Insurance generally refers to a legally enforceable contract—known as an insurance policy—in which an insurance company (the insurer) agrees to (1) defend the person or entity who purchased the policy (the insured) against future claims or lawsuits; and (2) pay for losses (usually financial) that are covered under the written terms of the insurance policy.

These two primary legal obligations of an insurer under a liability insurance policy are known as the duty to defend and the duty to indemnify.

Insurance may be purchased to cover a wide range of future claims or losses—ranging from health insurance to pay future medical expenses, to commercial general liability (CGL) to cover future claims and losses incurred by a business.

In Alabama, insurance is regulated by both state statutes and federal law. The Alabama Department of Insurance oversees the enforcement of state insurance laws and regulations. Insurance policies in Alabama are contracts between the insurer and the insured, and they are subject to general contract law principles as well as specific insurance statutes. The duty to defend obligates the insurer to provide legal defense to the insured against claims or lawsuits that fall within the scope of the policy coverage. The duty to indemnify means the insurer must pay for the losses or damages covered by the policy, up to the policy limits. Various types of insurance are available, including health insurance for medical expenses and commercial general liability (CGL) insurance for business-related claims and losses. Policyholders in Alabama have the right to expect their insurers to act in good faith and fulfill their contractual obligations, and they can seek legal recourse if an insurer fails to uphold its duties.