What is an insurance policy?

What is an insurance policy?

• A. A verbal agreement between friends
• B. A written contract between the insured and the insurance company
• C. A government-issued document for vehicle registration
• D. A document required for vehicle inspection

Answer: (B)

An insurance policy is fundamentally defined as a written contract between the insured individual and the insurance company. This document outlines the specific terms of coverage, including what is insured, the coverage limits, and any exclusions that may apply. It serves as a legal agreement, ensuring that the insurer provides financial protection against certain risks in exchange for regular premium payments from the insured. This contract also protects the rights of both parties, specifying the obligations of the insurer to cover claims and the responsibilities of the insured to maintain the policy conditions. Having a clear, written policy is crucial for understanding the extent of coverage and ensuring that there is no ambiguity regarding the protection afforded to the policyholder.

An insurance policy is fundamentally defined as a written contract between the insured individual and the insurance company. This document outlines the specific terms of coverage, including what is insured, the coverage limits, and any exclusions that may apply. It serves as a legal agreement, ensuring that the insurer provides financial protection against certain risks in exchange for regular premium payments from the insured.

This contract also protects the rights of both parties, specifying the obligations of the insurer to cover claims and the responsibilities of the insured to maintain the policy conditions. Having a clear, written policy is crucial for understanding the extent of coverage and ensuring that there is no ambiguity regarding the protection afforded to the policyholder.