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Insurance · Casualty Insurance Basics

What is the difference between liability insurance and property insurance?

Reviewed by Jordan Morley, Editorial Lead at 247SimpleTests. Written by the 247SimpleTests Editorial Team from the official source material cited on every question.

Correct answer

Liability (casualty) insurance covers the insured's legal responsibility for injury or damage to others, while property insurance covers damage to the insured's own property

  1. A Liability (casualty) insurance covers the insured's legal responsibility for injury or damage to others, while property insurance covers damage to the insured's own property
  2. B They are the same
  3. C Liability covers only the insured's own car
  4. D Property insurance covers lawsuits

Why this is the answer

Liability insurance, a core part of casualty coverage, protects the insured against claims that they are legally responsible for causing bodily injury or property damage to a third party — paying both the damages owed (up to policy limits) and the cost of legal defense. Property insurance, by contrast, covers physical damage to the insured's own property. Many policies (like auto and homeowners) combine both. The key distinction is whose loss is covered: liability covers harm the insured causes to others, while property covers the insured's own property. Understanding this fundamental difference is essential casualty insurance content.
Source: NAIC Model Outline, Liability vs Property

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About this topic: Casualty Insurance Basics

Casualty insurance basics cover the concept of legal liability, negligence and its elements, the types of damages, and how liability policies respond — including the duty to defend. This is one of 11 Casualty Insurance questions on casualty insurance basics, each with a full explanation on a single study page.

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