Insurance is a contract where one party agrees to indemnify another against certain types of loss, damage and liability in exchange for a fee. Typically, the premium will be payable by the insured, which can be paid either regularly or at a later date as an event occurs. Insurance coverage reduces the burden of financial loss on an individual, and it can also help in checking mental stress resulting from loss.
There are different kinds of insurance requirements, and each policy covers a particular area. Some examples are home or property insurance, automobile insurance, and health insurance. In the United States, for instance, home insurance is not compulsory but many lenders require it as a condition of getting a mortgage. It covers any physical damage or loss to the house and other structures on a property’s premises, including sheds and garages. It may also include the contents of the home, such as furniture and electronics. Typically, the policy will have a limit on the maximum amount of money that can be paid to cover a loss or damage and also a deductible.
Automobile insurance is also not compulsory in most countries, but it is required by some states and territories, as well as some companies, as a condition of owning a vehicle. It includes bodily injury and property damage coverage for drivers and passengers in the event of an accident. The prevailing minimum liability limits are set by the state or territory, and policyholders can purchase higher limits. Besides the standard auto policy, some states have specific endorsements for special circumstances or high-risk drivers.
Health insurance is compulsory in some states, and it protects the insured against any financial losses arising from an illness or disease. The most important provisions in a health insurance policy are the definition of a covered sickness or disease, as well as the coverage amounts for hospitalization and outpatient treatment. Generally, the insurance company will allow 30 (electronic) or 45 (non-electronic) days for processing claims after all necessary information has been received.
Compulsory insurance requirements are not easy to enforce, and there are many reasons why people choose not to get insured. For example, some drivers refuse to buy auto insurance, even though they face compulsory car insurance laws, because they think it is expensive. Others are not able to afford the minimum required amounts of liability coverage. A few states try to enforce compulsory auto and motorcycle insurance by matching vehicle registrations with insurance policies. Others use electronic proofs of insurance, such as smartphone apps, rather than physical insurance cards. 501(c)(3) insurance requirements