Insurance law relates to insurance policies and insurance coverage. In general, insurance protects you against the risk that you might have to pay money if something goes wrong – for example, if you cause an accident or a tree falls on your car. The purpose of insurance is to transfer the risk of that loss from you to the insurance company in exchange for money you pay to the insurance company to insure you against certain risks for a certain period of time. You can insure your house and its contents, your car, your health, your life and other property you own. You can also purchase insurance to protect your business against certain business-related risks.
In order to obtain insurance coverage, you pay money, called a “premium,” to your insurance company. Premiums are typically paid on a monthly, quarterly, or annual basis. And, if you do not pay or forget to pay the premium to your insurance company, you run the risk that you will no longer be insured.
The insurance company puts your premium, along with the premiums of other people, into a pool. In return, the insurance company promises to pay for certain losses, injuries, or damages to you, your property, or a third-party that is covered by your insurance policy. The insurance company pays for the loss out of the pool of premiums it has collected or out of reserves of money that it is required to have.
Generally speaking, there are two basic categories of insurance coverage: first-party coverage and third-party coverage. A first-party insurance policy insures you against certain damages or losses you suffer – for example, the tree that falls on your car. A third-party insurance policy insures you against certain damages or losses suffered by others – for example, damages and injuries resulting from an accident you caused. There are several different types of insurance, including life insurance, property insurance, health insurance, automobile insurance, disability insurance, title insurance, and mortgage insurance.
Your insurance policy is a contract between you and the insurance company. It spells out what risks are and are not covered. In addition, some insurance policies will pay for your lawyer or supply you with a lawyer if you are sued. It is important to read your insurance policy carefully and to discuss what may or may not be covered at the time that you purchase the insurance policy.
After something goes wrong – you are involved in an accident or someone breaks into your storage unit and steals everything – you might have a difficult time determining whether the insurance policy that you have covers that claim or loss. Under those circumstances, you might want to consult with a lawyer who knows insurance law in order to understand what rights you may or may not have under your policy.
Changes may occur in this area of law. The information provided is brought to you as a public service with the help and assistance of volunteer legal editors, and is intended to help you better understand the law in general. It is not intended to be legal advice regarding your particular problem or to substitute for the advice of a lawyer.