This is as simple as it sounds. Property insurance covers your “stuff”; liability insurance covers your a**.
Property insurance protects physical property; it covers your stuff (things that you purchase and belong to you), but you can also purchase property insurance for stuff you do not own (something you do not want to be damaged as you are responsible for keeping it undamaged).
- What do you want from a property insurer if the property does get damaged? As an insured, you should expect your insurer:
- To conduct a good-faith investigation into: (1) the facts surrounding the cause and extent of damage to your property; and (2) compare those facts against the literal words in your insurance policy and determine what benefits you are entitled to (as opposed to only looking for and providing exclusionary or limiting language).
- A good-faith investigation must also be timely (jurisdictions vary, but if your insurance company is taking longer than 30 days to explain what’s going on, that is usually too long (unless they have a “good faith” reason for being unable to complete their investigation in that amount of time). Good faith refers to the absence of bad faith. More on this later.
- To hire the appropriate experts, with sufficient qualifications for the task at hand.
- To pay out quickly – after all, you purchase insurance to provide timely financial relief.
- To conduct a good-faith investigation into: (1) the facts surrounding the cause and extent of damage to your property; and (2) compare those facts against the literal words in your insurance policy and determine what benefits you are entitled to (as opposed to only looking for and providing exclusionary or limiting language).
Liability insurance is most easily described as a “shield”. There are two primary benefits associated with a liability policy: defense and/or indemnity. Let’s use a car as an example. Say it’s a snowy day; and you and another car slide into one another. The drivers in the other car hire a lawyer to file a lawsuit against you. Their own insurance company has already paid them policy limits, but they want to recover from you as well. You take their lawsuit, and “tender” it to your insurance company (we’ll discuss “tenders” in more depth later on). Your insurance company is then supposed to provide:
- A “good-faith” investigation (exactly the same as what’s written above for a property claim).
- A “defense”: this means your insurance company has to appoint a lawyer to defend you against the allegations in the lawsuit. Your insurer-appointed lawyer (typically) is unable to bring affirmative claims (because the insurance company only has to pay for a “defense”). More on this later.
- A defense includes the appropriate experts and consultants (as described above).
- “Indemnity”: a fancy way of saying “cash” to settle a case or satisfy a judgment.
- In some jurisdictions, if an insurer fails to settle within policy limits and instead waits until a judgment is entered against you (for more money than it would have taken to settle), you can sue your insurance company and have them cover the difference, regardless of policy limits. More on this later.
Sue My Insurance Company 