Annual renewable term life insurance. Five Differences Between Life Insurance and Property Casualty Insurance

When I first started working at LOGiQ Life assurance.

, I was tasked with working alongside our teams of reinsurance analysts, who held backgrounds in both Property & Casualty (P&C) Insurance and Life Insurance. Together, we created content like Insurance eBooks and Whitepapers, or like this piece for the blog, on the differences in types of insurance.

Working in Life and Health reinsurance, I quickly learned that in order to firmly grasp the differences between P&C and Life Insurance, it was important to first establish a general concept of the two types of insurances.

Through my professional development, I began taking a few LOMA courses, and for anyone who might be developing their careers like I am, today I’d like to share with you a “quasi-exhaustive” overview of what I’ve come to learn in my experience in life reinsurance administration.

Life Insurance:

Life Insurance is the protection against the loss of income that would result if the insured dies. In the event of a death, the named beneficiary or beneficiaries will have access to compensation. Generally, the beneficiaries are the families of the insured, however, they can also be partners or creditors.

With a life insurance policy, you can help your family to:

Continue to pay the mortgage on a house / property

Ensure the economic stability of your children and/or spouse

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Maintain the family's current living standards

Create a fund for education - college/university

Property and Casualty Insurance (PC):

This type of insurance aims to protect the property, either real or personal, described in the policy against certain risks. As you can imagine, there are different needs for the protection of:

Various risks: construction, electronics and machinery breakdown, etc.

Similar to property insurance, casualty insurance protects against loss and/or damage of property. The difference between the two is that casualty insurance protects your business premises from injuries and crimes against it and property insurance covers losses to your land, building and/or belongings. For full protection against both, people will often find these two types of policies combined.

So what are the main differences between P&C and LIFE Insurance?

Five differences between P&C and Life Insurance

Life insurance essentially insures human life, while P&C insurance insures people’s property (real or personal).

Life insurance covers a certain risk, which is the death of the insured. P&C covers various risks and uncertain events that may cause damage to someone’s property.

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Life insurance is not renewed annually and expires only with the death of the insured or in the case of a lapse (in most cases). In contrast, P&C is regularly renewed either annually, semi-annually, monthly depending on the type of insurance and the renewal terms as agreed upon in the policy. For example, with an Inland Marine Policy, insured property will be covered from the beginning of transportation to the arrival of the destination.

In life insurance, the beneficiary/beneficiaries receive the payable benefit due to the death of the insured. Once this transaction occurs, the policy is terminated. Conversely, P&C can have multiple compensations (claims processed) and the policy may continue in force or be terminated with the payment to the insured. For example, on an insured property the insurance policy can have two different events such as theft and flood due to rainfall and they would both be covered.

Lastly, in life insurance there is no subrogation, “defined as the right for an insurer to pursue a third party that caused an insurance loss to the insured”, however, in P&C it is present.

Note: Subrogation is done in order to recover the amount of the claim paid to the insured as a result of the damage.

Why is it important to know the difference

Firstly, so that you can be positive you’re choosing the right policy for your need. You will have a better understanding of the risks covered by both insurance policies and an ideal grasp of when these policies expire. Also, you will learn when the payable benefit is due, who receives it, and the advantages to owning these types of insurance.

These are all critical concepts that should be taken into consideration when learning about P&C and Life insurance. It is important to remember that Life Insurance helps the named beneficiaries to take care of the financial crisis that may arise from the sudden death and/or sudden stop in income of the recently deceased insured.

Whereas in the case of the Non-Life or P&C Insurance, if the property or the insured item is destroyed, the insurance would cover for the financial loss to put the insured back in the condition he/she was in before the loss.

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These are key factors that separate Life insurance from Property and Casualty protection.

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Originally written by Alicia Ormaza, updated and modified by Nick Joly