Four Lines of Insurance
Another way of classifying insurance companies is by the type of insurance policies they write.
There are four broad categories, or lines, of insurance:
■ Property
■ Casualty
■ Life
■ Health and disability
An insurance company that writes only one line of insurance is referred to as a monoline company. An insurance company that writes more than one line of insurance is called a multiline company.
Life and Health
Now, let’s look a little closer at these four lines of insurance.
Life insurance is designed to handle the risk of premature death or the risk that an individual may outlive his or her financial resources. Health and disability insurance is designed to handle the risk of medical bills and loss of income resulting from injury or sickness.
In this course, we will not deal with these lines of insurance, although your company or agency may offer them.
Property and Casualty
The remaining two lines of insurance make up the property and casualty industry.
Property insurance is relatively simple to define. It includes many types of insurance designed to handle property risks—risks that we will suffer financial loss because something we own is damaged or destroyed.
The following types of insurance are generally considered to be property insurance:
■ Dwelling
■ Homeowners
■ Commercial property
■ Inland marine
■ Ocean marine
■ Crime
We’ll look more closely at each of these types of insurance later.
Casualty insurance is more difficult to define because it includes a wide variety of basically unrelated insurance products.
One of the most important risks covered by the casualty line is the liability risk—the risk that we will suffer financial loss as a result of our actions toward others.
A good example is the all-too-familiar auto accident in which Allen backs out of his driveway, hits Blanca’s car, and causes $500 in dam- age.
If the accident was Allen’s fault, he is liable for the damage he caused to Blanca or her auto.
Although insurance against the liability risk is an important casualty coverage, there are many other types of insurance that have historically been classified as casualty:
■ Aviation
■ Auto
■ Workers’compensation
■ Surety bonds
Personal and Commercial Lines
Insurance can be written to meet the needs of an individual or family as well as the needs of a business.
Personal lines are property and casualty coverages that protect an individual or family. Commercial lines are coverages designed for businesses.