Property and casualty insurance is a group of insurance types that provide coverage for everything from your home and car to your business and commercial property. “Property” coverage protects the stuff you own from damage or loss, while “casualty” insurance covers costs if you injure someone else or damage their property.
Components of property and casualty insurance
Here’s a breakdown of the two main components of property and casualty — or P&C — insurance.
Property insurance
Property insurance is a contract between you and an insurer in which you pay a premium in exchange for financial assistance in the event of damage resulting from covered risks (called perils). What is covered and how it’s covered will vary depending on the insurer you choose and your policy details.
Examples of different types of property insurance include:
Casualty insurance
Casualty insurance (also known as liability insurance) is a contract between you and an insurer in which you pay a premium in exchange for financial assistance in the event you’re responsible for another person’s injuries or property damage.
Examples of different types of casualty insurance include:
Who needs property and casualty insurance?
Generally speaking, most adults need property and casualty insurance. For example, 49 states and the District of Columbia require some form of car insurance, so anyone who drives a vehicle likely needs auto coverage. While laws don’t require homeowners insurance, most lenders require it as a condition of your mortgage. If your home is located in an area with a high risk of floods, you may have to purchase flood insurance, too. Additionally, landlords may require renters to carry renters insurance as a condition of the lease agreement.
On the business side, federal laws require businesses to have workers’ comp, unemployment, and disability insurance. On the state level, requirements can vary. Even if your state doesn’t require you to have certain types of insurance to operate a business, it’s usually a good idea to at least buy a general liability policy. Without any coverage at all, your business could be one lawsuit away from closing its doors.
Common types of P&C insurance policies
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Homeowners insurance: Provides coverage if your home or belongings are damaged due to covered situations, such as fire or theft. It also provides liability protection in case other people experience losses you’re responsible for.
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Auto insurance: The most basic form, liability insurance, covers damage and injuries others experience if you cause an accident. For broader coverage, drivers can add comprehensive and collision insurance (among other coverage types) to protect vehicles against damage in a variety of situations, regardless of who’s at fault.
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Renters insurance: In general, it covers damage or theft of your personal belongings, additional living expenses if you have to relocate temporarily while your unit is being repaired, and liability in the event that someone is injured while at your rented residence.
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Condo insurance: Similar to homeowners insurance, it typically covers a variety of situations that cause damage inside your condo, as well as damage or injuries guests experience that you’re responsible for. Unlike home policies, in most cases the exterior of the building and shared spaces aren’t covered; the condo association’s policy insures those.
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Commercial property insurance: Covers structures used for business purposes and business property against damage from covered incidents like fires and storms. Lost income could also be claimable if a business is damaged or destroyed.
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General liability insurance: Protects businesses from financial losses due to a range of situations for which they could be held responsible, including bodily injuries, medical expenses, and legal fees in the event of libel, slander, lawsuits, or court judgments.
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Professional liability insurance: Designed to protect a business if someone files a lawsuit against it for malpractice, mistakes, or negligence.
How to determine the right coverage for you
Here’s how to figure out which types of property and casualty insurance you might need.
Assess your personal or business risk exposure
Every home, automobile, and business is different. As a result, it’s important to consider your risk levels before buying P&C insurance. For example, if your home is in an area that typically floods during hurricanes but isn’t in a zone that requires flood insurance, it may make sense to buy flood insurance anyway.
If you own a business with a large warehouse and valuable equipment, you may want to purchase a robust commercial property policy to protect your assets. An important question to ask during this step is, “How much would it cost me out of pocket to replace my property or defend myself in a lawsuit if I didn’t have insurance?”
Understand coverage limits, deductibles, and exclusions
Like the individuals, property, and businesses they cover, property and casualty policy limits, deductibles, and exclusions can vary from policy to policy. Knowing this, it’s important to review what a policy offers before making a buying decision. Make sure you buy a policy with limits that cover the total value of property, meet state minimums for coverage, or, for business owners, could pay for the costs associated with a lawsuit.
For deductibles (what you pay out of pocket for a claim before your coverage kicks in), remember that, in general, the higher your deductible, the lower your monthly payment and vice versa.
Finally, identify your policy’s exclusions. For example, standard home insurance policies won’t cover flooding — even after a hurricane — and small business policies typically don’t cover intentional damages caused by the owner.
Work with a licensed insurance agent to tailor coverage
An insurance professional can review your assets and risk profile to help you find a policy that provides adequate coverage for your situation. Additionally, they can explain exactly what your policy does and doesn’t cover and clear up any confusion.
Regularly review and update policies as your needs change
Insurance coverage is usually based on the information you provide when you apply. Therefore, it’s essential to review your coverage details and reassess your needs annually to ensure that your policy offers adequate protection for your home, vehicle, property, or business.
For example, you may need to increase your homeowners insurance policy limits if your home value has increased because you’ve recently remodeled. Or maybe you’ve added safety features to your home that could potentially lower your premium. You can talk to an agent about anything that’s changed to figure out if your policy should change, too.
The cost of property and casualty insurance
The cost of P&C insurance can vary widely depending on what’s being insured, where you live or own a business, and other factors.
That being said, the national average cost of home insurance is $3,303 per year for a home with $350,000 in dwelling coverage, according to the Consumer Federation of America. However, average rates differ from state to state (and home to home). For example, annual coverage costs an average of $1,231 in New Hampshire and $7,344 in Florida.
The average full coverage auto insurance premium is $105 per month, according to the latest data from the National Association of Insurance Commissioners. Again, average rates vary by state, as well as a range of other factors specific to the driver and the vehicle.
Renters insurance is much more affordable than homeowners and auto insurance. For example, the national average cost of renters insurance is around $14 per month, according to the Insurance Information Institute. Location still matters, though. The Mississippi average is $22 per month, while the South Dakota average is approximately $11.
Tips to reduce P&C insurance costs
There are several ways you can reduce your premiums depending on which type of policy you want to buy:
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Bundle policies: Insurers typically give you a discount if you buy multiple policies from them. A popular option is bundling home and auto insurance, but bundles are sometimes available for business owners, too.
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Install safety features: Insurers might reduce your premiums if you take steps to reduce your risk. For example, installing storm shutters or reinforcing your roof with hurricane clips could lead to lower homeowners insurance premiums in areas with a high risk of storm damage.
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Maintain a clean claim history: Insurers tend to be wary of customers who have filed claims in the past. Keeping a clean claims history is one of the best ways to remain insurable and avoid rate hikes.
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Shop and compare quotes: Perhaps the most tried and true way to find the best premium is to get multiple quotes. Insurers weigh risk differently, so you could receive different quotes for the same coverage from different companies. Shop around before settling on an insurer, and get new quotes at least once a year to make sure you are still getting the best deal.
