To say insurance law is a complicated subject is no exaggeration. The average American has a limited understanding of insurance to begin with. The basics are simple enough: insurance is a contract, usually between two parties. The first party wishes to purchase a policy to become insured against the financial damages of certain outcomes. For example, if you get sick, health insurance helps. If you get into a car accident, car insurance helps. Home burned down? Homeowners insurance helps. Simple, right?
Not so fast.
Behind the scenes, everything is a bit more complicated. Insurance companies are rich. They’re rich because the insurers are often insured — sometimes with literal insurance, and sometimes through insurance defense attorneys. These are lawyers hired by the insurance company to protect both of the aforementioned parties in case of lawsuit.
Attorneys will also help the insurer cross all the “T’s” and dot all the “I’s” to reduce the opportunity for a third party to sue. The insured can also hire insurance attorneys to protect them in case an insurer decides not to pay up when it should. Keep in mind that insurance companies are rich for two reasons: first, they push people to purchase insurance even when statistically unnecessary (i.e. make sure you have it before you need it) and second, they do everything in their power to find a reason not to pay out claims.
Even attorneys who don’t practice insurance law will know a little about the subject. Personal injury attorneys will routinely represent car accident victims — and getting compensation for those victims often includes in-depth discussions with car insurance providers who represent both the victim and the person at fault. Real estate or estate planning attorneys will nearly always recommend that clients take out homeowners insurance policies. They know the ins and outs.
The short answer to the second part of our question — who needs insurance? — is simple: Everyone needs insurance. Whether we like it or not, that’s how the system works.