Insurance Law

Insurance law provides the framework for how carriers underwrite policies and enforce their terms. U.S. insurance law governs the following characteristics of the insurance business:

• The coverage offered,
• The buying/selling of policies, and;
• The claims administration process.

While the U.S. federal government provides some level of insurance regulation, state laws regulate the majority of insurance regulations in America.

Keep reading to learn more about the insurance laws in your state or enter your ZIP code above to start comparing free insurance quotes from multiple providers near you.

What is insurance law?

Insurance law refers to the body of jurisprudence amassed from statutes, regulatory guidance, and case law precedents. Insurance law deals with the contractual agreements between insurance carriers and policy owners. Contractual agreements transfer the risk of losses from the insured to the carrier in exchange for a fee, which you pay as monthly or annual premiums.

State insurance laws determine the premiums companies may charge, prohibit price-fixing, and determine what types of coverages carriers must include in policies. As an example, mandatory automobile insurance coverage levels are state issues, as are the penalties applied against carriers that violate the state standards.

The federal government’s introduction into the insurance industry began with the Social Security Act of 1935, but modern insurance law pertains to private insurance carriers, not government programs like Medicare or Social Security. Those types of programs are regulated by their own federal agencies.

Private insurance companies were originally exempt from federal laws and regulatory guidance, and states took over the responsibility of insurance regulation until a Supreme Court ruling officially gave the federal government the right to regulate insurance companies that cross state lines for business.

New Link Destination day, state insurance commissioners and administrators still establish the rules that govern the ways insurance carriers are allowed to conduct business, and states are responsible for investigating violations against the state insurance department’s regulations. However, the federal government can still regulate insurance law on its own terms.

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How do insurance issues lead to lawsuits?

Insurance comes into play during high-stakes situations. When there’s a medical issue, a car accident, or a death, insurance is almost always involved. But just because an insurance claim is filed doesn’t mean that the case is properly categorized as insurance law.

For example, f there’s a car accident, there are many other kinds of law involved, including health insurance law, civil law, and criminal law, that may require more than a car insurance lawyer.

If there was a traffic violation or driving under the influence, there’s an element of criminal law involved. If there was a wrongful death or serious injury, personal injury or other civil litigation enters into the case. You will need to research local law firms in your area to find the right attorney.

Only when there is damage or harm covered by insurance, or denied coverage by insurance, will you need to hire an insurance attorney to help with your case.

What is an insurance company’s duty to defend?

There are two primary ways that insurance enters into lawsuits: when the insurance contract requires the insurer to defend an insured person or when an insurer denies a claim.

In the first case, the insurer typically has a duty to defend a policy-holder. For example, if you cause a car accident, you could be sued by the other driver. However, if you have insurance that covers the accident, your insurance company will be required to defend you and pay the claim on your behalf up to your policy limits.

What happens when an insurance claim is denied?

It is in your best interest to get in touch with a local insurance law firm if you are in conflict with your own insurance provider. In these circumstances, the insured believes they have a viable claim that should be covered, but the insurance company denies responsibility and refuses to pay.

Examples of claims often denied by insurance companies include:

• After a loved one dies, the insurance company refuses to pay out the life insurance benefit
• When you are injured in an auto accident, the company of the liable party doesn’t cover injuries
• If you undergo a medical procedure and insurance refuses to pay the cost

These cases are essentially contracted disputes where the insurance company will cite some unknown or unexpected section of the insurance policy that protects their bottom line. In some instances, a company will act in a way that impacts so many people it results in a class-action lawsuit. These kinds of cases can be complex and result in lengthy litigation.

Remember that insurance companies have large and well-funded legal departments that can handle the financial and time-consuming burden of litigation. Finding an attorney with experience in insurance law is essential to protecting your rights if you’ve had a wrongful denial of your claim.

If you need to speak with an insurance attorney or need legal guidance regarding your insurance claim denial, use our free legal tool above to get in touch with affordable insurance law attorneys in your area.

What kinds of coverage do insurance companies provide?

In 2019, there were 5,695 insurance companies in the U.S. offering coverage to consumers. The four top lines of insurance offered by these providers are:

1. Property and casualty insurance (including homeowners insurance, renters insurance, pet insurance, and liability coverage)
2. Life insurance
3. Health insurance
4. Disability insurance

In addition to the top four insurance types, carriers can also offer lines of additional coverage for the following:

• Inland marine insurance: for movable equipment, products, and materials that transport overland (as opposed to water)
• Liability-only insurance: companies sell straight liability policies in many situations, such as umbrella policies that expand liability coverage beyond the base coverage amount
• Guarantee: sold as security for performance of work under a contract

Insurance policy types are not limited to what’s listed above. With over 5,000 insurance companies to choose from, it’s important to do your research and understand all of the different types of insurance policies offered by providers near you.

Keeping reading for more information on the kind of insurance coverage available to you.

