What is an insurance policy?
Insurance policy is the term for a contract between an insurer and an insured. The contract defines the aspects of the insurance coverage, from what is included in the agreement to exclusions. This term may also be referred to as a contract of adhesion because the insured agrees to abide by the terms of contract in order to receive the benefits from the insurance company. There are a number of different insurance areas, each with a unique policy, terms, conditions, underwriting process, claims filing process, etc., but the general term for the agreement between parties in an insurance policy.
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When do I need to be aware of an insurance policy?
Almost every area of the average lifestyle or business venture is exposed to certain risks, with the financial consequences of responsibility for these exposures being too much for one individual or company to shoulder on their own. With an insurance policy, the insuring company assumes the burden of the covered risk in exchange for a premium (policy payment). Individuals file claims against their policy when situations occur that are covered under the insurance agreement.
What is important to know about an insurance policy?
There are a number of elements to a policy, from the deductible to the limits and the duration of coverage. Specific policies are written for homeowners, renters, commercial ventures, automobiles, healthcare, and more. There are some other important items you should know about insurance policies:
- Policies can be sold by agents or brokers either representing a specific insurer or an area of the industry, with key differences occurring between commercial and residential or individual-use policies.
- Coverage limits are written to address the costs of the risk, making each policy unique to the insured and valued according to the potential claim scenarios.
- Policies can be written to repair or replace damaged assets, provide financial reimbursement for covered losses, pay for litigation expenses, or address business costs in commercial situations.