like with casualty insurance, these coverages will reimburse policyholders for repairs of their own property.
For auto policies, property insurance coverages come into play when no other identifiable parties are legally responsible for the damages to the insured car. The following are some scenarios when the collision and comprehensive portions of your policy would kick in:
- You caused an accident.
- Someone vandalized your car.
- Someone stole your car.
- You collided with an animal.
- Your car sustained weather-related damages.
Not All Auto Policies Have Both
Not all car insurance policies come with both property and casualty coverages.
In most states, you’re required to at least carry casualty insurance on your auto policy in order to cover your legal liability to other drivers, and drivers in most states can by policies that contain only the casualty components: property damage liability and bodily injury liability.
But no states legally require you to carry property insurance on your car. Some lenders, however, will require you to purchase it as a condition of your auto loan.
There are some scenarios in which you also might have just property insurance and not casualty insurance, like if you are insuring a classic car against theft and will not be taking it out on the road. To do this, though, you would likely have to turn in your car’s license plate and registration to the state.