What is workers’ compensation insurance?

Workers’ compensation insurance covers the medical bills and lost wages when a covered employee becomes sick or sustains an injury on the job. Benefits are only paid under workers’ compensation policies if the injury or illness is job-related and inhibits the employee from working.

Benefits may include physical therapy, occupational therapy, mental health visits, or even death benefits.

What is commercial business insurance?

Commercial business insurance generally means a combination of liability policies for product liability, malpractice insurance, general liability (with or without an umbrella policy), errors and omissions coverage (known as E&O), and workers’ compensation coverage.

Commercial property insurance is also a part of the commercial business insurance package. Commercial property coverage applies to building and vehicle, loss of income, equipment malfunction, and accounts receivables insurance.

What is business interruption insurance?

Sometimes businesses have to close due to a calamity. Business interruption insurance pays the business owner the net income that the company would have earned otherwise.

Business interruption insurance pays for rent, payroll, and other business expenses. Some policies cover a move to a temporary location or the loss of a significant client or important suppliers. It all depends on the contract provisions, so read your insurance policy closely or consult with an insurance lawyer before you buy.

What is crime insurance?

Crime insurance provides businesses protection from theft, robbery, vandalism, embezzlement, forgery, and dishonest employees when the loss results in economic/property damage.

Insurance companies are also beginning to offer cybercrime coverage against hackers who steal a client’s sensitive financial information and personal data.

What is universal life insurance?

What is universal life insurance? In simplest terms, universal life is a permanent life insurance policy that has an investment savings feature. The low premium amounts are similar to term life insurance.

The difference is that the universal life policy accumulates a cash value. The cash value earns current market interest or minimum interest rates, whichever is greater. The insured person may borrow against the cash value or use it to pay premiums.

Some companies provide universal life coverage with a single lump-sum premium payment while others may include fixed premiums on a schedule.

Beneficiaries under a universal life policy only receive the death benefit. The insurance company keeps the accumulated cash value if the insured left any in the account.

What should you look for before you buy insurance?

The following are questions everyone should ask about insurance policies before buying insurance coverage of any kind:

• What is the monthly or annual premium payment?
• How high is your deductible? How much do you have to pay each year before the company starts paying claims?
• Does this policy offer enough coverage for your needs? If liability-only coverage is not enough, should you buy umbrella insurance coverage?

The insurance industry is a multi-billion dollar segment of the U.S. gross national product. Insurance affects everyday life activities, such as buying a home, a car, or protecting yourself and your family through the purchase of health and life insurance coverage.

It’s important to research the insurance providers in your area, the types of coverages offered, and the average insurance rates of people your age in your city.

Personal insurance rates can vary based on gender, credit score, and claims history depending on which provider you choose, so shop around before you buy insurance coverage and make sure you’re getting the best policy at a fair price.

Start here. We invite you to use our free tool below to find insurance quotes or to speak with a local insurance agent about your coverage options. If your insurance claim has been wrongly denied, enter your ZIP code now to get in touch with affordable insurance lawyers in your area.

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Frequently Asked Questions: Insurance & Insurance Law

Scroll through for answers to commonly asked questions about insurance law, the history of insurance law, and different types of insurance policies.

#1 – When did insurance laws start?

In 1752, Benjamin Franklin co-founded the first property insurance company, the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire.  The fire insurance company served the Philadelphia area Philadelphia was one of the largest cities in Colonial times with 15,000 inhabitants.

Ben Franklin structured the Contributionship as a mutual insurance company and it worked much like modern insurance companies. Investigators inspected the properties and assessed the risk of fire. The company declined to write insurance for properties that did not meet company standards and based the rates it charged on the investigator’s assessments.

The standards of the Contributionship later evolved into the building codes and zoning laws of more modern eras.

#1A – How did early 21st-century legislative initiatives affect U.S. insurance laws?

Along with Obamacare, many more major pieces of insurance legislation in the early 2000s impacted the way insurance companies do business in the United States. Scroll through the list of insurance laws below to learn how U.S. insurance legislation is continuing to evolve.

Dodd-Frank Wall Street Reform and Consumer Protection Act

This law created the Federal Insurance Office (FIO) under the Department of the Treasury to reform the risks involved in the financial markets. The FIO liaisons with state insurance regulators and the federal government’s positions on insurance matters that could impact financial markets and lead to financial crises.

One of the most significant impacts of the Dodd-Frank Act was the new Consumer Financial Protection Bureau (CFPB). CFPB has power over service providers who sell products to consumers, including credit insurance and guaranteed asset waivers.

Affordable Care Act

Signed into law by President Obama in 2010, the Affordable Care Act (ACA) had a widespread effect across the health insurance industry.

