What defines an insurance policy?

An insurance policy is defined as a document detailing coverage and terms of insurance because it serves as the formal record of the agreement between the insurer and the insured. This document outlines the specific protections provided, the circumstances under which claims can be made, the rights and responsibilities of both parties, and the policy limits. It is crucial for ensuring that both the insurance company and the insured understand the scope of coverage, exclusions, and any endorsements or riders that may apply.

This definition emphasizes the importance of having a clear and written understanding when it comes to insurance agreements. Unlike informal agreements or verbal contracts, which can lead to misunderstandings or disputes, the policy provides a solid foundation that governs the insurance relationship. This clarity is essential in the insurance industry, where precise terms can significantly impact claims processing and coverage satisfaction.