Casualty insurance: Overview, definition, and example
What is casualty insurance?
Casualty insurance is a type of insurance that covers losses and liabilities resulting from accidents, injuries, or damage to property. Unlike property insurance, which protects physical assets, casualty insurance typically focuses on liability coverage—protecting businesses and individuals from legal claims due to accidents or negligence.
This type of insurance is common in business, auto, and general liability policies, helping protect policyholders from financial losses caused by unexpected events.
Why is casualty insurance important?
Casualty insurance is essential for businesses and individuals because it provides financial protection against lawsuits, claims, and liabilities. Without it, companies and individuals might have to pay out-of-pocket for legal costs, medical expenses, or damages awarded in lawsuits.
For businesses, casualty insurance is especially critical because it safeguards against risks such as workplace accidents, customer injuries, or third-party property damage. Many contracts, leases, and regulatory requirements also mandate casualty insurance to ensure protection against potential liabilities.
Understanding casualty insurance through an example
Imagine a retail store owner purchases a general liability policy, which includes casualty insurance coverage. One day, a customer slips on a wet floor and sustains an injury. The customer sues the store for medical expenses and lost wages. The casualty insurance policy covers the store’s legal defense and pays for any settlement or judgment, protecting the business from significant financial loss.
In another example, a construction company has casualty insurance as part of its business policy. During a project, an employee accidentally damages a client’s property. The casualty insurance policy covers the cost of repairing the damage, preventing the company from having to pay out of pocket.
An example of a casualty insurance clause
Here’s how a casualty insurance requirement might appear in a contract:
“The Contractor shall maintain casualty insurance coverage, including general liability insurance, in an amount not less than [$X] per occurrence, to cover any claims, damages, or liabilities arising from its operations under this Agreement.”
Conclusion
Casualty insurance provides financial protection against accidents, injuries, and liability claims. It helps businesses and individuals avoid significant financial losses due to lawsuits, medical expenses, or property damage. Whether required by contract or purchased voluntarily, casualty insurance is a crucial safeguard for mitigating risks and ensuring financial security.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.