Property and Casualty (P&C) insurance covers physical assets against damage or loss (property) and legal liability for harm caused to others (casualty). The National Association of Insurance Commissioners (NAIC) coordinates state-based regulation of U.S. P&C insurers.
Property and Casualty insurance is the umbrella category for insurance products that protect against physical and liability risks — as distinct from life insurance and health insurance. For businesses, P&C encompasses commercial property insurance (covering buildings, equipment, inventory), general liability (bodily injury and property damage caused to third parties), commercial auto, umbrella/excess liability, and specialty lines. The U.S. P&C market is regulated at the state level through insurance commissioners, coordinated by the NAIC (National Association of Insurance Commissioners, naic.org). There is no federal P&C insurance regulator — the McCarran-Ferguson Act (15 U.S.C. § 1011) preserves state regulation of insurance. This means P&C insurance requirements, rates, and form filings vary by state. For SBA and bank lenders, P&C insurance on collateral assets is typically required: (1) commercial property insurance at replacement cost value as a condition of any loan secured by real estate or equipment; (2) business interruption insurance is recommended but not always required; (3) general liability is standard underwriting requirement for most secured commercial loans. Lenders are named as 'loss payees' or 'additional insureds' on required policies. Key P&C concepts: (1) Replacement cost value (RCV) vs. actual cash value (ACV) — RCV pays full replacement without depreciation deduction; ACV deducts depreciation. (2) Coinsurance — if the property is underinsured, the insurer pays only a proportionate share of the claim. (3) Business interruption coverage — extension of property insurance covering lost revenue, not just physical damage (see separate entry).
Minimum essentials for most businesses: (1) commercial general liability (protects against third-party injury/property claims); (2) commercial property insurance if you own equipment, inventory, or premises; (3) commercial auto if company vehicles are used. Higher-risk businesses add umbrella/excess liability, professional liability (E&O), cyber liability, and product liability. Lenders requiring collateral insurance specify minimum coverage amounts and lender loss payee status.
SBA lenders typically require adequate property and casualty insurance as a condition of loan closing and ongoing maintenance. The SBA SOP 50 10 6 (Lender and Development Company Loan Programs) specifies insurance requirements. At minimum: hazard/property insurance on collateral equal to the lesser of replacement cost or loan balance, with lender as loss payee. Flood insurance required if collateral is in a FEMA Special Flood Hazard Area.