Insurance is a safeguard against financial losses. People purchase insurance to cover accidental, unexpected losses to their home, car, business, or health. They pay a premium to maintain this coverage; if and when a loss occurs, they can file a claim inviting the insurance company to cover the loss.
After an accident, the first place many people turn to for compensation is an insurance company. But what exactly is insurance, how does it work, and what role does it play in personal liability cases?
What Is Insurance?
Insurance is an agreement where one party (the insurer) compensates another (the policyholder) for certain losses. In turn, the policyholder pays the insurer a premium.
The insurance contract specifies the conditions for payment, including the risk categories covered, the policy limit, the types of exclusions, and any deductible the policyholder must pay before their insurance covers a claim.
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Why Is Insurance Important in Personal Liability Claims?
Without insurance, the costs of accidents, thefts, and other losses fall upon individuals and organizations. For example, in a car accident, either the victim or the at-fault party would have to bear the cost of medical treatment and auto repairs. Instead, auto insurance typically covers these losses.
This means that in many personal liability claims, at least one party is an insurance company. Even if a reckless driver or negligent homeowner is personally liable for an accident, their insurance company is typically responsible for compensating the victim.
If an insurance company determines that the policyholder was at fault, they may offer the victim a settlement amount. If the offer is too low, the two parties may continue negotiating, or the victim may file a personal injury lawsuit.
What Kinds of Insurance Are There?
There are insurance policies to cover a wide variety of potential risks, including the following:
- Car insurance
- Health insurance
- Homeowners’ and renters’ insurance
- Life insurance
- Business liability insurance
- Medical malpractice insurance
- Travel insurance
- Pet insurance
- Workers’ compensation insurance
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Which Types of Insurance Are Involved in Personal Liability Claims?
Personal liability claims commonly involve the following types of insurance:
Automobile Insurance
Auto insurance protects vehicle owners from financial losses in traffic collisions, theft, or natural disasters. Auto liability coverage helps pay for injuries or property damage the policyholder causes to others. Car accident lawyers typically negotiate with insurance companies when seeking compensation for injured clients.
In at-fault car insurance states, accident victims seek compensation for bodily injury from the at-fault driver’s insurance company. In no-fault insurance states, injured people must turn first to their insurer for compensation, no matter who caused the accident. However, injured parties may qualify to sue the at-fault party for compensation if their injury is severe.
Homeowners’ Insurance and Business Owners’ Policies
Homeowners’ insurance protects the homeowner from financial losses due to natural disasters, vandalism, and other damage. It may also include liability coverage, which covers injuries to someone else on the property due to the homeowner’s negligence.
Business owners’ policies typically combine property insurance and liability coverage. This means the insurance company would cover the medical expenses of someone injured in an accident caused by the business’s negligence, such as slipping in an icy parking lot, falling in a poorly lit stairwell, or tripping over loose wires.
Workers’ Compensation Insurance
Workers’ compensation insurance covers medical costs and a portion of lost wages for on-the-job injuries. Nearly all states require employers to carry workers’ compensation insurance on behalf of their employees. When an employee experiences an injury on the job, they file a claim through their company’s workers’ comp policy.
Unlike most other personal injury claims, injured workers don’t have to prove negligence to receive payment via workers’ compensation. Workers’ compensation even covers accidents when the injured employee is at fault. The employee gives up their right to sue their employer in exchange for coverage.
Medical Malpractice Insurance
Malpractice insurance is a type of professional liability insurance that protects medical providers against lawsuits. If an injured patient names a doctor, nurse, or hospital as a defendant in a lawsuit, their medical malpractice insurance covers the legal costs of the claim. It also covers the costs of medical damages and punitive damages awarded to patients harmed by medical negligence.
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What Expenses Does Insurance Cover?
Insurance companies may cover the economic and non-economic losses of an injury caused by someone else’s negligence.
Economic losses refer to the direct monetary costs of an accident, including the following:
- Medical bills, including emergency care, hospitalization, rehabilitation, and medication
- Lost past income, future wages, or earning capacity
- Vehicle repairs and other property damage
Non-economic damages are the less tangible consequences of an accident, including the following:
- Pain and suffering
- Permanent disfigurement
- Mental anguish
- Loss of enjoyment of life
Although these consequences are often the most lasting effects of an accident, they are more difficult to quantify financially. Personal injury attorneys can help calculate the value of non-economic damages.
What Do Insurance Companies Do?
When determining a compensation amount to offer (if any), insurance companies do the following:
- Investigate the accident using available photos, video footage, police reports, and eyewitness statements
- Assess the nature and extent of injuries and property damage, including looking at medical records
- Determine liability (i.e., whether the policyholder or other party was at fault)
- Conduct interviews with the policyholder (and perhaps the other party)
- Calculate the compensation amount they will offer
- Negotiate with the victim or the victim’s attorney to settle the claim
Working with an attorney before settling is important, as victims typically give up their right to seek additional compensation — even if the injury worsens or costs more than expected. Personal injury lawyers also recommend not making any recorded statements, releasing medical records, or signing any written documents without seeking legal counsel.
About the Company
Accident Hotline connects injured people nationwide with qualified personal injury attorneys. With 24/7 support, clients can speak to a lawyer in minutes instead of hours. For help negotiating with an insurance company after an accident, contact us for a free consultation with a skilled local legal professional.
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