Property and Casualty (P&C) Insurance is a protection policy. It protects you, your possessions, or even your business. It differs from life or health insurance because it can cover your potential legal liability or expenses from lawsuits. P&C insurance is one of those things we know we need, but can’t explain why we need it. Understanding whys’ behind an auto or homeowner’s insurance policy is an important component of your overall financial education.
One of the most familiar types of P&C insurance is auto insurance. It provides financial coverage in case of bodily harm, property damage, or other liabilities that may arise from the operation of your vehicle. Property damage can be anything from a collision to hail, flood, or fire that happens to your vehicle. There are two basic types of auto insurance: full-coverage and liability only. A full-coverage policy usually covers personal injury to you or your passengers, medical payments for injuries sustained while operating or riding in your vehicle, uninsured or under-insured motorist insurance required by most states, and emergency roadside service. A liability only policy means the insurance company will only pay for damages you caused to another person or their property. It will not cover expenses for any damage to you or your vehicle.
Another type of P&C insurance is homeowners or renters insurance. This type of policy protects you against damages to your house and anything inside. It also provides liability coverage for any accident that may happen to you or your guests while inside your home. There are many different homeowners and renters insurance. It is EXTREMELY important that you discuss each type with a professional and then read the policy to understand what it what it does or does not cover. Homeowners insurance is different from renters insurance because it protects the structure (i.e. the building), as well as the contents. A renters insurance policy only protects the policy owner’s possessions that are inside the rental property. The building owner or landlord is responsible for carrying insurance that covers the building structure; however, your landlord’s insurance will not cover any of your personal belongings inside the rented space. You are responsible for carrying renter’s P&C insurance to protect your furniture, electronics, clothing, jewelry, and any other valuables.
Flood insurance is one of the most overlooked insurance policies for homeowners. This type of P&C insurance is different because commercial insurance companies do not cover flood damage, flood insurance is only offered by the Federal government. The flood policy can be obtained through most insurance agencies, but it is the Federal government that actually issues the policy and covers the damages if they occur. Where you live will determine your premium. If you live near a river, you have a greater chance of experiencing a flood. Therefore the premiums will be higher than if you lived in the Rocky Mountains.
Property and Casualty
When we hear the term P&C we usually think of home and auto insurance, or maybe a special policy for high-value jewelry, works of art, antiques or other collectable. P&C insurance means protection for anything you own. Boat owners need a marine P&C policy. Business owners may need general liability or business interruption insurance. If you own it, there is usually a private company that will insure your special possession.
The insurance industry is as complicated and regulated as the securities markets, yet most of us pay very little attention to our insurance policies until we need them. Insurance is important. Most people will own a car before they invest in their first stock or bond. Insurance is an important part of your personal financial plan. Take time to understand your policies, the coverage they provide and, just as important, what they don’t cover. Ask questions. Get answers. Select the best policy for you and be prepared for the worst-case scenario. Floods, hurricanes, fires, theft and accidents can happen to anyone and can wipe out your “rainy-day-fund” very quickly if you are no properly insured. Protect yourself, your family and your savings – you’ll sleep better knowing you and your hard-earned possessions are properly insured.
Jonathon Rowles Captain, USMC (Ret.)
Disclaimer: (have to do it) – This blog should not be considered financial, investment, legal or tax advice. Consult your licensed financial professional, tax advisor or legal counsel. This blog is for educational purposes only.