The Insurance Agreement
Insurance policies are legal contracts. While they seem very complex, a basic understanding of common insurance terms can make them much more understandable. If you have any questions, an attorney with experience in insurance law can be an excellent resource.
All insurance policies must meet the requirements of contract law. This means that most legal disagreements over an insurance policy can be settled using the procedures of contract law. Policies contain clauses which define the agreement and any exclusions or limitations. The policy will lay out the definition of losses, and the details regarding proof and payment. It will define the amount of money the insured party must pay in premiums, and the amount of coverage provided by the insurance company.
"Exclusions" define circumstances or losses which the policy does not cover. An example would be an exclusion for losses caused by an intentional act by the insured. "Limitations" are provisions which limit coverage under certain circumstances or time periods. For example, many health insurance policies limit coverage for pre-existing conditions, or conditions which began or were diagnosed before the insurance policy was issued.
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Insured parties must have an "insurable interest" in the losses covered by the policy. This means that the contract is void if, for example, the insured does not own property covered by the insurance policy.
Again, an attorney is the best resource for any questions about a policy or its language.
Types of Insurance
There are many different types of insurance, meant to provide protection in a variety of circumstances. An attorney with experience in insurance law can explain the details of an insurance policy, and determine a policy's fitness for individual situations.
Health Insurance. Health insurance is a large part of the American insurance industry. Many Americans have health insurance through their employer. These policies protect individuals against losses caused by injury or illness. The lack of sufficient (or any) coverage has become a major dilemma for millions of Americans.
Indemnity Plans. Indemnity plans are the most common forms of health insurance. Basic indemnity plans cover common medical expenses, such as visits to a doctor or hospital. Major medical plans cover expenses above this ceiling. Indemnity plans generally require the insured party to pay a deductible.
HMOs. Health Maintenance Organizations, or HMOs, require the insured party to use an approved network of doctors and hospitals. These plans cost less, but also provide lower coverage.
Life Insurance. These policies protect the insured party against financial losses resulting from death. Life insurance pays a beneficiary (either in a single payment or in installments) if the insured person dies. The cost of these policies depends on many factors, including age, health, smoking, BMI, and gender. The most important cost factor is the use of statistics to determine your expected age at death.
Disability Insurance. These policies are designed to replace income if injury or illness prevents you from working. These policies have many forms and options.
Automobile Insurance. Auto insurance protects against losses involving automobiles, from property damage to injury. Many states require automobile insurance to own a car.
Homeowner's Insurance. These policies protect homeowners against both property losses (whether from theft, fire, or other accidental causes) and liability losses (when others make a claim for damages sustained due to the homeowner's negligence).
Business Insurance. These policies cover a number of insurance policies intended to protect a business. These include:
Property Insurance. This covers a business against property loss or damage. There are two types, building and personal property insurance. Building insurance protects against such threats as fire, smoke, wind, lightning, or vandalism. Personal property insurance protects property within a building, such as furniture, equipment, inventory, and raw materials.
Commercial Multi-Peril or Business Owner's Insurance. These policies protect businesses against claims for property damage, liability, and sometimes business interruption or workers' compensation. Not all business entities can get these policies.
Business Interruption Insurance. This protects a business against losses caused when property loss or damages forces your business to suspend operations. It also protects against losses taken to prevent or minimize downtime.
Business Vehicle Policy. If a business uses vehicles, this is needed to protect those vehicles. If employees use personal vehicles as part of the business, the business may require a non-owned vehicle insurance policy.
General Liability Insurance. These policies protect businesses against bodily injury or property damage for which the business is legally responsible.
Umbrella Insurance. This protects the business against liability claims greater than the business' liability policy.
Malpractice or Professional Liability Insurance. This protects businesses against claims of negligence or error. Some states require some types of businesses (such as medical practices) to carry professional liability insurance.
Product Liability Insurance. This protects a business when its product harms a person or property. This is vital to any business which supplies or manufactures products.