The Insurance Bulletin
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Casualty insurance: What is it and how does it work?

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Mandy Sleight
Updated October 2, 2022
3 Min Read

Casualty insurance is a type of liability insurance that provides coverage if you’re held liable for injuries or property damage to others. If someone sues or files a claim against you and wins, your insurance company will pay the injured party on your behalf, up to the coverage limit defined in your policy.

How Does Casualty Insurance Work? 

Casualty insurance is a coverage that is included with other coverages as part of an insurance policy. There are several types of casualty insurance that can cover you personally or professionally if you are found at fault for damaging someone’s property or person. Without casualty insurance coverage, you can be held personally responsible for damages and required to pay a monetary amount to the injured party.

For instance, business owners can buy different types of casualty insurance, including:

  • Employment practices liability insurance (EPLI)
  • Employer’s liability
  • Excess liability umbrella
  • Foreign casualty insurance
  • General liability
  • Liquor liability 
  • Professional liability/errors and omissions insurance
  • Workers’ compensation

You may be more familiar with casualty insurance on your auto and home policies. Auto policies provide coverages like bodily injury liability and property damage liability. Both these coverages are usually lumped together, with minimum limits required by most states. Home casualty insurance can include personal liability and guest medical payments to other coverages.

What's the difference between property insurance and casualty insurance?

Property insurance and casualty insurance are commonly called property and casualty, or P&C, insurance. The difference between property insurance and casualty insurance is who the coverage protects.

Property insurance protects your property, such as your car, home, personal belongings, golf cart or motorcycle. Casualty insurance is liability protection that protects you if you’re at fault for damaging someone else’s property or causing injuries to another person or people.

What are the types of property and casualty insurance?

Property and casualty insurance types include auto insurance and various types of home insurance, like condo, renters, and homeowners insurance. The coverages under these policy types provide either property or casualty insurance, depending on the coverage.

For example, your auto policy provides bodily injury and property damage liability casualty insurance. Comprehensive and collision coverages are property insurance, as they protect your vehicle if it is damaged.

Under a home policy, the personal liability and guest medical payments coverages are casualty insurance. Dwelling and personal property coverages are property insurance, as they provide coverage for your home and its contents – your personal property.

How do I file a casualty insurance claim? 

Typically, the other party will file a casualty insurance claim against you through your insurance carrier. If you are the injured party or had your property damaged, you would likely file a casualty insurance claim with the at-fault party’s insurance carrier.

The process may differ by insurance carrier. Most often, the person who starts the claim will provide details about the occurrence and may provide supporting documentation as photos or a police report. They may need other documents to complete the insurance investigation, which can include witness statements and medical evaluations if the claim is for injuries.

If the person filing the claim is not the policyholder, the insurance claims department will speak with their insured before determining fault. If the insured is deemed at fault, the insurance claims department will either pay the claimant directly, or with an auto insurance claim, pay a repair shop fixing the damaged car.

How Much Casualty Insurance Should I Get?

How much casualty insurance you should get is a personal choice. However, consider your total assets to help determine the minimum casualty insurance coverage you should buy. For example, if you have total assets of $1 million, having at least that amount in personal liability coverage may be a good idea.

Most insurance experts recommend buying as much liability coverage across your casualty insurance policies as you can afford, and for good reason. If you are held liable and they award the other person monetary compensation, you could have to pay out of pocket if you exhaust your underlying liability limits. 

Let’s say you have a $300,000 personal liability coverage limit on your homeowners insurance policy. You are sued after someone gets injured on your property, and the court awards them $500,000 in damages. Your insurance company will only pay up to the $300,000 limit. They can then grant the claimant a judgment for the remaining $200,000, which you are responsible for paying.

While most states set a minimum liability limit on your auto policy, it’s typically a low amount. Auto liability is divided into three separate figures, usually expressed like 25/50/25. Here, you would have a maximum coverage amount of:

  • $25,000 per person for bodily injuries
  • $50,000 per accident for bodily injuries
  • $25,000 per accident for property damage

A home policy typically has a minimum liability coverage amount of $100,000, but can go up to $1 million or more. You can also increase the guest medical payments coverage from the minimum of $1,000 to a higher amount.

To provide even more protection, if you have a higher net worth, consider an umbrella insurance policy. This policy will automatically kick in if you exhaust your underlying liability limits on your auto or home policy.

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