ACA made the following changes to U.S. insurance law:

• Eliminated health insurance companies’ refusal to write coverage based on pre-existing conditions
• Eliminated annual and lifetime maximums on health coverage
• Required health insurance policies to meet minimum essential health benefit standards,
• Made significant enhancements to Medicaid laws, and
• Created health care exchanges where Americans may purchase health coverage directly from insurance companies at reasonable rates

Controversy plagues this insurance law since its original passage. The ACA appeared on the U.S. Supreme Court docket three separate times (National Federation of Independent Business v. Sebelius, Secretary of Health and Human Services, et al; Florida et al v. Department of Health and Human Services, et al; Department of Health and Human Services et al v Florida, et al) and was upheld by the Supreme Court every time.

In June 2021, Justice Breyer writing for the U.S. Supreme Court dismissed yet another appeal. The ACA stands.

Terrorism Risk Insurance Act

The terrorist acts of September 11, 2001, reinforced the concept of terrorism risk insurance. Congress passed the Terrorism Risk Insurance Act (TRIA) to reimburse carriers that cover property and casualty risks subject to terrorism. Consequently, when the Department of the Treasure certifies that a terrorist attack impacts a risk, the U.S. government reimburses the carrier covering that risk.

The TRIA requires that carriers meet certain deductibles, pay stated co-payments, and applies caps on losses. In addition, the U.S. government reserves the right, subject to formulas set out in TRIA, to recover payments from the insurance industry at large.

Congress reauthorized the TRIA in 2015 and 2019. The insurance industry relies on TRIA as it requires insurance companies to provide terrorism coverage on certain commercial properties.

Data Privacy and Security

Protection of sensitive personal information and data privacy are topics of paramount importance in today’s digital world of increased cyberattacks. As a consequence, cybersecurity regulations have proliferated.

The New York Department of Financial Services was the first to propose cybersecurity obligations on insurance industry licensees. The National Association of Insurance Commissioners (NAIC) issued its Data Security Model Act that eight states adopted have adopted since.

The California legislature passed the California Consumer Privacy Act (CCPA) in response to cybersecurity concerns. The CCPA applies to almost every kind of business, but especially to the insurance industry as it embraces cloud computing, blockchain, and tougher cybersecurity measures. These measures are the industry’s response to challenges in technological disruption, the explosion in consumers’ demands, and the entry of new competitors into the insurance marketplace.

The law went into effect on January 1, 2020, but had a delayed enforcement date.

Principles-Based Reserve

The NAIC made big changes to the way insurance companies calculate life insurance reserves. Before the Principles-Based Reserve rules change, insurance companies based life insurance reserves on rigid formulas and static assumptions. These rules often resulted in reserves for life and annuity policies that far exceeded what some customers needed while providing inadequate reserves for others.

The Principles-Based Reserve rules replaced the former formulas with more logical formulas and assumptions based on each insurance company’s information. The new Principles-Based Reserve manual went into effect in 2016 and now has 51 jurisdictions that follow the model.

As of January 1, 2020, the new system became part of the revised NAIC standards for accreditation.

#2 – What happens if you miss an insurance premium payment?

Missing a premium payment may impact the benefits paid under the plan and even cost you your current coverage. Failure to make insurance payments on time can also raise your insurance rates in the future as you present a higher risk to insurance companies.

#3 – Do insurance companies sell bed bug insurance?

Actually, yes, some insurance companies do. Most renters and homeowners insurance policies do not cover bed bug infestation. That makes it hard for homeowners because getting rid of the pesky vermin can cost upwards of $1,000.

The good news is that some insurance companies will add bed bug coverage as a rider to the homeowners’ or renters’ policies for an additional premium.

#4 – Do models insure their body parts?

Yes, they do. Models, singers, actors, dancers, all have body parts that can add up to huge financial losses if they are seriously injured or sick. Athletes often have multi-million dollar policies on their bodies.

Body part coverage is really in the category of short-term disability coverages but at much higher limits than the run-of-the-mill policies everyday people buy.

#5 – Are life insurance premiums tax-deductible?

The Internal Revenue Code does not allow individuals to deduct the cost of life insurance premiums. The exception to that rule is the self-employed taxpayer who uses life insurance to protect business assets.

#6 – Do all insurance policies have waiting periods before they go into effect?

Some plans have a period of time between when you pay your premium and when the time benefits kick in. Waiting periods for insurance coverage vary by carrier and by line of business.

For example, life insurance policies have waiting periods that may range from 24 hours to two years after the first premium payment hits the account.

Homeowner policies have waiting periods that range from 30 to 90 days after the first premium payment before benefits are payable in the event of a loss.

Health insurance coverage may have no waiting period in the case of group plans, or they may have waiting periods that range from a few days up to one year after the first premium payment.

The philosophy behind waiting periods is that it protects the carrier’s other members so that a new insured cannot apply for the risk and immediately file a large claim and then cancel the policy. This would only end up raising the premiums for everyone else. In some cases, insurers may waive waiting periods as a tool in a promotional campaign.

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