Justia Legal Resources: Insurance Law Center

The law requires people to get insurance in certain situations, and it makes financial sense in many others. The Insurance Law Center provided by Justia highlights some of the key issues and options to consider.

Approximate Read Time: 5 Minutes

Consumers and businesses get insurance policies to protect them against a variety of risks. These range from car crashes and property damage to high medical bills and malpractice claims. Not everyone needs the same types of insurance, though, and deciding what works best for a particular person or entity may require some thought. The Insurance Law Center in the Justia Legal Guides covers areas such as life insurance, auto insurance, homeowners’ insurance, health insurance, and business insurance. Here are some answers to basic questions that a policyholder or potential purchaser of insurance might raise.

Should I Get Life Insurance?

Life insurance does not make sense for everyone. For example, a consumer may not want to get life insurance if their dependents will become self-sufficient soon or would have other income sources that would cover their living expenses. Life insurance may make sense, though, if the consumer’s estate will go through probate, which may take a long time. It can also go toward any debts and taxes that their estate owes, as well as funeral costs.

When Are Life Insurance Proceeds Taxed?

Life insurance proceeds generally fall within the taxable estate of the consumer if their estate meets the threshold for federal estate tax liability, and they own the policy, unless their spouse is the only beneficiary. However, most estates will not need to pay estate tax, since the threshold is over $10 million for individuals and doubles for married couples. If a consumer believes that their estate will need to pay estate tax, they may consider making someone else the owner of the policy or placing it in a life insurance trust.

Which Types of Auto Insurance Are Required?

Almost all states require a driver to buy at least a certain amount of liability auto insurance, which covers injuries or property damage to someone else in an accident for which the driver was at fault. Buying more than the mandatory minimum may make sense in case a crash causes serious injuries. Some states also require drivers to purchase uninsured/underinsured motorist coverage, which applies when an at-fault driver does not have liability insurance or does not have enough to cover the costs of an accident. Again, this is often wise to purchase even if it is not legally required. A handful of states require drivers to get no-fault insurance, which covers certain types of expenses like medical bills regardless of fault.

How Can I Reduce My Auto Insurance Premiums?

You may be able to reduce your premiums if your car has a wide range of safety features and if you take care to drive safely, avoiding accidents and traffic violations. You also can consider limiting your time behind the wheel, using public transportation as an alternative when this is feasible. A strong credit score may help keep premiums in check, since data show that people with lower credit scores tend to file larger and more frequent claims. In addition, you can ask your insurer about the specific discounts that they offer and consider whether you can meet the criteria for any of them.

How Does Hazard Insurance Protect a Homeowner?

Hazard insurance generally applies to property damage or loss. Covered events usually include fires, explosions, theft, and vandalism, as well as ordinary water and wind damage. However, these policies generally do not cover events like floods, mudslides, hurricanes, and earthquakes. A consumer can look for a separate policy to cover those risks if needed. If a homeowner needs to move out of their home while it is being repaired, hazard insurance may pay for at least some of their living expenses during this period. It also may compensate a homeowner when personal property in the home is damaged or destroyed.

What Does Homeowners’ Liability Insurance Cover?

Liability insurance pays for injuries that the homeowner or their household members (or pets) cause to other people. For example, these include a slip and fall caused by a dangerous condition at the home that the homeowner failed to promptly address. Liability coverage also usually covers injuries away from the property that resulted from the carelessness of the homeowner or someone else covered by the policy. However, it does not cover crimes and other acts involving intent, such as sexual harassment. It also does not cover car accidents, for which a consumer must have a specific auto insurance policy.

What Did Obamacare Do?

Formally known as the Affordable Care Act, Obamacare requires almost everyone in the U.S. to have health insurance. (However, it no longer imposes tax penalties for individuals who do not have coverage.) This led to the creation of health insurance exchanges that make coverage more affordable. The law also requires an employer with 50 or more full-time employees to provide health insurance to them. In addition, the Affordable Care Act expanded protections for people with pre-existing medical conditions beyond the rights provided by the Health Information Portability and Accountability Act (HIPAA).

How Does a Health Savings Account Work?

You can put funds into a health savings account to cover medical expenses that your family or you incur in the future. Tax does not apply to money put into the account. If you start an HSA, you also must use a high-deductible health insurance plan. This reduces the premiums that a consumer must pay, while setting deductibles and out-of-pocket maximums higher than for an ordinary plan. The consumer covers all medical costs below the deductible and some costs between the deductible and the out-of-pocket maximum. The plan covers all costs above the out-of-pocket maximum.

Which Types of Insurance Should My Business Get?

One basic type of business insurance is general liability coverage, which applies when a business is responsible for injuries to non-employees on its property. A business also likely will need to get workers’ compensation insurance and unemployment insurance. Property insurance can cover various forms of damage to the physical space of the business or items inside it, such as computers and furniture. If workers drive for business purposes, auto insurance covers related accidents. If the business sells items to consumers, products liability insurance covers claims based on injuries caused by alleged defects in its products. Professionals like doctors and lawyers probably need malpractice insurance.

What Does Medical Malpractice Insurance Cover?

Some medical malpractice insurance policies, known as claims-made policies, apply when both the incident and the claim occurred during the covered period. (A healthcare provider can supplement this type of policy with “tail coverage” for claims made after the policy ended based on incidents during the covered period, or “nose coverage” for claims made during the covered period based on incidents before the policy began.) In contrast, occurrence-made policies apply when the incident occurred during the covered period, regardless of whether the claim occurred during that time. Malpractice policies generally have per-occurrence limits, in addition to aggregate limits for claims within a year or another fixed time. They do not cover crimes committed by healthcare providers, such as sexual assaults of patients.

Final Thoughts

The world of insurance can seem opaque to the average person, but having the right policy at the right time can make a huge difference. If a consumer or business wants to understand the implications of a particular policy, they should check with an insurance specialist before making a final decision. If any disputes arise with an insurer over a claim, a policyholder should contact an insurance claims attorney for advice and representation. In the meantime, the Insurance Law Center offers a readable overview of some key concepts in this area. Like the other Justia Legal Guides, it furthers our mission of making the law free and accessible to all.

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