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Insurance by Mind Map: Insurance
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WHAT IS INSURANCE? Insurance is a type of contract between a person (the insured) and an entity (the insurance company). The insured pays a premium (money) to the insurance company in exchange for the company’s promise to pay (or indemnify) for the insured’s property loss, medical bills, funeral expenses, liability, and so on, up to a specific amount. Nearly anything can be insured, as long as public policy is not violated.

1. What is Insurance?

WHAT IS INSURANCE? Insurance is a type of contract between a person (the insured) and an entity (the insurance company). The insured pays a premium (money) to the insurance company in exchange for the company’s promise to pay (or indemnify) for the insured’s property loss, medical bills, funeral expenses, liability, and so on, up to a specific amount. Nearly anything can be insured, as long as public policy is not violated.

The Insurance Contract

THE INSURANCE CONTRACT The policy is actually a type of contract and it has many of the same elements of any contract. The difference is that these types of policies are highly regulated by state statutes. If the insurance policy does not conform to state statute, it is void. The parties are free to negotiate any terms not required by state law.

The Insurance Policy

THE INSURANCE POLICY The insured received three benefits in exchange for the premium payments paid to the company: 1.       The company agrees to compensate the insured for specific losses covered by the policy; 2.       The company agrees to provide an attorney to the insured should the insured by sued for any actions covered by the policy; and 3.       3. The company agrees to act as a fiduciary in handling the insured’s policy matters. If the insurance company breaches any of these promises, it has violated the terms of the contract and the insured is entitled to bring suit to enforce the contract provisions.

State Laws Governing Insurance

STATE LAWS GOVERNING INSURANCE POLICIES The insurance field is heavily regulated by state law. These regulations affect everything about insurance. Many states even have statutes that specify the size of the type used in the policy and require bold-face print for certain terms. Further, some states require an insurance policy to be “readable” by the policy holder, which means that legal and/or technical terms are kept to a minimum. All states require that drivers have minimum amounts of insurance coverage as a condition of receiving a valid driver’s license from the state.

2. Automobile Insurance

AUTOMOBILE INSURANCE Car accidents generate most personal injury lawsuits. That, alone, makes auto insurance worth studying. However, because it is required by law, a study of the topic is even more important. Automobile insurance coverage usually falls into categories that are discussed further in the subtopics.

Laibility Coverage

LIABILITY COVERAGE This type of coverage will compensate the other party who is in an accident with the insured for personal or property damage caused by the insured. Liability coverage will pay for medical and funeral expenses, lost wages, disability, pain and suffering, and legal fees (up to the policy limits). Liability coverage is broken down into two parts: 1.       Bodily Injury—refers to any injury, disease, wound, or sickness caused by the insured. It also covers the death of the injured party. The policy limits are usually per person injured or per accident. If injuries exceed the policy limits, the insurance policy does not pay over the limit.   2.       Property damages—any type of property injury, loss, or destruction for which the insured is legally responsible. This type of coverage also specifies policy limits.   The medical statements clause will often pay for medical expenses incurred by the insured or anyone else covered by the policy. Usually, experimental procedures or treatments that are not commonly and customarily recognized are excluded. Uninsured motorist coverage was developed to protect drivers from other drivers who do not have insurance. When an uninsured motorist is at fault, the standard provision is that the company pays compensatory damages to the insured. Underinsured motorist coverage provides compensatory damages to the insured if another driver is at fault and causes injuries over the policy limits of his or her policy.

Typical Provisions

TYPICAL PROVISIONS IN AUTOMOBILE POLICIES There are only a few provisions that are critically important in an insurance contract. Among these are the following: 1.       Duty to Defend One of the main duties of the insurance company is to provide a legal defense for an insured when he or she is sued by someone and the suit is covered by the policy. The attorney is hired by the company, represents the insured, but is paid by the company. The client is the insured. 2.       Subrogation Subrogation is the insurance company’s right to sue the tortfeasor in its own right to recover the money it paid to the insured. 3.       “Stacking” of Policies Stacking is when two or more insurance policies are combined. This will increase the overall policy limits. Insurance companies try to limit stacking, but when it is not specifically prohibited, policies can be combined in a number of ways.

"No-Fault" Insurance

NO-FAULT INSURANCE   Under a no-fault system, the insurance company pays for the insured’s damages, whether the insured was at fault or not. People who are insured under a no-fault system receive immediate compensation for damages, but there is a catch. The insured is limited in the types of actions and damages that can be received from the other driver.   All insurance policies have an element of no-fault in them, in that medical payments and property damage are paid to the insured without regard to fault.


EXCLUSIONS   An insurance policy will not apply in all situations. For example, if the insured drives under the influence of alcohol or drugs, the company will not pay if it has an exclusion in the policy.   1.       Intentional Injuries Almost all insurance policies include exclusions for the intentional acts of the insured. This prevents an insured from intentionally injuring someone and then being able to avoid accountability by making the insurance pay for damages.   2.       Other Exclusions Among other types of exclusions are provisions that limit the responsibility of the insurance company to situations when the injured is in a vehicle (rather than something like an airplane).

3. Insurance and Lawsuits

INSURANCE AND LAWSUITS The Plaintiff’s attorney will want to know as early as possible whether the Defendant has insurance coverage. It will be important to know, as well, the limits on the policy. Settlement, especially if the insurance company offers the policy limit to the Plaintiff, is in the Plaintiff’s interests because he or she may not receive as much from a jury verdict. If the jury does award more than the policy limit, the Defendant may not have the means to pay the verdict. Plaintiff’s lawyers usually take the case on a contingency bases, which means that the lawyer does not get paid unless the lawsuit is won. If the lawyer wins, the typical “cut” is 1/3 of the award (or settlement amount). If the lawyer loses the case, he or she receives nothing for the time put into the cse. Defense firms that represent the insurance companies usually do so at an hourly fee. The lawyer sends detailed hourly billings to the company each month so that the insurance company can see exactly what the lawyer has done. When both sides of the lawsuit wish to settle, they are actually creating a kind of contract. One side promises to do something in exchange for a promise of payment from the other side. Releases are official relinquishment (a giving up) of the Plaintiff’s claim against the Defendant in exchange for the money payment through the settlement. When the Plaintiff signs the release, he or she is giving up all possible actions he or she may have against the Defendant. As a result, the lawsuit is dismissed, often “with prejudice,” which means that the Plaintiff cannot bring the suit again.

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