An insurance policy is indeed a legal agreement between the insurance company (the insurer) and the policyholder (the insured). This agreement outlines the terms and conditions under which the insurer agrees to provide financial protection or compensation in exchange for the payment of premiums by the insured.
Key elements of an insurance policy typically include:
- Policyholder: The individual or entity purchasing the insurance and receiving coverage.
- Insurer: The company providing the insurance coverage.
- Premium: The amount the policyholder pays to the insurer for the coverage.
- Coverage: The specific risks or events the policy protects against (e.g. accidents, damage, loss or death).
- Terms and Conditions: The rules, exclusions and obligations outlined in the policy including the duration of coverage.
- Deductible: The amount the policyholder must pay out of pocket before the insurance kicks in.
- Claims Process: The procedure for filing a claim and how compensation will be provided if a covered event occurs.