Casualty Insurance Policy: Definition & Uses

Instructor: Shawn Grimsley

Shawn has a masters of public administration, JD, and a BA in political science.

Casualty insurance policies are one of the most common types of insurance policies. In this lesson, you'll learn what a casualty policy is and who may benefit from purchasing one. We'll also look at key components of the policy and claims process.

Casualty Policy Defined

One of the most common insurance policies that people and businesses purchase is a policy of casualty insurance. Casualty insurance is a contract between you and insurance company wherein the insurance company agrees to cover part or all of your loss or liability relating to damage to property or people in exchange for your payment of a premium.

As you can probably see, casualty insurance is a pretty broad topic. In fact, you probably hold at least one casualty policy yourself. Types of casualty insurance include but are not necessarily limited to:

  • Auto insurance - covers losses related to vehicle accidents
  • Homeowner's Insurance - covers losses related to a homeowner's property
  • Renter's Insurance - covers the renter but not the landlord for loss related to the rental property
  • Landlord's Insurance - covers the landlord but not the renter for loss related to rental property
  • Workers' Compensation Insurance - obtained by employers to cover losses relating to employees injured while on the job (coverage is usually mandated by law)
  • Liability Insurance - covers the policyholder for her liability relating to injuries to a person or damage to property of another where the policy owner is at fault
  • Theft Insurance - covers loss resulting from theft

Anatomy of a Policy

While there are may different types of casualty policies, the structure of a policy of casualty insurance is pretty much the same regardless of the insurance company and specific type of casualty coverage provided. A policy can be broken down into four parts. Let's take a quick look at each component.

  1. Declaration page - identifies who's insured, what risks are insured, the limits on what the policy will pay, and the policy period.
  2. Insuring agreement - the agreement between you and the insurance company outlining its responsibility towards you and your responsibilities to it. In a nutshell, you are agreeing to pay a premium in exchange for the insurance company agreeing to pay for covered losses within the policy period up to the policy limits.
  3. Exclusions - tells you what the policy will not cover. The policy may exclude types of risk, such as floods or earthquakes. The policy may also exclude certain losses, such as loses resulting from normal wear and tear. Finally, policies may exclude coverage for certain types of property, like a fishing boat that happens to be parked in your driveway during a tornado.
  4. Conditions - requirements that an insurance company imposes on a policyholder that must be met before the insurer is obligated to pay a covered claim. This is important in the claims process. The insurance company will determine whether the claim concerns a covered risk, whether there is an applicable exclusion, and whether all conditions have been met requiring payment of the loss. So what are these conditions?


If you file a claim on a casualty insurance policy, you'll usually have to provide a proof of loss, which is basically a statement from you to the insurance company detailing your loss. For example, in a car accident, you may have to describe the accident and provide evidence of the loss, such as repair estimates and medical bills.

You also usually have a duty to protect the property from further damage. For example, if your house catches on fire, you can't just watch it burn to the ground; you need to call the fire department and take any other safe and reasonable action to mitigate the damage. You'll also be obligated to cooperate with the company's investigation of your claim and even cooperate in any litigation that a company may commence regarding the loss.


Other important parts of many policies are endorsements, which modify the standard policy in some way. An endorsement is often purchased separately from the standard policy that enhances the coverage in some manner.

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