Casualty insurance is a type of insurance that covers you if you’re legally responsible for another person’s injuries or property damage, such as from a car accident or an accident in your home. Below, we take an in-depth look at what casualty insurance is, how it works, who files the claim, and whether it’s worth getting or increasing your coverage.
Casualty insurance protects you when you’re liable for someone getting hurt or their belongings getting damaged. The circumstances in which you’re covered depend on the specifics of your policy. For instance, a car insurance policy might pay to repair a neighbor’s fence after you drove into it.
You’ll often see casualty insurance lumped together with property insurance and referred to as “property and casualty insurance” or “P&C insurance.” While the casualty portion shields you from the costs of injuries and damages to other people or their property, the property portion of P&C insurance covers damages to your own belongings.
Casualty insurance doesn’t cover your own injuries or property damage, or those of other people listed in your policy.
If you own a company, business casualty insurance can protect you when a customer is injured by one of your products or services.
Casualty insurance is usually bundled into your insurance policy, so you pay for it when your insurance bill is due. Your policy and quotes may specify how much you pay for each coverage, making it easier to adjust limits to fit your budget and needs.
When looking at your policy, you’ll typically find casualty insurance under coverages for others when you’re at fault. For homeowners policies, these coverages may show up as “personal liability,” “personal injury liability,” and “medical payments to others.” Your auto policy includes this type of insurance under “bodily injury liability” and “property damage liability.”
Business owners can purchase casualty insurance coverages like workers’ compensation, general liability, and employer’s liability insurance (EPLI).
There are many scenarios where your casualty insurance would kick in to cover costs. For example, home insurance might pay for expenses and legal fees associated with:
Auto casualty insurance can come into play in a number of situations, such as when someone in another car is hurt in an accident you caused or if you accidentally hit a neighbor’s mailbox while making a U-turn.
Each insurer handles the claim process differently. In general, the other party files the claim with your insurance if you’re at fault for the damage or injury. Home and auto liability claims don’t usually have a deductible, so your insurance covers all costs for approved claims up to your limits.
If you’re the one who was hurt or had property damage, you’ll most likely work with the other person’s claim representative or insurance adjuster. Their insurer may pay your claim directly to you or another entity, such as a collision repair shop.
Car insurance companies use police reports, photos, details gathered from you and the policyholder, and more to determine who is at fault and whether a liability payout is due. For any insurance claims involving injury, it’s crucial to gather as much evidence as possible to support your claim, such as immediate medical evaluations, photos and videos of what caused your injury, and witness statements.
If the issue is with a homeowner and they have no-fault medical coverage, you may be able to submit bills directly to their insurance company without needing to file a claim first.
After a car accident, it’s essential to contact your insurer, regardless of who was at fault. Your insurer can then work on your behalf to help you file a liability claim with the other insurer.
Liability limits are the maximum an insurer will pay for a claim. Standard homeowners policies typically provide $300,000 of personal liability for property damages and injuries and $1,000 to $5,000 for medical payments to others.1 If your personal liability limits are enough to protect your assets in claims and lawsuits, then your insurance is likely sufficient. If not, consider raising your coverage to the highest level you can reasonably afford.
It’s important to understand the distinction between liability coverage and medical payments to others. Liability takes care of medical costs if you’re deemed liable for someone else’s injury. Medical payments is a more limited form of coverage that pays regardless of fault (and only to guests you invite on your property, in the case of a homeowners policy).
minimum liability limits are set by each state, though these amounts may not be enough to cover expenses in a serious accident. Like with homeowners insurance, consider purchasing as much liability coverage as you can afford.
Tip: Umbrella policies are sold separately and can cover liability claims in excess of your home and auto insurance policies. Costs depend on factors like your existing liability coverage and your risk profile. In general, a $1 million umbrella policy costs $150 to $300 per year.1