What makes insurance policies legal and binding?


Car insurance among other type of insurance policies has different legal implications. It is bound to mutual bonds and as well as on the punitive side of justice. It is a mutual bond since it is a contract that the insurance company or the “insurer” and the policy holder or the “insured” mutually signed. The legal implication of an insurance policy as a mutual bond is that the insurer has the authority to charge regular payments in exchange of insuring possible economic losses of the policy holders. The regular payments include predetermined payments at regular intervals; this payment is also known as the premium. Insurance is an optional service, however among state laws it is already being ratified as a part of the standard traffic laws. Punishments in the form of sanctions and fines are some of the common actions that the law imposes among car owners who are not policy holders.

Safety is the underlying logic of most government in requiring insurance to drivers and car owners. Driving is not a secluded action that people do every day. It is an action that inevitably forces people to interact; it is capable of building some sort of community wherein everyone is expected to act responsibly. An irresponsible action can jeopardize a lot of people’s lives. To compensate for this probability car insurances are required and integrated into law. It is treated that way so that at times of accident people will be given less burden through the financial coverage that it offers. One can think that the premiums that insurance companies charge is the safety net of a lot of people like drivers, car owners, and even pedestrians. Driving without license is punishable by law, but driving without insurance is even more expensive. The failure to obtain the minimum required insurance before driving will result up to six months of confiscation of both license and car; these punishments will even be accompanied by very expensive fines.

Insurance’s legal significance is also a bureaucratized one. The existence of insurance’s standard procedures which are practiced among countries show that insurance policies work. The workability of insurance even made lawmakers move and ratified it to the law. What is the legal significance in insurance? It is legally significant through the binding mutual agreement that both insurer and insured put into paper to maintain an assurance of help and assistance. In this mutual bond, a legal significance is realized through the safeness it offers to the citizens.