Legal Definitions - compulsory insurance

Compulsory insurance refers to any type of insurance coverage that individuals, businesses, or organizations are legally mandated to obtain and maintain by a government or regulatory authority.

The primary purpose of compulsory insurance is often to protect third parties from potential financial losses or harm caused by the insured, or to ensure that certain societal risks are adequately managed for public safety and welfare.

• Example 1: Automobile Liability Insurance

  In nearly all jurisdictions, drivers are legally required to carry automobile liability insurance before they can operate a vehicle on public roads. This insurance covers damages and injuries the insured driver might cause to other people or their property in an accident.

  This illustrates compulsory insurance because the law dictates that a driver must purchase this specific type of coverage; failure to do so can result in fines, license suspension, or other penalties. The mandate ensures that victims of car accidents have a source of compensation for their losses.

• Example 2: Workers' Compensation Insurance

  Most employers are legally obligated to provide workers' compensation insurance for their employees. This insurance covers medical expenses, lost wages, and rehabilitation costs for employees who suffer work-related injuries or illnesses, regardless of fault.

  This demonstrates compulsory insurance because state laws require businesses to secure this coverage. It ensures that employees are protected financially if they are hurt on the job, and it also limits the employer's liability for such incidents.

• Example 3: Professional Indemnity Insurance for Architects

  In some countries or regions, licensed architects are legally required to carry professional indemnity insurance. This coverage protects them against claims of negligence, errors, or omissions in their professional services that might cause financial loss to their clients.

  This is an example of compulsory insurance because the regulatory bodies governing the architectural profession mandate this specific insurance. It provides a safety net for clients who might suffer damages due to professional mistakes, ensuring that architects are accountable for their work.