Owning a vehicle, home or business includes the potential risk of a financial loss due to occurrences such as property damage or injuries. When a substantial loss occurs, many people don't have the funds on hand to pay for the resulting damage. You can transfer your financial risk to an insurance company by purchasing a property and casualty (P & C) insurance policy.
The "property" element of P & C insurance covers losses you incur due to damage to valuable assets you own. The "casualty" element compensates others for injuries or damages you cause. Casualty insurance is also referred to as third-party coverage because it pays out to others as opposed to you, the policyholder. Personal lines property and casualty insurance pertains to your personal assets such as your home or car, while a commercial line of P & C coverage provides protection for your business.
According to the American Insurance Association, a primary function of P & C insurance is to prevent losses from occurring in the first place. By educating their policyholders regarding the development and implementation of safe practices, insurers can help to reduce the likelihood of serious accidents or injuries. When a loss does occur, P & C insurance aids in the recovery process by providing the financial means necessary to make repairs or pay medical bills.
Suppose you are involved in an auto accident where you ran a red light and struck another vehicle. The property component of your auto policy would pay to repair the damages to your own vehicle, while the casualty component would cover damages to the other driver's vehicle and any injuries he sustained. Your casualty insurance would also pay for your legal defense if the other driver decided to pursue a lawsuit against you due to your negligence.
When you apply for coverage, a P & C insurance professional known as an underwriter assesses the company's level of risk to determine your eligibility as well as the amount of premium you pay. In general, the lower the risk that you pose, the more cheaply you can attain coverage. A person who has a history of causing auto accidents, for instance, is more likely to pay a higher amount for auto insurance than an excellent driver. An expensive home is more costly to insure than a modest abode, as the insurer has more to lose if the home is destroyed by fire or other covered disaster.
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