Just about anything can be insured -- it really just comes down to how much something is worth and the odds that it will become lost or damaged. And regardless of which type of insurance you pay into, those who don't suffer losses generally foot the bill for those who do. For example, the health insurance market would fundamentally collapse if not enough healthy people were paying into it, since there would be a lack of funds to cover the claims of the sick and injured. Insurance markets also are subject to quite a bit of regulation at both the state and federal levels. FindLaw's Insurance Basics section provides a solid overview of how insurance generally operates and the various kinds of insurance products available, including automobile insurance, life insurance, and even pet insurance.
As discussed above, insurance is a way to protect against losses. But from a legal standpoint, insurance is a contract between the insurer and the insured party -- you agree to pay premiums (usually on a monthly basis) and the insurer agrees to cover your losses (or shield you from personal liability) within certain limits. As with any other contract, the insurers responsibilities are spelled out -- sometimes in the "fine print" -- but also may be subject to interpretation. This is why it's very important to fully understand what is covered and what is not.
In addition to monthly premiums, you may also be subject to what is called a "deductible." This is the amount of money (either a set amount or a percentage of the claim) that you must pay out-of-pocket prior to receiving insurance benefits. Similar to deductibles are "copays," which are out-of-pocket payments made when visit the doctor's office or emergency room.
In order to receive benefits from your insurer when you suffer a loss -- a crushed rear fender from an auto accident, for example -- you file a claim with your insurer. The claims adjuster will investigate the claim to make sure it's legitimate and then cut you a check to cover the repair estimate.
What May Be Insured?
Most items in which you have an "insurable interest" may be insured. An insurable interest is something or someone that provides a benefit to you, and which would conversely impact your interests directly if it were lost, damaged, or otherwise diminished. Therefore, you cannot take out an insurance policy on the house down the street since you don't have a direct stake in that house (unless you happen to own it, of course).
Common types of insurance include:
- Health insurance
- Automobile insurance
- Life insurance
- Liability insurance
- Homeowners insurance
Regulations and Insurance Law
Although your insurer is legally bound by the contractual obligations of the insurance policy, those very terms (and the legitimacy of the claim) are sometimes subjects of disagreement when a claim is filed. These disputes can sometimes lead to legal action, such as through a "bad faith" claim against the insurer, but often they can be settled or otherwise resolved outside of court. Since insurance is so complicated to the average policy holder, regulations require certain disclosures to allow for more consumer transparency. Other regulations seek to keep insurers honest while also encouraging a competitive marketplace.
Learn more about how insurance works, the various types of insurance available, government regulations, legal requirements, and related topics by clicking on a link below.