What is a Policy?
A policy is a legally binding agreement between an insurance company and a policyholder, detailing the terms of the insurance coverage provided. It specifies the risks that are covered, the policyholder’s responsibilities, premium costs, and any exclusions or limitations. The policy acts as a contract, obligating the insurer to pay benefits in case of a covered event, such as death, illness, accident, or property damage, depending on the type of insurance.
The core components of a policy include the declarations page, which lists the insured, the coverage amount, and the duration of coverage. It also includes the policy conditions, which outline the rules and obligations of both the insurer and the policyholder. Exclusions specify what is not covered, and endorsements or riders can modify the policy to include additional coverages or provisions.
A clear understanding of the policy’s terms is crucial for policyholders, as it dictates the scope of protection, the claims process, and any financial obligations. Reviewing the policy regularly ensures that coverage remains adequate as personal or financial circumstances change.