Property and Casualty Insurance: What Does It All Mean?


Most of us understand the importance of insurance to protect us financially. But many of us pay for insurance every year without understanding exactly what we are protected for — and what’s not covered.

Let’s take a closer look at the common policies most of us need, including homeowner’s insurance, renter’s insurance, auto insurance, valuables insurance, and umbrella insurance.

Homeowner’s Insurance

Homeowners need comprehensive homeowner’s insurance. This adds liability insurance to the standard hazard policy to cover any injuries to people on your property. It also covers injuries caused by household members (including pets). Your homeowner’s insurance would kick in, for example, if your dog accidentally injures a child on your property.

Homeowner’s insurance covers many possible damages, including wind damage, fire damage, theft, and more. But many potential disasters aren’t covered. The most common exclusions are for flood and earthquake damage. Look at the “exclusions” category of your homeowner’s insurance to see what isn’t covered with your existing policy. If you’re at risk for these scenarios, additional insurance policies are available (and may even be required from lenders if you’re taking out a mortgage to buy a property).

Make sure to read the fine print as to what the insurance company will provide in the case of the destruction of your home. Many policies will cover replacement cost up to an initial estimate, but some policies will provide guaranteed replacement coverage, which covers the complete repair or rebuilding costs.

Also consider a high deductible if you have the cash flow to handle paying the initial costs should anything happen. And remember that if you claim small losses on your homeowner’s insurance, your rate will rise and your policy could be canceled in some circumstances.

Renter’s Insurance

If you rent, you’ll want to make sure you have renter’s insurance. A renter’s insurance policy protects against the loss or destruction of your possessions when renting a house or an apartment. (The landlord’s insurance will cover the building, but it doesn’t usually include any provisions for the renting occupants.)

Similar to homeowner’s insurance, renter’s insurance also provides personal liability coverage to those renting the home as well as guests visiting the home. Since the policy doesn’t protect the building itself, renter’s insurance is often very affordable. Many landlords will require renter’s insurance as a condition before accepting a lease.

Car Insurance

In most states, drivers need auto insurance with liability coverage in order to obtain a license. Liability coverage covers the injury and property claims of another party when you’re at fault in an accident. You can also have collision insurance, which covers your repairs costs if you are at fault in an accident.

Comprehensive coverage will cover damage on the car from multiple sources, not just automobile accidents. This includes damage due to fire, storms, theft, and vandalism. Some states also require personal injury protection. This will pay for your own medical expenses in the case of an automobile accident, regardless of who was at fault.

You will likely also want uninsured or underinsured motorist coverage for better protection in case of an accident. This will cover your damages in the case of a hit-and-run or uninsured driver. For just a bit more, you can also pay to cover for drivers that are underinsured. This would kick in if the driver injures you or damages your property, but does not have adequate coverage for the full amount.

Valuables Insurance

If you have homeowner’s insurance or renter’s insurance, you have some protection for precious valuables like jewelry, art, or collectibles. However, the liability limits are often low as these items can be stolen easily.

If you have special valuables that would be difficult to replace (think art work, engagement rings, inherited jewelry, etc), look into covering these items by raising the limit on your policy or by purchasing a separate valuables rider for each item.

Insuring each piece might cost more in premiums, but you’ll also be offered more protection.

Umbrella Insurance

We’ve discussed protecting your home, your car, and your valuables. But there’s something that many of us don’t think to protect with insurance – and that’s your net worth.

Even though homeowner’s insurance and auto insurance does cover some amount of liability coverage, a bad car accident quickly could exceed your liability limit in your vehicle insurance. Your savings, home, and future earnings could be at risk. Umbrella insurance steps in to cover the difference in all your policies to protect your net worth.

It will cover property damage, bodily injury claims, and legal costs. Typically, policies will start at $1 million in coverage for around $200 a year. If you can’t afford to rebuild your nest egg, you want to protect it with umbrella insurance.

Sleep Easy At Night

We’ve covered many types of property and casualty insurance, from homeowner’s insurance to umbrella insurance. With this overview in hand, talk with your insurance agent or broker about which coverage is right for your situation. This way you can look into your policies with confidence to make sure you, your possessions, and your assets are properly protected.


Mary Beth Storjohann, CFP® is an author, speaker, and financial coach who takes a fun, no-nonsense approach in working with individuals and couples across the country, helping them make smart choices with their money.

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