The A’s and B’s of P&C

The property and casualty industry, or P&C industry as it is commonly called, provides insurance protection for two important types of business. Property insurance coverage protects a policyholder against losses to property they own. For example, the insurance you purchase that will pay you for repairs to your home or car is property coverage. Coverage that you purchase to protect you from lawsuits is referred to as casualty insurance.

Property insurance comes in many forms. For your home, it covers the buildings and personal property that you own. It also covers property that you might borrow or rent. As an example, consider a leased vehicle. You do not own the car, yet you have to purchase collision and comprehensive coverage to protect it. This is a property-based coverage. Any time you purchase insurance that will pay you to make repairs or replace property that you own, that is generally considered property coverage. If you would like to learn more about how to handle property damage claims, particularly with respect to homeowner’s and commercial owner’s policies, be sure to check out my book Property Adjusting – A Beginner’s Guide.

The “casualty” part of the P&C industry refers to policies that are written to protect policyholders from claims of negligence. That is the coverage we will focus on in this text, and it is more commonly referred to as Liability Insurance or General Liability Insurance coverage.

People are negligent every day, all day. This negligent behavior doesn’t always end up in an injury, or damage to someone else. When it does however, the person who was harmed will likely seek some sort of compensation from the person who caused the injury or damage. That is the focus of liability insurance. It pays on behalf of an insured policyholder. Not only will it pay on behalf of the policyholder, but the insurance company will also investigate the incident to determine who was actually at fault. If it was the policyholder, the insurance company will obtain a full release from the injured party. This release further protects the policyholder from any and all claims that arise out of a single incident.

Liability insurance protection is important because of the large potential losses that can occur from an incident involving injuries. When people are injured the medical costs alone can be significant. The cost of an injury claim doesn’t stop at medical bills either. There may also be costs associated with maintaining a person’s lifestyle. If they are disabled, the costs to manage that aspect can be very significant. Transportation, household maintenance, grocery shopping and more may all have to be accomplished through paid services. A policy with limits of several hundreds of thousands of dollars, or even millions of dollars is quite common. Without this type of insurance coverage, an individual or business could risk losing all of their assets in the event of a civil judgment. Furthermore, without the proper limits in place, a verdict that exceeds the policy limits could occur, meaning that the insurance company will only pay to their liability limit and the policyholder would have to fund the rest.

Liability coverage is available for many different exposures, including automobiles, boats, aircraft, businesses, not-for-profit organizations, and churches. Auto liability insurance coverage is one of the most regulated forms of liability insurance coverage, and it is mandatory in most states. There are usually minimum limits of liability that must be obtained by drivers and in most cases, those who drive without insurance coverage in place could face stiff penalties and fines.

There is a societal need for liability insurance, particularly for bodily injury claims. When someone suffers severe injuries, health insurance will only afford protection to a certain extent. Once the limitations of health insurance are exhausted, the funding will need to come from somewhere else. When liability coverage can contribute, there is less burden on government forms of health insurance such as Medicare and Medicaid.

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