Why would someone need or be required to have insurance?

The purchase of insurance is usually done voluntarily based on an individual determination of need. In some instances, however, there may be a legal or contractual obligation to have a certain type of insurance. However there are exceptions, most of which are shown in adjoining sections. Auto insurance covers your legal liability which could arise if you injure another person or damage another person's property with your vehicle. Auto insurance also pays the cost of your defense.

Unlike automobile insurance, there usually is no law that requires a homeowner to have insurance. However, if you borrow money to buy a house, the bank or loan company will take a "mortgage" or "deed of trust" to protect its interest until the loan is repaid. The mortgage or deed of trust will require that you have an adequate amount of Property Insurance to cover the repair or rebuilding of the house in the event it is damaged. Normally you will be required to name the mortgage company as a "loss payee" on your policy, which means that if the house is damaged, the insurance payment will go to the loan company, or jointly to both you and the loan company, to assure that the money is used to repair, rebuild or pay off the loan.

Businesses must provide Workers' Compensation coverage for the benefit of their employees, injured while on the job.