Casualty insurance is a broad category of coverage against loss of property, damage, or other liabilities. Casualty insurance includes vehicle insurance, liability insurance, theft insurance, and elevator insurance.
Breaking Down Casualty Insurance
An essential type of casualty insurance for businesses is workers' compensation insurance, which protects a company from liabilities that arise when a worker is injured on the job. Another important type of casualty insurance is liability insurance. Liability losses are losses that occur as a result of the insured’s interactions with others or their property. For homeowners or car owners, it's important to have casualty insurance as damage can end up being a large expense.
Probably the best example of this would be an auto accident. Consider this hypothetical example: Let’s say Maggie backs out of her driveway and hits Lisa's parked car, resulting in $600 of damage. Because Maggie was at fault, she is legally liable for those damages, and she must pay to have Lisa’s car repaired. Liability insurance would protect Maggie from having to cover the damages out-of-pocket.
Just as you can purchase property insurance to protect yourself from financial loss, liability insurance protects you from financial loss if you become legally liable for injury to another or damage to property. To be legally liable, one must have demonstrated negligence—the failure to use proper care in personal actions. If negligence results in harm to another, the offending party is liable for resulting damages. People in the insurance industry often call liability losses third-party losses. The insured is the first party. The insurance company is the second party. The person to whom the insured is liable for damages is the third party.
Many other types of insurance have traditionally been considered casualty insurance, such as:
- Workers’ compensation
- Surety bonds
Casualty Insurance and Business
If you own a business, you should consider a few different types of casualty insurance, depending on what you do. There are policies available for cyber-fraud insurance, employee-theft, and identity theft (to name a few). If you primarily do business online, check if your policies cover your website. If you depend on computers to run your business, you might want to ensure the computers in a separate policy.
Most business owners need to have casualty insurance coverage because, if you produce something, the possibility exists that it may end up harming someone. Even if you are a sole proprietor, it’s a good idea to carry insurance that is specific to your line of work. For example, if you’re a freelance auto mechanic who works from your shop, you likely won’t need workers' compensation coverage, but you should have insurance that covers a situation in which a repair you made causes injury to a customer.