The Difference Between Compulsory and Non-Compulsory Insurance

by | May 10, 2021 | Uncategorized

The first step towards determining the difference between the two types of insurance policies is to look at the unfamiliar word the two have in common: compulsory. Compulsory, per Merriam-Webster, is defined as “something that is mandatory or enforced; we can then conclude that non-compulsory insurance would refer to a policy that is neither mandatory nor enforced. 

Compulsory Insurance

Compulsory insurance is applicable to both individuals and businesses alike, although the former will find far fewer restrictions and requirements. For people, the most common type of compulsory insurance (usually set on a state-by-state basis) is car insurance. Practically every state requires that anyone with a motor vehicle needs to have car insurance; this is less about protecting them and more so about protecting other drivers. 

For businesses, the net of compulsory insurance is much wider: insurance policies like workers compensation, general liability, specialized liability coverage, automobile coverage, and employee theft insurance are the most common types required for commercial businesses. This is not only to protect the business but also the individuals it employs. These policies are more often than not included in the initial employment contract, and we’d encourage you to do your due diligence when it comes to finding employment. If you’re working in an accident-prone industry, this becomes especially true. 

For more details on the specific policies mentioned above, check out this great article from BizFluent. 

Non-Compulsory Insurance 

One type of non-compulsory insurance is vacation insurance

Like we mentioned earlier, non-compulsory is any policy that is not mandated nor required to have. This umbrella category covers a wide-range of policies. The most common would be travel insurance (coverage on non-refundable funds lost on travel/vacation for whatever reason), renter’s insurance (coverage on items inside a rental property, and phone insurance (blanket coverage on damage/theft to mobile devices). 

The most popular type of non-compulsory insurance is one that many wrongly assume is required: life insurance. Life insurance is not something any individual is required to have by either their employer or the government, so choosing to pay for a life insurance policy to protect your loved one’s in the event of your untimely demise is a policy held in a non-compulsory manner. 

To learn more about insurance law, read our other blog post here: Understanding Insurance Terms As a Policy Holder. If you have other legal questions we did not answer here, our associates at Markesbery and Richardson are always here to help. Please reach out to us via the contact form on our website so that we can begin your journey to legal resolution together.

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