You may think that insurance is just one more thing you have to pay for, month after month, year after year. But unlike other ‘subscription services’, you don’t regularly see the benefits – so why do we really need it? 

Well, insurance is a means of protection from financial loss.  It not only protects you, it also protects others around you; whether it’s when you’re in your car, your home, your apartment, or your business.  It will protect us and the things we value from a financial impact, big and small.  It provides peace of mind that you have coverage if and when you need it.  No one expects to be in a car accident or have a house fire after all. 

Now peace of mind is worth it for most people. However, there is also a legal requirement involved.  

Most states require you to have auto insurance with at least liability coverage on your vehicle.  If you would get pulled over for say speeding, the officer will ask for proof of insurance. If you can’t provide it, you may be fined for not having insurance.   

If you own a home and there is a mortgage, the bank or institution that owns that mortgage will require you to have insurance so that both you and they are protected in the event of a loss to the home.  They will require that they be listed on your home policy as mortgagee, so in the event of a covered loss they will be listed on the claim check.   

So we get it, insurance is there for us when we need it. But… how does it work? Insurance is essentially a gigantic rainy-day fund shared by many people (called policyholders). The insurance company uses money collected (called premium) from its policyholders and other investments to pay for its everyday operations and to fulfill its promise to policyholders when they file a claim. 

All types of insurance are regulated by the states. And of course, each state has their own set of statutes and rules that insurance companies must follow.  Some states are stricter than others, but of course insurance companies need to make sure they understand and follow the statutes in any type of transaction; otherwise fines can be imposed if they are not in compliance with any statute.  For instance, any time an insurance company wants to make a rate change, they need to file those rates with the state for them to be approved.  The state may also receive consumer complaints from policyholders regarding their policies or claim handling.  Once a complaint is received by the state, they will contact the insurance company with the information they received from the policyholder and the insurance company has a set timeframe to respond.