The invention of smart contracts is one of the major innovations for the legal world as well as in the insurance industry. In the following research, the focus is on the use of smart contracts in Insurance Law. So far, the research has shown that the implementation of the smart contract represents a significant step forward in improving the level of protection of insurance users. However, the research has shown that smart contracts are facing many shortcomings as well. Moreover, the use of AI in legal practice has raised many questions that need to be answered in the foreseeable future. Furthermore, when innovations are being introduced, the popular (and reasonable) opinion is that a special regulatory framework is required, one that would allow the smart contract to reach its full potential. But will the new (and most likely incomplete) regulations be able to overcome the challenges? Thus far, some states have already regulated Blockchain and smart contracts which will be examined in this research. There are many benefits that new technologies bring, but the question is whether the legal world is truly ready for its transformation. There is a lot of work to be done for smart contracts in insurance, since the technology to execute smart contracts exists but is still in the early stages of creating blockchain-powered insurance products. This research has been carried out by having three following goals in mind: Finally, the conclusion is that there is huge potential for adoption, growth, and expansion in the smart contract space, but the regulation and application must be done properly.