Definition - What does Insurance Policy mean?
An insurance policy is a formal contract between an insurance company and the insured wherein the former party agrees to provide a certain service or pay out a certain amount of money in the event the latter experiences a form of loss covered in the policy. This legal document states the exact terms and conditions of the policy and includes relevant information, such as perils covered, coverage limits and duration, and premium amounts.
Insuranceopedia explains Insurance Policy
An insurance policy is typically comprised of four basic sections: the declaration page, the insuring agreement, exclusions, and conditions. The declaration page lists the insured party, the covered risks or items, limits of the policy, and the coverage period, while the insuring agreement lays out the exactly what the insurance company agrees to do, such as paying out valid claims in case the insured experiences a covered loss. Next, the exclusions details what the policy does not cover, such as certain perils and types of property. Finally, the conditions section states any present provisions that either limit or qualify the insurer's duty. For example, if the insured does not file a proof of loss, the insurer is not obligated to pay for a covered loss.
Furthermore, insurance policies often include a definitions section as well as endorsements and riders. The former defines the terms used throughout the policy, while the latter two refer to provisions that either add to, take away from, or modify the original coverage conditions of the policy.